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  • An investor looks at an electronic board showing stock information at a brokerage house in Nanjing.

    An investor looks at an electronic board showing stock information at a brokerage house in Nanjing. | Photo: Reuters

Published 24 February 2020

On Sunday, Chinese President Xi Jinping said that his country will step up policy adjustments to help cushion the blow to the economy from a coronavirus outbreak.

Global stocks plunged Monday, joining a global equity selloff, as fears of a coronavirus pandemic rattled investors, hampering the prospects for a global recovery in 2020.

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The Dow Jones Industrials and the S&P 500 fell more than three percent on Monday, as investors fled riskier assets. While oil prices slumped by nearly four percent as the rapid spread of the coronavirus in countries outside China added to investor concerns over the effect on demand for crude.

“The reports of the coronavirus spreading is raising more fears of demand destruction,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “When we saw the big move down in the stock market, oil traders were selling first and asking questions later.”

Europe took a beating early on, with Italy plunging more than four percent, Frankfurt and Paris down more than three and London’s FTSE dropped 2.5, meaning at least US$350 billion had been wiped off the region’ market value.

During the weekend, several countries including Iran, Italy, and South Korea reported a substantial rise in virus cases, fanning fears of a pandemic that also prompted a rush to safe-haven assets such as gold and U.S. Treasuries.

"The economic impact could be very strong. At this moment we can calculate that there will be a negative economic impact, we are not yet in a position to forecast what will happen," Italian Prime Minister Giuseppe Conte told reporters.

A yield curve - the gap between the yields on short-term bonds and long-term bonds- inversion between the three-month and 10-year U.S. Treasuries deepened in a classic recession sign. Adding to worries, Goldman Sachs slashed its U.S. growth forecast and predicted a more severe impact from the epidemic, CNBC reported. 

On Sunday, Chinese President Xi Jinping said that his country will step up policy adjustments to help cushion the blow to the economy from a coronavirus outbreak.

“The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society,” Xi said, adding that the impact would be short-term and controllable.

While Saudi Aramco expects the coronavirus impact on oil demand to be short-lived and for consumption to rise in the second half of the year, Chief Executive Amin Nasser told Reuters.

As of Monday, there are over 79,500 infected worldwide and 2,600 deaths caused by the novel virus. 

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