“The market selloff that everyone was waiting for is here,” said Edward Moya, a senior market analyst at currency exchange platform Oanda. "The US stock market rally was overextended, and investors will use the coronavirus epidemic as the trigger needed to deliver a pullback.”

By Ian Horswill


Posted on January 28, 2020

The world’s stock markets have had their worst day’s trading of the year with concerns growing about the coronavirus that has killed 106 and infected more than 2700 people.

The coronavirus, which originated in the fifth biggest city Wuhan, hit sectors from travel to a wide range of manufacturing, prompting concerns that the disease would slow China’s economic growth. The manufacturing hub of Suzhou, which is the base for factories owned by companies including iPhone contractor Foxconn, has postponed the return to work of millions of migrant labourers for up to a week. International carmakers including Nissan and the French groups PSA and Renault said they were preparing to pull foreign staff from plants in parts of China that had been hit by the virus.

Investors are braced for a hit to first-quarter domestic growth in China as the virus curbs consumer spending and travel during the new year holiday which Chinese authorities have extended until next week in an effort to contain the outbreak.

The S&P 500 index ended the day 1.6% lower in New York while both the UK’s FTSE 100 and the European composite Stoxx 600 closed 2.3% lower. Brent crude, the international benchmark, fell 3% to US$58.89 a barrel. In Australia on Tuesday the market fell 1.3% in early trading.

Chinese shares suffered a 3.1% fall last Thursday and the Shanghai and Shenzhen stock exchanges will not now reopen until Monday, 3 February. Shanghai authorities separately advised that companies should not return to work until at least Monday, February 9.

Futures on the FTSE China A50 Index sank as much as 5.9% in Singapore on Monday, and extended declines in after-hours trading. The offshore yuan fell 0.8%, trading weaker than its 50-day and 200-day moving averages, Yahoo reported.

Hong Kong’s financial markets are due to reopen on Wednesday. Hong Kong Chief Executive Carrie Lam on Saturday upgraded the government’s response against the coronavirus to the highest level, and said the outbreak could extend the city’s recession in 2020.

The virus is seen as a new “black swan” event for global equity markets, many of which ended last week at ­all-time highs despite lingering economic uncertainty, The Telegraph reported.

“The market selloff that everyone was waiting for is here,” said Edward Moya, a senior market analyst at currency exchange platform Oanda. “The US stock market rally was overextended, and investors will use the coronavirus epidemic as the trigger needed to deliver a pullback.”

Lee Hardman, a currency analyst at Japanese bank MUFG, told the Financial Times the virus marked “a setback for the global economy and manufacturing sector, which had been showing tentative signs of improvement in recent months”.