Global Fears Escalate As Virus Weighs On Economic Growth

As risk-off mode may continue to stay, gold and yen may be your best bet.

Concern about the coronavirus intensified as the tally of infections jumped over the weekend

Investors around the globe stepped up their retreat from stocks and many commodities, reflecting intensifying fears that a viral outbreak in China will deliver a fresh setback to the outlook for world economic growth. 

On the first trading day of the week, the Dow Jones Industrial Average posted its fifth consecutive daily decline, dropping 453.93 points, or 1.6%. The S&P 500 also declined 1.6%, its first drop of more than 1% since October. Meanwhile, the yield on the benchmark 10-year Treasury note fell to 1.605%, its lowest level since October, a signal that investors are eschewing risk as they reconsider an outlook that just recently had been brightening. The CBOE Volatility Index, which measures expected moves in the S&P 500 index, also climbed to its highest level since October.

It’s probably too early to determine the impact on global growth from the outbreak of this virus, which is probably the key uncertainty. Concern about the coronavirus intensified as the tally of infections jumped over the weekend. The virus has infected more than 4,000 people and killed at least 100, mostly in China’s Hubei province. It has spread to other countries including the US, Japan and South Korea, and public health officials have warned that it is growing more contagious. 

Shares of tourism-related companies and those with ties to China were among the hardest hit, after the country imposed travel restrictions in response to the outbreak. It reminded investors that this market can turn on a dime, should it start to question what was causing it to go higher.

The sharp sell-off jolted an equity market that had been unusually calm. The S&P 500 hadn’t logged a daily rise or fall of more than 1% since October. It also hadn’t suffered two consecutive daily declines since December 10.

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