Virus fears push Asian stocks to seven-week low, currencies fall

SINGAPORE (Reuters): Asian stocks and currencies fell on Thursday as the death toll from a new virus spreading in China rose and more cases were reported around the world.

Federal Reserve Chairman Jerome Powell acknowledged on Wednesday the risks from any slowdown in the world’s second-largest economy but said it was too early to say what the extent of the impact would be on the United States.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7% to an almost seven-week low. It has dropped for six straight sessions.

Japan’s Nikkei dropped 2%. Hong Kong’s Hang Seng fell 1.7% and has lost more than 8% in the 10 days since the spread of the virus roiled markets.

Taiwan’s benchmark index slumped 4.9%, which if sustained would be its biggest daily drop in 15 months, in its first session since the Lunar New Year break. The Taiwan dollar fell half a percentage point to its lowest this year.

Yields on benchmark 10-year US Treasuries, which fall when prices rise, hit a three-month low of 1.5600%.

China’s National Health Commission said on Thursday the total number of confirmed deaths from the coronavirus in the country climbed to 170 as of late Wednesday and the number of infected patients rose to 7,711.

Infections have been reported in at least 15 other countries and in every province of mainland China. 

 “In a matter of days, the coronavirus has shuffled the cards, and Fed policy is not sitting quite as comfortably,” said Alan Ruskin, Chief International Strategist at Deutsche Bank.

“The Fed, like everybody else, is going to have a tough time quantifying the scale of the potentially large shock emanating out of China.”

J.P. Morgan economists on Thursday said a big negative shock in the current quarter could knock China’s growth from a previously-forecast 6.3% to 4.9%, for a year-on-year figure of 5.6%. ING economists made a similar forecast on Wednesday.

 “The spillover effect from China to the rest of world tends to be much larger than the SARS episode,” they added, pointing out China’s share of the world economy has more than trebled since then.

China’s yuan, which had steadied on Wednesday, was again falling – dropping 0.2% to 6.9871 per dollar along with other trade-exposed currencies in the region.

The Australian dollar, New Zealand dollar, Korean won all fell, while the safe havens of the Japanese yen and Swiss franc were firm.