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Coronavirus cases outside China rattle markets

Oil prices slumped, equity markets in Asia-Pacific retreated and US stock futures fell sharply following a jump in new coronavirus cases in Italy and South Korea over the weekend.

South Korea raised its alert level to red after the number of confirmed cases in the country surged to more than 600 in a matter of days. Meanwhile, Italy quarantined a group of northern towns as the number of cases topped 150.

Brent crude was down 2.7 per cent at $56.94 a barrel while S&P 500 futures fell 1.3 per cent. For equities, South Korea’s Kospi shed 2.4 per cent and the S&P/ASX 200 was down 2 per cent in Australia.

The offshore renminbi also weakened 0.3 per cent against the dollar to Rmb7.0557.

Gold, which is seen as a haven in times of uncertainty, was up 1.3 per cent at $1,664 per ounce at a seven-year high.

South Korean President Moon Jae-in warned on Sunday of a “crucial watershed” and said “the next few days will be a very important critical moment”. The country’s capital, Seoul, reported 256 new cases on Sunday.

Italy quarantines 10 towns to control spread of virus

Italy has placed at least 10 towns under strict quarantine in a bid to control the largest outbreak of coronavirus outside Asia.

The country has now reported 152 cases from the total count of just 3 on Friday morning as well as three deaths linked to coronavirus. In response, authorities have cancelled the last days of the Venice Carnival and closed schools and universities.

Read our full coverage here

Coronavirus puts China’s exotic animal trade under pressure

China has a widespread tradition of consuming exotic wild animals as food or medicine, despite the implication of some species such as civet cats in the Sars epidemic 17 years ago.

The lucrative industry is now in the sights of China’s senior leadership following the animal trade’s suspected role in the deadly coronavirus outbreak.

Read more in our coverage here

South Korea reports 161 new coronavirus cases

Song Jung-a reports from Seoul

South Korea’s government is considering an extra budget to deal with the rapid spread of the novel coronavirus, which has pushed the Korean won to a six-month low and sparked heavy foreign selling of Korean stocks, as the country reported 161 new cases.

The ruling Democratic Party has asked the government to draw up a supplementary budget, which is likely to be nearly $10bn, after President Moon Jae-in on Sunday put the country on the “red” alert level that can be used to close schools and ban public gatherings.

The number of new cases jumped 20-fold over five days with the total number of infected patients now reaching 763, with six deaths. The majority of infections were linked to a fringe church in the country’s fourth-largest city of Daegu, about 235km south-east of Seoul, and a hospital in the neighbouring county of Cheongdo. South Korea has designated the two areas as “special care zones” to focus its medical resources.

“The key will be the pace. We call for the government to draft a supplementary budget proposal immediately and report it to the national assembly,” Lee In-young, floor leader of the ruling party, told reporters on Sunday. The ruling party held a meeting with officials from the government and the presidential Blue House to discuss the plan, according to state-run Yonhap News.

The Kospi Composite index was trading nearly 3 per cent lower on Monday morning while the won dropped 0.5 per cent to Won1,217.90 per dollar, the weakest since August.

The government on Monday vowed to act “quickly, firmly” in case the currency moves excessively in one direction. The won is Asia’s second-worst performer against the dollar so far this year.

“The government will do its utmost to minimise the fallout on our economy and maintain the momentum for its recovery by preparing for the worst-case scenario,” said vice finance minister Kim Yong-boem.

The Bank of Korea will convene a monetary policy board meeting on Thursday, where it is expected to cut interest rates from 1.25 per cent and revise down its 2.3 per cent growth forecast for this year. The South Korean economy grew 2.0 per cent last year.

Air New Zealand warns of $47m hit from weak demand

Jamie Smyth reports from Sydney

Air New Zealand has warned the spread of the coronavirus will dent 2020 earnings by up to NZ$75m ($47.4m), as it announced a series of cost cuts aimed at mitigating the impact of softer demand for Asian travel.

The airline said on Monday it is suspending flights to Seoul from March 7, which together with a halt on flights to mainland China and frequency reductions on its Hong Kong routes would reduce total Asian capacity by 17 per cent until June.

Capacity between on its Australian routes will be reduced 3 per cent while domestic capacity will fall by 2 per cent, said the airline.

New Zealand is among the countries most exposed to the Chinese economy, due to high levels of tourists and international students.

The airline said it is targeting earnings before tax in the range of NZ$300-350m in 2020, if the adverse impact of the coronavirus is NZ$55m- the mid point of its guidance range of NZ$35-75m.

China reports 150 new coronavirus deaths

China reported 150 new deaths from coronavirus to the end of Sunday, with just one of those cases from outside Hubei, the centre of the outbreak. That figure was up from 97 new deaths for the previous day. It takes the total number of deaths to 2,592 in the mainland.

There were 409 new cases in the mainland, taking the total to 77,150.

BlueScope Steel flags hit to China business

Jamie Smyth reports from Sydney

BlueScope Steel has warned its China business would be “heavily impacted” by the spread of the coronavirus, as it blamed a fall in steel prices for a 70 per cent drop in net profits after tax in the first half of 2020.

Australia’s biggest steelmaker said net profit after tax fell to A$185.8m ($122.6m) in the six months to end December and warned of uncertainty in key markets due to the impact of the coronavirus. BlueScope shares fell by as much as 10 per cent to A$12.44 following the announcement.

Mark Vassella, BlueScope chief executive, said BlueScope’s China operations had now all resumed following the implementation of return to work guidelines from Beijing, except for a sales office in Hubei. But the February and March business performance would be “heavily impacted” and the rate of the recovery remains unclear at this point, he said.

