Oil prices and Asian stock markets fell sharply on Monday following a surge in new coronavirus cases in Italy, South Korea and Iran over the weekend that heightened concerns over the global impact of the virus.
The price of brent crude, the international oil benchmark, fell as much as 3.4 per cent to $56.53 a barrel in Asian trading, while S&P 500 futures were down 1.3 per cent. Gold, viewed as a safe-haven asset for investors, increased as much as 1 per cent.
Confirmed cases of the virus in South Korea rose to 763 with seven related fatalities. Iran, meanwhile, has reported eight coronavirus deaths but only 43 cases, implying that the spread of the illness there could be far greater than captured so far by official screening. In China, where almost 2,600 people have died, the official mortality rate from Covid-19 virus is just over three per cent of those infected.
Robert Carnell, chief Asia-Pacific economist at ING, said: “Markets [are] likely to show extreme caution in the face of [the] global spread of the coronavirus — this is no longer solely an Asia issue.”
Chinese authorities reported that only eleven new cases had been discovered outside Hubei on Sunday, which would suggest the spread of the virus had slowed in the rest of the country. President Xi Jinping’s administration has been racing to contain the epidemic outside Hubei in order to bring the world’s second-largest economy back up to full speed as soon as possible.
But in an indication of just how difficult that will be, Mr Xi told thousands of Chinese government and Communist party officials on Sunday that the epidemic was the “most difficult” public health challenge the party had faced, and that it had also exposed “obvious shortcomings” in governance.
The official Xinhua news agency noted that the meeting was broadcast to all county governments and military units across the country.
While China’s extended lunar new year holiday officially ended on February 10, consumption of commodities such as coal for power generation was far below normal levels, analysts have noted. Steel inventories are also at five years high because of a lack of demand, according to Mysteel, a consultancy.
Monday’s markets sell-off came after Italy imposed a strict quarantine across at least 10 towns, as authorities battled to contain the biggest outbreak of the virus outside Asia. Officials said on Sunday that a third person in Italy had died from the virus, known as Covid-19, as a sharp rise in the infection count to 152 fuelled fears over the disease’s spread through Europe.
On Sunday, South Korea raised its infectious disease alert to its highest level for the first time in a decade. The virus has caused seven deaths and more than 760 infections in Asia’s fourth-largest economy. South Korea’s Kospi index was down 3.2 per cent on Monday, while the won declined 0.7 per cent against the dollar.
Elsewhere in Asia, Hong Kong’s Hang Seng sank 1.5 per cent while Australia’s S&P/ASX 200 shed 2.2 per cent. The Australian dollar was trading at $0.6609 against its US counterpart, a near-11-year low.
China’s CSI 300 index of Shanghai- and Shenzhen-listed shares was 0.7 per cent lower. Investors expect that Beijing will turn to new stimulus measures to support China’s economy, after the country’s lenders last week cut a key lending rate in a bid to cushion the impact. Markets in Japan were closed for a national holiday.
Gold extended its rally by 0.8 per cent to trade at $1,658 per troy ounce. The price of gold is at its highest in more than seven years.
“Previously, most of the concern from the oil market was the impact Covid-19 would have on Chinese demand,” said Warren Patterson, head of commodities strategy at ING. “But clearly, as we see more cases outside China, this will start to raise concerns about demand in other countries and regions.”
Mr Carnell said traders would be closely watching European efforts to contain the virus epidemic. Stock markets, which in the US hit all-time highs last week, were “slowly waking up to the fact that something is wrong”, he said.
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February 24, 2020 at 10:42AM
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Oil and Asia stocks falls as coronavirus spreads beyond China - Financial Times
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