S&P 500 may face selling pressure as systematic funds reach full exposure
* Risk assets slump in Asia, led by losses in Chinese stocks
* Worries about China virus grow before Lunar New Year
* Oil drops on threat from virus, rise in supply
* European stocks fall, ECB policy review in focus
By Marc Jones
LONDON, Jan 23 (Reuters) - World shares fell on Thursday,
led by the biggest decline in Chinese stocks in more than eight
months, as concern mounted about the spread of a deadly virus in
China.
With millions of Chinese preparing to travel for the Lunar
New Year, the potential the disease to spread, along with the
tendency of traders to reduce their exposure before holidays,
left markets struggling.
Safe options like Japan's yen and government bonds rose,
while European stocks followed Asia lower .EU . The threat to
airline travel and an increase in supply pushed oil prices to
seven-week lows. O/R
"Ultimately, the coronavirus is a slow-burning but important
story for markets that is likely to last for months rather than
just a few days," said TD Securities' European head of currency
strategy, Ned Rumpeltin. "And the natural go-to currencies when
there are headlines like these are the yen and the Swiss franc."
The Swiss franc rose to a near three-year high against the
euro overnight CHF , but it was trading little changed as the
focus in Europe turned to its central banks. /FRX
Norway's central bank had already left its interest rates
unchanged. The European Central Bank holds its first meeting of
the year later on Thursday, where it's expected to outline its
first formal policy review in 17 years.
It will probably last for most of the year and span topics
from the inflation target to digital money and the fight against
climate change.
"Quite a lot has happened in the last 17 years," Rumpeltin
said. "They are due for a rethink."
WUHAN BAN
As the virus took hold, MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.07%.
Chinese shares .CSI300 dropped 3.1%, the biggest daily decline
since May, when U.S. President Donald Trump's threats of
additional tariffs on Chinese goods rocked financial markets.
Hong Kong .HSI shares ended down 1.5% and Japan's Nikkei
index .N225 slid 1%.
Among major currencies, the Chinese yuan fell to a two-week
low, on course for its worst week since August. The Japanese yen
climbed 0.2% to secure a third day of gains.
Gold and U.S. Treasuries also rose as China blocked travel
to and from Wuhan, the city where the coronavirus outbreak
originated. Gold later recovered in Europe.
Deaths in China from the coronavirus rose to 17 on
Wednesday, with nearly 600 cases confirmed. The outbreak has
evoked memories of Severe Acute Respiratory Syndrome (SARS) in
2002-2003, another coronavirus that broke out in China and
killed nearly 800 people worldwide. "The coronavirus has introduced some caution," said Michael
McCarthy, chief market strategist at CMC Markets in Sydney.
"There is no reason to expect a global pandemic now, but there
is some repricing in financial markets."