Gold prices steady ahead of Fed decision; weekly weakness noted
(Adds close of U.S. markets)
* Stocks snap large gains made after Biden's strong showing
* S&P 500 closes 10.7% lower from all-time closing high
* Dollar slumps 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 coronavirus spread
quickly outside China, leading Britain to prepare for a
significant increase in cases and France to say it appeared
"inevitable" the outbreak would become an epidemic in the
country.
HSBC in London sent more than 100 staff home and Italy's
UniCredit told some staff the same, while companies began
issuing profit warnings. Southwest Airlines Co LUV.N said it
expected a hit of up to $300 million to first-quarter operating
revenue. In Britain, regional airline Flybe collapsed, making it the
industry's first big casualty of the outbreak, and broadcaster
ITV ITV.L fell 12.0% after warning that ad revenue for April
could fall about 10% as travel companies deferred campaigns.
Three more people died from a coronavirus infection in
France, taking the total to seven, and Britain logged its first
death from the pathogen. The number of people in
New York state who have tested positive for the virus doubled to
22 following a significant increase in testing. "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, and warned that global growth
could be the weakest since the financial crisis. Global growth in 2020 could approach 1%, far below last
year's 2.6% expansion, the Washington-based financial industry
association said. The pandemic has spread to 80 countries and
has killed more than 3,000 worldwide.
In Wuhan, the Chinese epicenter of the epidemic, an expert
with the country's top panel battling the illness said the city
will likely see new infections drop to zero by the end of
March. Total cases in China rose to 80,409.
In Italy, where the virus has hit Europe the hardest, the
Civil Protection Agency said the death toll rose by 41 from
Wednesday to 148, with the contagion showing no sign of abating.
U.S. stocks fell sharply and European equities snapped a
three-day winning streak as the epidemic's advance darkened the
mood. A day earlier, Wall Street rose on former Vice President
Joe Biden's strong performance in the Democratic nomination
campaign and the U.S. House of Representatives' approval of an
$8.3 billion funding bill to combat the coronavirus. The Senate
passed the legislation on Thursday. MSCI's gauge of stocks across the globe .MIWD00000PUS shed
1.89%, while emerging market stocks were little changed.
The pan-European STOXX 600 index .STOXX lost 1.43%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
969.58 points, or 3.58%, to 26,121.28. The S&P 500 .SPX lost
106.18 points, or 3.39%, to 3,023.94 and the Nasdaq Composite
.IXIC dropped 279.49 points, or 3.1%, to 8,738.60.
The benchmark S&P 500 closed down 10.7% from its closing
all-time high recorded Feb. 19.
The dollar index slipped to an eight-week low as traders bet
the U.S. Federal Reserve will cut interest rates further, and
gold prices climbed about 1.5% to the highest in more than a
week.
The Fed cut rates by one-half percentage point on Tuesday.
Money markets are pricing in another 25d-basis-point cut at the
next Fed meeting in two weeks and a 50-basis-point cut by April.
The dollar index =USD fell 0.826%, with the euro EUR= up
0.89% to $1.1233, a 2020 high.
The Japanese yen JPY= strengthened 1.38% versus the
greenback at 106.09 per dollar.
U.S. Treasuries rallied as investors worried about the
economic implications of increasing quarantines.
Corporate mergers could shrink in number by as much as 25%
this year as executives fret about the coronavirus and the
impact of this year's U.S. election, said Blair Effron,
co-founder of major M&A adviser Centerview Partners U.S. economic data still does not show the impact from the
coronavirus. The number of Americans filing for unemployment
benefits fell last week. Labor market strength was
underscored by other data showing planned job cuts by U.S.-based
employers fell sharply in February.
The epidemic's impact is not showing up in data 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, a consideration
investors need to take into account and to not panic.
Benchmark 10-year notes US10YT=RR rose in price to push
their yield lower to 0.912%.
Oil prices edged lower, but losses were limited as the
Organization of the Petroleum Exporting Countries (OPEC) agreed
on deeper output cuts to bolster prices. Brent crude LCOc1 settled down $1.14 at $49.99 a barrel.
U.S. West Texas Intermediate CLc1 slid 88 cents to settle at
$45.90.
U.S. gold futures GCv1 settled 1.5% higher at $1,668 an
ounce.
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