Stocks crumble as deadly coronavirus spreads, safe havens in demand

SYDNEY (Reuters): Asian stocks extended a global selloff on Tuesday as China took more drastic steps to combat the coronavirus, while bonds found favour on expectations central banks would need to keep stimulus flowing to offset the likely economic drag.

As the death toll reached 100 and the virus spread to more than 10 countries, including France, Japan and the United States, some health experts questioned whether China can contain the epidemic.

China has already extended the Lunar New Year holiday to 2 February nationally, and to 9 February for Shanghai. On Tuesday, the country’s largest steelmaking city in northern Hebei province, Tangshan, suspended all public transit in an effort to prevent the spread of the virus.

With Chinese markets shut investors were selling the offshore yuan CNH= and the Australian dollar AUD=D3 as a proxy for risk.

“The wildcard is not the fatality rate, but how infectious the Wuhan virus is,” Citi economists wrote in a note.

“The economic impact will depend on how successfully this outbreak is contained.”

Analysts said travel and tourism would be the hardest-hit sectors together with retail and liquor sales though healthcare and online shopping were seen as likely outperformers.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.8% in early Asian trading on Tuesday. Japan’s Nikkei was 0.7% down, Australian shares stumbled 1.3% and South Korea’s Kospi index skidded 2.6%.

On Monday, key indexes for British, French and German equity markets slid more than 2%, as did pan-European markets on worries about the potential economic impact from the deadly virus. Stocks on Wall Street fell more than 1%.