Global markets slide again on enduring concern over coronavirus

New York, March 5 (AP): Stocks are opening sharply lower on Wall Street, erasing 2 per cent from major indexes, a day after surging 4 per cent as the mood swings back to fear.

European markets quickly lost early gains Thursday and are down more than 2 per cent. The virus-fuelled volatility in financial markets is into its its third week as new cases and deaths rose globally.

That is putting more pressure on companies, with businesses lowering their earnings targets or cancelling forecasts altogether as it remains unclear how long the outbreak will remain disruptive. Treasury yields dropped again as investors flocked to safe investments. The price of gold also rose.

Stock markets turned lower on Thursday, despite earlier gains in Asia, extending days of wild swings as investors try to gauge the economic damage of the virus outbreak and how much governments and central banks can help.

European markets quickly lost their early gains, with France’s CAC 40 down 2 per cent at 5,357. Germany’s DAX shed 1.9 per cent to 11,897. Britain’s FTSE 100 was down 1.8 per cent to 6,697. Wall Street was expected to fall sharply on the open, with Dow futures down 1.7 per cent and those for the S&P 500 retreating 2 per cent.

The virus-fuelled volatility in world financial markets has extended into a third week as new cases and deaths rose globally. That is putting more pressure on companies, with numerous airlines cancelling flights and some even laying off workers.

Businesses are lowering their earnings targets or cancelling forecasts altogether as it remains unclear how long the outbreak will continue to disrupt supply chains, production and travel. In Britain, a financially troubled regional airline, Flybe, collapsed as it struggled with the drop in demand for flights due to the virus.

“Initial gains for equity markets have faded as investors once again begin to worry about the spread of the coronavirus outside China,” said Chris Beauchamp, chief market analyst at IG.

“The Western world is now following some of China’s playbook, closing schools and declaring a state of emergency for example, but there is a sense that this is too little, too late.”

Thursday’s decline comes a day after markets rallied, particularly in the US, on former Vice President Joe Biden’s strong showing in the Democratic presidential nomination. Investors see him as more business-friendly than his main rival, Senator Bernie Sanders.

Sentiment had been helped also by Congress’s decision to make USD 8.3 billion available to battle the coronavirus outbreak in the US. The measure’s funds would go toward research into a vaccine, improved tests and drugs to treat infected people.

Other policymakers are trying to help the economy. The US Federal Reserve and the Bank of Canada both cut their key rates by half a percentage point, though analysts say that cheaper credit will do little in the short term to solve supply-side problems in global business.

Earlier, Asia closed higher, buoyed by Wall Street’s gains the previous day. Japan’s benchmark Nikkei 225 rose 1.1 per cent to finish at 21,329.12.

Australia’s S&P/ASX 200 added 1.1 per cent to 6,395.70. South Korea’s Kospi gained 1.3 per cent to 2,085.26.

Hong Kong’s Hang Seng added 2.1 per cent to 26,762.43, while the Shanghai Composite jumped 2.0 per cent to 3,071.68. India’s Sensex climbed 0.5 per cent to 38,593.25.

Investors expect other central banks will follow up on the Federal Reserve’s surprise move Tuesday of slashing interest rates.

The Bank of England has a meeting on March 26 on interest rates. The European Central Bank and others have already cut rates below zero, meanwhile, which limits their monetary policy firepower.

But economists say they could make other moves, such as freeing up banks to lend more.

In energy markets, investors were monitoring an OPEC meeting in Vienna, where oil-producing countries are expected to slash output to support prices. Some analysts expect the two-day meeting to produce an agreement to cut production by at least 1 million barrels a day.