Dubai: Global markets followed Hong Kong and other Asian markets down again on Thursday as concerns an over an escalating coronavirus outbreak continued to raise concerns about the global economy.
Wall Street and much of Asia, which on Wednesday has seemed calmer following panic selling earlier in the week, resumed the selling spree on Thursday.
“The return in risk-on sentiment yesterday was quite short lived as concerns over the coronavirus returned to the fore and wiped out the positivity caused by positive earnings statements,” said Daniel Marc Richards, Mena economist at Emirates NBD.
Japan’s Nikkei 225 and South Korea’s Kospi each ended down 1.7 per cent. Among other Asian markets, Taiwan’s Taipei, returning from the Lunar New Year holiday, pushed the market down by 5.8 per cent and was the biggest loser in the region. Stocks in Tokyo and Seoul closed down 1.7 per cent, while in Hong Kong they fell 2.6 per cent.
China’s markets remain closed for an extended holiday until February 3, but investors punished the stocks of Chinese companies listed in Hong Kong. European stocks and US futures are also falling. The Dow, S&P 500 and Nasdaq Composite were all down roughly 0.6 per cent.
Investors grew alarmed after regulatory bodies and analysts provided more definite signs on how the coronavirus epidemic is disrupting the world’s second-largest economy, fuelling concerns that the outbreak will cause a definite dent in global growth in the first half of this year.
Regulators voice concerns
World Health Organisation (WHO) officials expressed “great concern” of the virus’ spread outside of China and is meeting to consider declaring the coronavirus as a global crisis, an announcement which is widely expected to weigh on market sentiment.
US Federal Reserve Chairman Jerome Powell, meanwhile, said that the central bank is “carefully” monitoring the coronavirus situation. Powell predicted it will probably disrupt the Chinese economy. But he also noted that the economic disruption from the disease remains in “very early stages”, and it’s unclear how far it will spread and how much damage it will do to economies.
Analysts at Moody’s Analytics said that as the risk of contagion affects economic activity and financial markets, the immediate and most significant economic impact is in China and will reverberate globally, given the importance of China in global growth.
“It’s going to be challenging to put concerns over the coronavirus to one side, but fortunately for risk, the robust data in the US should at least be able to keep risk a wobbly but even keel,” wrote Stephen Innes, chief market strategist at AxiTrader.
The central bank’s Federal Open Market Committee said it will hold its interest rates steady, decision which was largely expected and marked the second straight meeting the Fed made no changes to rates, following three consecutive reductions in 2019.
“The likelihood of a hike by the US Fed now looks vanishingly unlikely this year after Jerome Powell’s statement, barring a surprise uptick in inflation,” Richards said. “The market implied probability of a rate hike at the next meeting in March has fallen from around 12 per cent to 0 per cent, with no hikes priced in through January 2021.”
UAE markets slip in light trade
Top indices in Dubai and Abu Dhabi slipped on Thursday, in a day of light trading and when banking stocks eked out gains.
The Dubai Financial Market (DFM) index edged down 0.5 per cent to 2,790 points, while the Abu Dhabi Securities Exchange (ADX) slipped 0.2 per cent to 5,156.
In Dubai, Air Arabia dropped 1.9 per cent, while Dubai Islamic Bank slipped 1.2 per cent ahead of the lender reporting its full-year results. In Abu Dhabi, International Holding was up 1.5 per cent, a day after the company reported a rise in full-year profit. Telecom heavyweight etisalat was up 0.5 per cent.