World Shares Slump After Donald Trump Reveals Coronavirus Plans

Shares fell in Europe and Asia on Thursday after President Donald Trump announced that the US was stepping up its efforts to combat the new coronavirus outbreak that began in China, as the number of cases surpassed 81,000. Germany's DAX lost 2.2 per cent to 12,498.88 and the CAC 40 in Paris dropped 2.3 per cent to 5,59.99. In London, the FTSE 100 lost 2.5 per cent to 6,869.80. The future for the Dow Jones Industrial Average fell 0.5 per cent to 26,779.00 and the future contract for the S&P 500 was 0.6 per cent lower, at 3,092.20.

Trump told reporters late Wednesday that he was open to spending "whatever is appropriate" to fight the virus, after the Senate Democratic Leader Chuck Schumer of New York suggested USD 8.5 billion instead of the requested USD 2.5 billion. He put Vice President Mike Pence in charge of the response to the virus outbreak.

Trump said he didn't believe a pandemic was inevitable, though health officials standing beside him warned more infections are coming. And shortly after Trump spoke, the government announced that another person in the US was infected- someone in California who appears not to have the usual risk factors of having travelled abroad or being exposed to another patient.

Traders are concerned the global economy could stumble as major industrial countries struggle to contain the outbreak. News of hundreds of new infections in China and elsewhere helped pull share prices lower Thursday in Asia.

"Previous crisis playbooks have all revolved around buying the dip in equities, so I wonder just how much further the fire sale will go before the market at least starts to scale in again," Stephen Innes of AxiCorp said in a report.

"But based on last night's price action, it does appear that any bounce in stocks is likely to be short-lived. And eventually, the markets could fall deeper as investors start to think what's the point of trying to pick the bottom in the short term."

Japan's Nikkei 225 index lost 2.1 per cent to 21,948.23, while in Australia, the S&P ASX/200 dropped 0.8 per cent to 6,657.90. Hong Kong's climbed 0.3 per cent to 26,778.62.

In South Korea, where 334 new cases of the virus were reported, the Kospi dropped 1.1 per cent to 2,054.89. The central bank downgraded its growth estimate for 2020 to 2.1 per cent from 2.3 per cent and said the virus outbreak would have a short-term impact on business activity, after the economy expanded at its slowest pace in a decade last year.

The Bank of Korea kept its key policy rate unchanged, at its current record low 1.25 per cent.

The Shanghai Composite index rose 0.1 per cent to 2,991.33, while shares fell in Taiwan and most of Southeast Asia. Thailand's benchmark rose 1.5 per cent after tumbling 5.1 per cent on Wednesday following reports of newly discovered virus cases.

Investors have been moving more money from stocks into bonds in the wake of the outbreak.

The yield on the 10-year Treasury was at 1.29 per cent Thursday, down from 1.34 per cent. The yield on the three-month Treasury bill edged up to 1.51 per cent. The inversion in the yield between the 10-year and the 3-month Treasurys is a red flag for investors because it has preceded the last seven recessions.

Benchmark crude gave up 60 cents to USD 48.13 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday it lost USD 1.17 to settle at USD 48.73 a barrel. Brent crude oil, the international standard, shed 63 cents to USD 52.18 per barrel. It dropped USD 1.52 to close at USD 53.43 a barrel in London.

Gold climbed USD 7.60 to USD 1,650.70 per ounce, silver rose 17 cents to USD 18.01 per ounce and copper fell 2 cents to USD 2.58 per pound.

The dollar fell to 109.89 Japanese yen from 110.40 yen on Wednesday. The euro strengthened to USD 1.0942 from USD 1.0884.