Gold prices steady ahead of Fed decision; weekly weakness noted
(Adds U.S. market open, byline, dateline; previous LONDON)
* Stocks snap large gains made after Biden's strong showing
* Dollar falls as traders look for another Fed rate cut
* Oil falls on virus concerns even as OPEC agrees to output
By Herbert Lash
NEW YORK, March 5 (Reuters) - Global equity markets tumbled
and the dollar slid on Thursday as the number of coronavirus
cases outside China mounted rapidly, leading California to
declare an emergency and HSBC in London to send more than 100
staff home.
Italy's UniCredit also told some staff to go home while
corporations around the world began issuing profit warnings,
with Southwest Airlines Co LUV.N saying it expected a hit of
up to $300 million to its first-quarter operating revenue.
In a sign of deep damage to the travel industry, British
regional airline Flybe collapsed, making the struggling carrier
the industry's first big casualty of the outbreak. British commercial broadcaster ITV ITV.L fell 12.0% after
warning that ad revenue for April could fall by about 10% as
travel companies deferred campaigns. "I thought 2020 would be the year of the election but it
turns out it's the year of the virus, and it's going to dominate
everything in the global economy this year," said David Kelly,
chief global strategist at JPMorgan Asset Management.
The Institute of International Finance cut its forecast for
the U.S. and Chinese economies because of the coronavirus and
warned that global growth could be the weakest since the
financial crisis a decade ago. Global growth in 2020 could conceivably approach 1%, far
below the 2.6% expansion in 2019, the Washington-based financial
industry association said. The pandemic is now in some 80
countries and has killed more than 3,000 worldwide.
Mainland China had 139 new confirmed cases as of Wednesday,
the National Health Commission (NHC) said, bringing the total
accumulated number of cases to 80,409.
U.S. markets swung sharply higher Wednesday after the strong
performance of former Vice President Joe Biden in the Democratic
nomination campaign and the U.S. House of Representatives
approved an $8.3 billion funding bill to combat the coronavirus.
But the rising number of cases, and deaths, outside of China
swiftly changed the mood, as European equity markets snapped a
three-day winning streak and U.S. stocks fell sharply.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
1.33%, while emerging market stocks rose 0.31%.
The pan-European STOXX 600 index .STOXX lost 1.35%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
699.71 points, or 2.58%, to 26,391.15. The S&P 500 .SPX lost
75.32 points, or 2.41%, to 3,054.8 and the Nasdaq Composite
.IXIC dropped 169.24 points, or 1.88%, to 8,848.85.
The dollar slipped to a fresh eight-week low as traders bet
the Federal Reserve will cut interest rates further, and gold
prices climbed about 1.5% to a more than one-week high.
Money markets are pricing in another 25 basis point cut from
the current 1% to 1.25% range at the next Fed meeting on March
18-19 and a 50 basis point cut by April. The Fed cut its target
rate by one-half percentage points on Tuesday.
The dollar index =USD fell 0.563%, with the euro EUR= up
0.57% to $1.1198.
The Japanese yen strengthened 0.94% versus the greenback at
106.55 per dollar.
U.S. economic data still does not show the impact from the
coronavirus. The number of Americans filing for unemployment
benefits fell last week, which suggests the labor market is on
solid footing despite the outbreak. Labor market strength was underscored by other data on
Thursday showing planned job cuts by U.S.-based employers fell
sharply in February.
The economic effects of the epidemic are not showing up in
the hard data that people look at but the storm is approaching,
Kelly said.
"We have not seen the eye-wall of this storm yet. But it
will gradually fade and as it does the global economy will pick
up relatively quickly in 2021," he said, an important
consideration investors need to take into account, and not to
panic.
Oil prices edged lower on coronavirus concerns, but losses
were limited as the Organization of the Petroleum Exporting
Countries agreed on deeper output cuts to bolster prices.
OPEC agreed to cut oil output by an extra 1.5 million
barrels per day in the second quarter of 2020, its deepest cut
since the 2008 financial crisis, but its action is conditional
on Russia and others joining in. Brent crude LCOc1 fell by 18 cents to $50.95 a barrel.
U.S. West Texas Intermediate CLc1 slid 13 cents to $46.65.
Spot gold XAU= added 1.7% to $1,662.55 an ounce.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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