Asia stocks fall on virus fears after Wall Street plunge

Asian stock markets fell further Friday on spreading virus fears, deepening a global rout after Wall Street endured its biggest one-day drop in nine years.

Tokyo’s benchmark fell by an unusually wide margin of 3.4% and Shanghai, Hong Kong and Seoul all dropped by more than 2%. Oil prices slumped further on expectations industrial activity and demand might decline.

Investors who had been confident the disease that emerged in China was under control have been jolted by outbreaks in Italy, South Korea and Iran. They worry the virus is turning into a global threat that might derail trade and industry.

On Wall Street, the benchmark S&P 500 index is down 12% from its all-time high a week ago.

A growing list of major companies are issuing profit warnings and say factory shutdowns in China are disrupting supply chains. They say travel bans and other anti-disease measures also are hurting Chinese consumer spending.

Virus fears “have become full-blown across the globe as cases outside China climb,” said Chang Wei Liang and Eugene Leow of DBS in a report.

Tokyo’s Nikkei 225 tumbled to 26,157.36 while the Shanghai Composite Exchange lost 2.9% to 2,904.92. Hong Kong’s Hang Seng lost 2.3% to 26,157.36.

The Kospi in Seoul fell 2.2% to 2,007.89 and Sydney’s S&P-ASX 200 sank 2.3% to 6,502.6. New Zealand and Southeast Asian markets also retreated.

On Thursday, the S&P 500 fell 4.4% to 2,978.76.

The Dow Jones Industrial Average 1,190.95 points, its largest one-day point drop in history, bringing its loss for the week to 3,225.77 points, or 11.1%. To put that in perspective, the Dow’s 508-point loss on Oct. 19, 1987, was equal to 22.6%.

The U.S. losses extended a slide that has wiped out gains major indexes posted this year. Investors came into 2020 feeling confident the Federal Reserve would keep interest rates at low levels and the U.S.-China trade war posed less of a threat to company profits after the two sides reached a preliminary agreement in January.

U.S. bond prices soared as investors fled to safe investments. The yield on the benchmark 10-year Treasury note fell as low as 1.246%, a record low, according to TradeWeb. When yields fall, it’s a sign that investors are feeling less confident about the strength of the economy.

China shut down much of its economy to stem the spread of the infection.

Most access to the city of Wuhan, a manufacturing hub at the center of the outbreak, was suspended Jan. 23. The Lunar New Year holiday was extended to keep factories and offices closed. The government told the public to stay home.

Authorities are shifting to trying to reopen factories and other businesses in areas with low disease risk but travel controls still are in effect in many areas.

Elsewhere, governments are tightening anti-disease controls as new cases mount.

Japan will close schools nationwide. Saudi Arabia banned foreign pilgrims from entering the kingdom to visit Islam’s holiest sites. Italy has become the center of the outbreak in Europe, with the spread threatening the financial and industrial centers of that nation.

Goldman Sachs on Thursday said earnings for companies in the S&P 500 index might not grow at all this year, after predicting earlier that they would grow 5.5%.

Benchmark U.S. crude fell 68 cents to $46.41 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.64 on Thursday to settle at $47.09.

Brent crude oil, used to price international oils, sank 68 cents to $51.40 per barrel in London. It declined $1.25 the previous session to $52.18 a barrel.

The dollar declined to 109.28 yen from Thursday’s 109.58 yen. The euro sank to $1.0987 from $1.0998.

GSG