By Herbert Lash
NEW YORK (Reuters) – Global equity markets posted their biggest weekly and monthly loss since August on Friday as growing concerns about the economic impact of the coronavirus outbreak in China sapped risk appetite and lifted the safe-haven Japanese yen and Swiss franc.
Gold posted its best month in five, while yields on U.S. debt fell to almost five-month lows as the United States, Japan and other countries tightened travel curbs to China, where the death toll from the virus rose to 213.
Global crude benchmark Brent notched its biggest monthly decline since November 2018. Economists tempered their outlook for the world’s second-largest economy, as travel curbs and supply chains disruptions are likely to crimp Chinese growth.
Citigroup revised its full-year forecast for China’s GDP growth to 5.5% in 2020 from 5.8%. The bank also cut first-quarter growth expectations to 4.8% from 6% in the fourth quarter of 2019.
JPMorgan shaved its forecast for global growth by 0.3 percentage point for this quarter.
“Until you get some sort of clarity that the spread has subsided and is slowing or there’s a foolproof antidote to it, I think the market will struggle,” said Lou Brien, market strategist at DRW Trading in Chicago.
Equity markets tumbled more than 1% as disappointing U.S. and European data pointed to economic weakness and a mixed batch of corporate earnings added to the gloom.
U.S. consumer spending rose steadily in December, the Commerce Department said, but tepid income gains pointed to moderate consumption growth this year.
The Chicago Purchasing Management Index fell to a lower-than-expected 42.9, the lowest since December 2015, as new orders and production tumbled and producers forecast tepid activity in 2020.
“The Chicago PMI was very weak,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
The recently signed U.S.-China trade deal had been expected to lift the global economy, but the coronavirus outbreak has dampened that outlook, he said.
“Market expectations are for a big push in growth. It’s being put off every quarter, especially the industrial side of the economy,” Ghriskey said. “Bond yields have plummeted. The bond market is trying to tell us something.”
Yields on the benchmark 10-year U.S. Treasury note slid to a low of 1.508%.
MSCI’s gauge of stocks across the globe shed 1.21%, while emerging market stocks lost 1.11%. The world index has lost 1.2 for January, after gaining as much as 2.6% earlier in the month.
In Europe, the pan-European STOXX 600 index closed down 1.07%. Losses for the week were 3%, its worst in almost six months, while the 1.2% monthly loss was the worst January since 2016.
Early gains in Europe quickly soured as headlines of more cases and deaths, travel bans and factory shutdowns due to the virus were compounded by disappointingly weak economic data.
The big blow was that both the French and Italian economies unexpectedly shrank at the end of last year, with Eurostat also confirming that the euro zone as a whole grew slower than analysts had forecast.
On Wall Street, the Dow Jones Industrial Average fell 603.41 points, or 2.09%, to 28,256.03. The S&P 500 lost 58.14 points, or 1.77%, to 3,225.52 and the Nasdaq Composite dropped 148.00 points, or 1.59%, to 9,150.94.
The poor data reading and fears of a spreading virus obscured relatively solid fourth-quarter earnings reports.
Amazon.com Inc surged 7.4% after it trumped Wall Street’s estimates for holiday-quarter results, bolstering the online retailer’s market capitalization to more that $1 trillion.
Asia-Pacific shares outside Japan extended their fall, dropping 0.4%. Japan’s Nikkei bounced 1%, but was off 2.6% for the week. Hong Kong’s Hang Seng drifted 0.3% lower and has shed 9% in two weeks. Korea’s Kospi had its worst week in 15 months, losing 5.6%.
Sterling extended gains after jumping on Thursday when the Bank of England confounded market expectations by not cutting interest rates.
Sterling traded at $1.3201, up 0.82% on the day. The yen strengthened 0.57% versus the greenback at 108.37 per dollar.
The dollar index fell 0.49%, with the euro up 0.53% to $1.1089.
The Australian dollar fell to a four-month low against the U.S. dollar, while China’s offshore yuan struggled to find a footing.
The 10-year Treasury note rose 15/32 in price to yield 1.5051%. Earlier its yield fell to 1.503%.
Spot gold rose 0.87% at $1,587.5 an ounce, while U.S. gold futures settled 0.1% lower at $1,587.90.
Oil prices fell, on track for a fourth straight weekly loss.
Brent crude slid 13 cents to settle at $58.16 a barrel. U.S. West Texas Intermediate (WTI) settled down 58 cents at $51.56 a barrel.
(Reporting by Herbert Lash, additional reporting by Karen Brettell in New York; Editing by Andrea Ricci, Diane Craft and Sonya Hepinstall)