(AP) — Shares were mostly lower in Asia on Tuesday after Wall Street suffered its worst session in two years, with the Dow Jones Industrial Average slumping more than 1,000 points on fears that a viral outbreak that began in China will weaken the world economy.
Japan’s Nikkei 225 index lost 3%, to 22,686.61, after it reopened from a holiday on Monday. Hong Kong’s Hang Seng edged 0.2% lower to 26,777.88 and the Shanghai Composite index sank by 1.6% to 2,984.19. In Australia, the S&P ASX/200 shed 1.2% to 6,896.10.
South Korea’s Kospi rebounded from a steep loss on Monday, gaining 0.6% to 2,091.80. Shares also rose in Singapore but fell elsewhere in the region.
In Kuala Lumpur, Malaysia’s main benchmark dropped by 2.7% amid political upheaval after Prime Minister Mahathir Mohamad offered his resignation to Malaysia’s king and his political party quit the ruling alliance. The king accepted his resignation.
Overnight on Wall Street, traders sought safety in U.S. government bonds, gold and high-dividend stocks such as utilities and real estate. The yield on the 10-year Treasury fell to the lowest level in more than three years.
Technology companies, whose supply chains have been disrupted, accounted for much of the broad market slide, which wiped out all of the Dow’s and S&P 500’s gains for the year.
More than 79,000 people worldwide have been infected by the new coronavirus. China, where the virus originated, still has most of the cases and deaths. The country’s economy has been hardest hit as businesses and factories sit idle and people remain homebound because the government has severely restricted travel and imposed strict quarantines to. Economists have cut growth estimates for the Chinese economy.
The ripple effects of the outbreak are being felt around the world, as China is both a major importer of goods and a source of parts for intricate supply chains.
China’s government promised tax cuts and other aid Monday to help companies recover from anti-disease controls that shut down much of the world’s second-largest economy in January. Economists say it is likely to be at least mid-March before automakers and other companies return to full production.
Still, while concern about the virus has prompted some sporadic selling in the past few weeks, for the most part global markets have traded as if the virus’ impact would be limited. Until Monday, the major U.S. stock indexes had all been in the green.
Crude oil prices slid by 3.7% Monday but were stable early Tuesday. Benchmark U.S. crude oil rose by 26 cents to $51.69 per barrel in electronic trading on the New York Mercantile Exchange. It fell by $1.95 to settle at $51.43 a barrel on Monday. Brent crude oil, the international standard, gained 28 cents to $56.06 per barrel. On Monday, it dropped by $2.17 to close at $55.77 a barrel.
The rapid spread from China to other countries is upping increasing about the threat the outbreak poses to the global economy.
“Stock markets around the world are beginning to price in what bond markets have been telling us for weeks — that global growth is likely to be impacted in a meaningful way due to fears of the coronavirus,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
The Dow lost 1,031.61 points, or 3.6%, to 27,960.80. The S&P 500 index skidded by 3.4%, to 3,225.89. The Nasdaq dropped 3.7% to 9,221.28 — its biggest loss since December 2018. The Russell 2000 index of smaller company stocks dropped by 3% to 1,628.10.
The slump in U.S. indexes followed a selloff in markets overseas. Italy’s benchmark tumbled after the number of virus cases there rose dramatically and a dozen towns in the northern part of the country were put under quarantine. More cases of the virus are being reported in the Middle East as it spreads to Iran, Iraq, Kuwait, and other nations.
Technology companies were among the worst hit by Monday’s selloff. Apple, which depends on China for a lot of business, slid by 4.8%. Microsoft dropped 4.3%. Banks including JPMorgan and Bank of America were also big losers.
Cruise lines suffered steep losses, as Carnival, Royal Caribbean Cruises and Norwegian Cruise Line were three of the top four decliners in the S&P 500, each falling by around 9%. American Airlines also dropped sharply, and after the market closed, United Airlines withdrew its earnings estimate for 2020 because of uncertainty about how long the virus epidemic will last
Gilead Sciences climbed 4.6% and was among the few bright spots. The biotechnology company is testing a drug to treat the new coronavirus. Bleach-maker Clorox rose by 1.5%.
Utilities and real estate companies held up better than most sectors. Investors tend to favor those industries, which carry high dividends and hold up relatively well during periods of turmoil, when they’re feeling fearful. They’re now the best-performing sectors in the S&P 500 for the year, while the tech sector has lost ground.
In the eyes of some analysts, stocks are finally catching up to the bond market, where fear has been dominant for months.
Investors have turned to the safety of bonds throughout 2020, even as stocks overcame stumbles to set more records. The 10-year yield had recovered to 1.40% early Tuesday after dipping to an intraday record low Monday of 1.325% set in July 2016, according to Tradeweb. The 30-year Treasury yield fell further after setting its own record low, down to 1.83% from 1.92% late Friday.
Gold retreated as shares steadied, losing $16.50 to $1,660.30 ounce; silver lost 28 cents to $18.60 per ounce and copper fell by 3 cents to $2.59 per pound.
The dollar rose to 110.85 Japanese yen from 110.68 yen on Monday. The euro strengthened to $1.0865 from $1.0853.