Global stock markets tumble on Covid-19 fears
By ECCT staff writers
Global stock markets suffered some of their worst drops in more than two years on Monday, following fears that the outbreak of the 2019 novel coronavirus (Covid-19) will be much more damaging to the economy than originally feared.
The US’ benchmark S&P 500 plunged 3.4%, erasing all of its gains for the year to date in its biggest fall since trade tensions rattled markets in February 2018. The FTSE All-World index lost 3% and the Kospi in South Korea fell sharply, following hundreds of confirmed cases in the country over the weekend. Today, Japan’s Topix was down 3.7% and on track for its worst one-day performance in over a year, after returning from a long weekend. Australia’s S&P/ASX 200 fell as much as 2.6%.
Here in Taiwan, the weighted index on the Taiwan Stock Exchange (TWSE) or the Taiex closed down 151.48 points, or 1.30% on Monday. Downward pressure on the local main board escalated as local investors were spooked by the large spike in the confirmed cases in South Korea. Investors dumped their holdings in tech heavyweights, in particular contract chipmaker Taiwan Semiconductor Manufacturing Company (TSMC), the most heavily weighted stock on the local market. TSMC fell 1.54%. In addition, on the back of fears that global supply chains will be disrupted by the outbreak in China, Taiwan’s largest contract manufacture and iPhone assembler, Hon Hai Precision Industry, second to TSMC in terms of market capitalization, fell 1.22% while Largan Precision, a supplier of smartphone camera lenses to Apple, lost 2.74%.
In the US markets, investors sold off equities in favour of so-called “safe havens” of government debt, pushing the yield on the US 10-year Treasury bond down 10.2 basis points to 1.369%, just above its record low, as expectations grew that the Federal Reserve would be pushed to cut interest rates by April. In addition, the gold price continued its surge, rising an additional 1% to over US$1,650 per ounce, adding to large gains over the past month and reaching a seven year high when measured in US dollars and a record level when measured in euros.
Energy stocks led the stock market decline in the US, driven by a weakening oil price, followed by technology shares. Advanced Micro Devices dropped 7.8% amid concerns the outbreak would disrupt computer-chip supply chains.
Transport stocks were also battered, with American Airlines, Delta and FedEx all dropping more than 5%, while the KBW index of US banks fell 3.6%, its worst day since August.