Asia braces for more stock declines on virus angst

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(Feb 26): Asian traders prepared for more severe market moves on Wednesday after heightened concern about the spreading coronavirus triggered a slide in U.S. stocks and Treasury yields. U.S. stock futures opened modestly higher following Tuesday’s tumble.

Fears grew that the spread of the deadly virus into Europe may eventually cross the Atlantic, with the U.S. Centers for Disease Control and Prevention warning Americans to prepare for a coronavirus outbreak at home. The 10-year U.S. Treasury yield fell to a record low of 1.3055% as investors sought shelter from the virus’s impact on the outlook for growth. Futures on the S&P 500 Index edged up after a 3% slump in the gauge of U.S. shares brought its losses to 7.6% over the past four days. Australian bonds climbed as shares retreated, with equity futures pointing lower in Japan and Hong Kong.

Investor sentiment has deteriorated following a rapid increase in coronavirus cases from Italy to Iran and Japan and a growing list of companies warning that profits will suffer as growth in economies around the world gets hit. U.S. central bankers are closely monitoring the spreading virus, but it is “still too soon” to say whether it will result in a material change to the outlook, Federal Reserve Vice Chairman Richard Clarida said. That’s not swayed traders away from expectations for further easing.

“It’s the concern of the unknown,” David Kudla, chief investment strategist at Mainstay Capital Management LLC, told Bloomberg TV. “The question is, is the selling getting a bit overdone or is it a more appropriate response to how far coronavirus has spread, and that eventual impact to the economy.”

Elsewhere, volatility gauges spiked, sending the Cboe’s measure of equity gyrations surging past 30 for the first time since 2018. Crude oil remained around $50 a barrel after slumping for two straight sessions.

These are some key events coming up:

    Earnings keep rolling in from companies including: Peugeot SA on Wednesday; Baidu Inc., Best Buy Co. Inc., Occidental Petroleum Corp. and Dell Technologies Inc. on Thursday; and London Stock Exchange Group Plc on Friday.
    The Bank of Korea announces its policy decision on Thursday, with rising risks of an interest-rate cut.
    U.S. jobless claims, GDP and durable goods data are out Thursday.
    Japan industrial production, jobs, and retail sales figures are due on Friday.

These are the main moves in markets:
Stocks

    Futures on the S&P 500 Index added 0.3% as of 8:03 a.m. in Tokyo. The gauge fell 3% on Tuesday.
    Futures on Japan’s Nikkei 225 retreated 2.8%.
    Hang Seng Index futures earlier lost 1.5%.
    Australia’s S&P/ASX 200 Index declined 1.9%.

Currencies

    The yen was at 110.19 per dollar.
    The offshore yuan traded at 7.0260 per dollar.
    The euro bought $1.0880, little changed.
    The Bloomberg Dollar Spot Index dropped 0.2% Tuesday.

Bonds

    The yield on 10-year Treasuries declined two basis points to 1.35%.
    Australia’s 10-year yield lost about two basis points to 0.91%.

Commodities

    West Texas Intermediate crude oil added 0.3% to $50.08 a barrel.
    Gold was flat at $1,637.01 an ounce.