INSUBCONTINENT EXCLUSIVE:
TOKYO: Global share markets were headed for the worst week since the depths of the 2008 financial crisis as investors ditched risky assets
on fears the coronavirus would become a pandemic and derail economic growth.
Asian stocks tracked another overnight plunge in Wall Street's
benchmarks on Friday with the markets in China, Japan and South Korea all posting heavy losses.
Hopes that the epidemic that started in
China would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the
world now surpass those in China.
The worsening global threat from the virus prompted investors to rapidly step up bets the US Federal
Reserve would need to cut interest rates as soon as next month to support economic growth.
"We don't even need to wait for economic data to
see how badly the economy is being hit
You can tell that the sales of airlines and hotels are already falling by a half or something like that," said Tomoaki Shishido, senior
economist at Nomura Securities.
"It is fair to say the impact of the coronavirus will be clearly much bigger than the US-China trade war
So the Fed does not have a reason to take a wait-and-see stance next month," he said.
MSCI all country world index fell 0.3 per cent after
3.3 per cent drop on Thursday
So far this week it has lost 9.2 per cent, on course for its biggest weekly decline since a 9.8 per cent plunge in November 2008.
Wall
Street shares led the rout as the S-P 500 fell 4.42 per cent, its largest percentage drop since August 2011.
It has lost 12 per cent since
hitting a record close on Feb
19, marking its fastest correction ever in just six trading days while the Dow Jones Industrial Average fell 1,190.95 points, its biggest
points drop ever.
The CBOE volatility index, often called the "fear index", jumped to 39.16 on Thursday, the highest level in about two
years, well out of the 11-20 range of recent months.
The index, which measures expected swings in US shares in the next 30 days, often
shoots up to around 50 as bear market selling hits its heaviest although it approached 90 during the 2008-09 financial crisis.
In Asia,
MSCI's regional index excluding Japan shed 1.4 per cent
Japan's Nikkei gave up 3.3 per cent on rising fears the Olympics planned in July-August may be called off due to the coronavirus.
Australian
shares dropped 2.8 per cent to a six-month low while South Korean shares shed 2.1 per cent.
"The coronavirus now looks like a pandemic
Markets can cope even if there is big risk as long as we can see the end of the tunnel," said Norihiro Fujito, chief investment strategist
at Mitsubishi UFJ Morgan Stanley Securities
"But at the moment, no one can tell how long this will last and how severe it will get."
WHO Director General Tedros Adhanom Ghebreyesus
said the virus could become a pandemic as the outbreak spreads to major developed economies such as Germany and France.
The global rout
knocked mainland Chinese shares lower, which have been relatively well supported this month, as new coronavirus cases in the country fell
and Beijing doled out measures to shore up economic growth.
CSI300 index of Shanghai and Shenzhen shares dropped 2.4 per cent, on track to
post its first weekly loss in three.
Fears of a major economic slump sent oil prices to their lowest level in more than a year.
US crude
futures fell 1.6 per cent to $46.35 per barrel, having lost 13.2 per cent so far on the week, which would be the deepest fall in more than
five years.
As investors flocked to the safety of high-grade bonds, US yields plunged with the benchmark 10-year notes yield hitting a
record low of 1.241 per cent
It last stood at 1.274 per cent.
That is well below the three-month bill yield of 1.439 per cent , deepening the so-called inversion of the
Historically an inverted yield curve is one of the most reliable leading indicators of a US recession.
Expectations the Fed will cut
interest rates to cushion the blow are rising in money markets
Analysts say Fed funds futures are now pricing in more than a 50 per cent chance of a 25 basis point cut at the central bank's March 17-18
meeting.
As investors rushed to safe assets, gold stood at $1,646.4 near seven-year high of $1,688.9 hit earlier this month.
In currency
markets, the yen rose to a three-week high of 109.33 to the dollar and last stood at 109.40.
The euro stood at $1.0993, having jumped over 1
per cent in the previous session, the biggest gain in more than two years as investors wound back bets against the currency versus the