Finance Finance News Markets hammered as US braces for virus outbreak

Markets hammered as US braces for virus outbreak

Fuelled by deepening concerns of the Coronavirus becoming a global pandemic, the stock market plunged Tuesday. Photo: Getty
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Australian stocks have suffered a third day of heavy losses as the global market rout sparked by the spread of the coronavirus deepens.

Financial markets are becoming increasingly nervous about the impact of the virus on the global economy with the Australian stock market shedding a further two per cent at the start of trading.

The Dow and S&P 500 both closed down over 3 per cent, while the Nasdaq fell around 2.8 per cent.

The S&P 500 and the Dow Jones Industrial Average both shed more than 3 per cent on Tuesday in their fourth straight session of losses.

The World Health Organisation says the epidemic has peaked in China, but concern that its spread is accelerating in other countries is likely to keep investors on edge.

“What we are seeing is share markets are playing catch up,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“Other asset markets have been flashing warning signs for weeks. A corrective bounce in equities is possible, but we still have a lot of downward momentum.”

While the stock rout has been global, the recent pace of selling in Asia has not been as severe as it has on Wall Street, which has been hit hard by the escalation of virus cases outside of Asia.

The Wall Street tumble has pushed yields on safe-haven Treasuries to record lows.

The losses come as Americans are being advised to prepare for the spread of the virus, also known as COVID-19, in the US after infections surfaced in several more countries.

“The data over the past week about the spread in other countries has raised our level of concern and expectation that we are going to have community spread here,” the US Centers for Disease Control and Prevention’s Doctor Nancy Messonnier told reporters on a conference call.

The sentiments signal a change in tone for the Atlanta-based US health agency, which had largely been focused on efforts to stop the virus from entering the country and quarantining individuals travelling from China.

What is not known, she said, is when it will arrive and how severe a US outbreak might be.

“Disruption to everyday life might be severe” and businesses, schools and families should begin having discussions about the possible impact from the spread of the virus, Dr Messonnier cautioned.

In a teleconference later on Tuesday, Doctor Anne Schuchat, the CDC’s principal deputy director, said that while the immediate risk in the United States was low, the current global situation suggested a pandemic was likely.

“It’s not a question of if. It’s a question of when and how many people will be infected,” Dr Schuchat said.

Centers for Disease Control and Prevention Principal Deputy Director Anne Schuchat speaks about the coronavirus. Photo: Getty

Locally, Treasurer Josh Frydenberg remains coy on what impact the coronavirus will have on his much-promised surplus, as a global credit rating agency warned the odds of a global pandemic are rising.

Asked directly whether a surplus was still likely amid the economic impacts of coronavirus, Mr Frydenberg said people will have to wait until the budget is handed down in May.

“But I do know that this is going to hit the economy, and I do know that our focus has been – in relation to the fires and other shocks that we’ve faced – on getting the support to the community in need,” he told Sky News on Wednesday.

“That’s been our primary focus, not the surplus.”

Credit rating agency Moody’s Investors Services said the assumption COVID-19 would be contained to China appeared to be becoming “increasingly tenuous” and the odds of a global pandemic are rising.

It now sees the risk of a pandemic as a 40 per cent chance, double the 20 per cent previously estimated.

“The coronavirus has been a body blow to the Chinese economy, which now threatens to take out the entire global economy,” Moody’s Analytics chief economist Mark Zandi said in a research note.

“A global recession is likely if COVID-19 becomes a pandemic, and the odds of that are uncomfortably high.”

Mr Frydenberg declined to say whether a recession in Australia was on its way, saying: “That’s not the word I would use.”

-with AAP