Equities crash, rush to invest in safe gold
Gold, which is viewed as a safe place to invest during market tumult, rose to a seven-year high on Monday as investors seemed to sense a further disruption in economic activity owing to the jump in coronavirus related deaths. Gold futures for April delivery topped the Rs 43,000 per 10 gm mark for the first time.
Investors are jittery since the virus outbreak, because of the role Chinese factories play in global business and because it is a huge consumer market itself.
The S&P 500 dropped nearly 3 percent at the start of trading, after European markets recorded their worst day since 2016 and major benchmarks in Asia closed sharply lower. The Dow Jones industrial average fell more than 900 points. Indian benchmark equity index, Sensex, lost nearly 807 points during afternoon trade
What rattled stocks on Wall Street was the spike in corona virus cases in Italy and South Korea and the concern it has ignited among investors about the potential damage the spurt might inflict on the global economy.
Airline and technology stocks were particularly hard hit. Delta Air Lines and American Airlines were each more than 4.5 percent lower, while shares of Apple — which said last week that the outbreak in China was hurting both its supply of iPhones and demand for it — fell more than 5 percent in early trading. The deadly virus has infected more than 77,000 people in China and was described by Chinese President Xi Jinping as the "largest public health emergency since the founding of the country".
Oil prices slid as demand for crude waned. Brent crude, the international benchmark, fell nearly 4 percent to about $56.40 a barrel on Monday, as did West Texas intermediate, the main U.S. benchmark. The lower prices will increase pressure on OPEC and Russia to reduce oil supplies at their next meeting, which is scheduled for early March in Vienna.
The South Korean market ended 3.9 percent lower, after a surge in coronavirus cases prompted President Moon Jae-in on Sunday to put the country on its highest level of alert.
An analyst note from JPMorgan warned “the immediate impact of a large China demand and supply shock will be substantial.” The analysts predicted that global GDP would slow to about 1 percent this quarter, but said they expected a strong recovery midyear.
In a commodities report, Citi Research analysts said that the virus’s ripple effect on the global supply chain may be more problematic than expected.