* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asian shares slip on coronavirus fears
* Safe-haven demand rises, risk assets sell off
* Virus contagion regional, rather than global shock -
JPMorgan
By Swati Pandey and Wayne Cole
SYDNEY, Jan 28 (Reuters) - Asian shares slipped again on
Tuesday as China took more drastic steps to combat the
coronavirus, while bond yields fell globally on expectations
central banks would need to keep stimulus flowing to offset the
likely economic drag.
As the death toll reached 81 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. Beijing has already extended the Lunar New Year holiday to
Feb. 2 nationally, and to Feb. 9 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.
"What is becoming clearer is that the Chinese economy will
take a hit for a time," said David de Garis, a director of
economics at National Australia Bank.
"Travel and tourism is being impacted, including in
Australia where China has the largest share in exports of
personal tourism and education."
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was 0.4% lower in early Asian trading on
Tuesday. Australian shares .AXJO stumbled nearly 1%.
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%.
E-Mini futures for the S&P 500 ESc1 held near three-week
lows after slumping 1.6% overnight for their biggest single day
percentage loss since last October.
Analysts at JPMorgan said the coronavirus outbreak was an
"unexpected risk factor" for markets though they see the
contagion as a regional rather than a global shock.
"The rise in risk aversion and worry of a region-wide demand
shock ... means the knee-jerk market reaction will likely be to
richen low-yielding government bonds," JPMorgan analysts wrote
in a note.
"Concerns about coronavirus contagion has driven yields
lower and is the latest risk of a series that have driven US
Treasuries (UST) yields far below what fundamentals indicate. We
remain short 30-year UST."
Treasury 10-year note yields US10YT=RR dived as deep as
1.60%, the lowest since Oct. 10. Yields on two-year paper
US2YT=RR also fell sharply while Fed fund futures 0#FF:
rallied as investors priced in more risk of a rate cut later
this year.
Futures imply around 35 basis points of easing by year end
FEDWATCH . The Federal Reserve is widely expected to stand pat
at its policy meeting this week, but markets will be sensitive
to any changes to its economic outlook.
JPMorgan said they have not yet altered their developed or
emerging markets forex forecasts though they were taking profits
on their "bullish" EUR/USD positions and remain "considerably
long" on Swiss francs which benefits from safe-haven demand.
Short build-up in the Aussie was another risk hedge.
In the currency market, the dollar index .DXY added 0.1%
to 97.948 led by safe-haven demand. The euro EUR= was steady
at $1.1019.
The yen JPY= , which has been rising for the past five
sessions, paused at 108.12 per dollar. The Aussie AUD=D3 also
steadied after posting its biggest one-day percentage loss in
three weeks on Monday.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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