BlueScope operates three businesses in China, including a metallic coating and painting facility in Suzhou, seven building systems manufacturing facilities, 32 sales and marketing offices. It employs 2,000 people in China.

BlueScope said it expects second-half 2020 earnings before interest and tax to be similar to the first half, which was A$302.4m.

Pakistan and Afghanistan close land borders with Iran

Farhan Bokhari reports from Islamabad

Pakistan and Afghanistan have closed their land borders with Iran, in a bid to prevent the spread of coronavirus, as Iran wrestles with a worsening outbreak.

Pakistani officials have expressed concern that the virus may already have spread into Afghanistan, due to the heavy border trade and traffic between Iran and Afghanistan.

Afghan health officials in a border province next to Iran have detected three suspected cases of coronavirus, though these have yet to be confirmed.

Iranian authorities closed schools and universities after at least 43 people were confirmed to have the virus in the country, with eight deaths linked to coronavirus.

Tensions flare between India and China over coronavirus measures

Amy Kazmin reports from New Delhi

The coronavirus crisis has led to a sharp flare-up in tensions between neighbours China and India, with Beijing accusing New Delhi of wrongfully barring the export of respiratory masks and other protective gear urgently needed for Chinese medical workers.

India’s directorate general of foreign trade banned the export of respiratory masks and protective clothing at the end of January, as the WHO declared coronavirus as a global public health emergency.

However, New Delhi announced last week that it planned to send a special C-17 military transport plane loaded with protective gear and other medical to China as a one-time exemption to the export ban as a gesture of “solidarity of the people of India with the people of China.”

But that has failed to failed to placate Beijing, which has yet to grant permission for the special flight to operate.

For its part, New Delhi also wants to use the empty plane to evacuate many of its citizens still stranded in the stricken Hubei province. It has has offered to help citizens of some of its smaller neighbouring countries to leave China.

A statement posted on the website of China’s embassy to India on Monday said that “Chinese medical institutions, charity organisations and local authorities complain that the medical products they purchased in China are prohibited for export by the Indian side.”

The statement went on to demand that India “review the epidemic situation in an objective manner, handle China’s much needed items in a calm and constructive way, and resume normal personnel exchanges and trade between our two countries as soon as possible.”

India has evacuated around 650 of its citizens in two separate flights this month, but many are still stranded in Hubei province and now eager to return home as the outbreak continues.

India, however, has defended its export ban, saying “these items are in short supply here too.”

“Just like any other country, India with a billion plus people has the responsibility to take necessary measures to combat the spread of the COVID-19 outbreak,” an Indian government spokesman said, responding to China’s complaint.

The Indian spokesman appealed to China to grant permission for the special relief flight to operate, and to “allow Indian citizens and those of our neighbouring countries to return by the same flight”.

Chinese steel inventories reach record levels as demand slows

Christian Shepherd reports from Beijing

Steel is stacked up to record levels in warehouses across China, as the coronavirus outbreak has put a freeze on construction and manufacturing that account for over half of global demand for the material.

A total of 34.3 million tonnes of finished steel products – the highest level ever recorded – were being held by steel makers and traders as of February 20, according to Shanghai-based industry data provider Mysteel.

In a press conference on Sunday, the China iron and steel association warned that mills should actively cut back on production or risk causing oversupply and rising debt levels in the industry.

China’s steel mills usually run through the Lunar New Year, ticking over on minimum output in order to avoid the high cost of restarting idled blast furnaces.
This leads to an annual build up of inventory over the holiday, when the vast majority of China’s construction workers leave building sites and go home to visit family.

This year, government travel restrictions and curbs on business, aimed at combating the spread of the virus, have extended shutdowns of China’s construction, with only 10 per cent of 7,326 projects having restarted, according to a Mysteel survey.

Oversupply of steel in China has in the past plummeted global prices and led to dumping of Chinese products in global markets, putting pressure on struggling manufacturers in Europe and North America.

Europe: what you missed

A spike in new coronavirus cases in Italy and South Korea over the weekend unnerved markets with oil prices down 2.4 per cent, South Korean stocks sliding 3.4 per cent and US stock futures slipping 1.4 per cent. Read more here.

South Korea reported 161 new cases on Monday, taking the total number of confirmed coronavirus cases in the country to 763. Seoul raised its alert level to “red”, allowing the government to take steps to control the virus.

There were 409 new cases of the virus across China to the end of Sunday, with the bulk of those in Hubei, the province at the centre of the outbreak, taking the number of cases in the mainland to 77,150. There were 150 new deaths.

Air New Zealand said it expects a $47m dent to 2020 earnings on low demand for travel in Asia. And shares in Australia’s BlueScope Steel fell by as much as 10 per cent as the company warned its China business would be “heavily impacted” by the spread of the virus.

Pakistan and Afghanistan have closed their land borders with Iran after at least 43 cases were found in the country.

Wuhan to allow healthy non-residents to leave the city

Sun Yu reports from Beijing

Wuhan, the city at the centre of the coronavirus outbreak, has eased travel restrictions following a one-month lockdown as the epidemic began to show signs of moderation.

The city’s government said it would allow non-local residents, who are healthy and have no close contact with virus carriers, to travel elsewhere. Patients with certain disease are also permitted leave the city to seek treatment.

The relaxation remains limited as the city government said yesterday it would continue to ban urban and rural residents from leaving their neighbourhood for “an extended period of time” in order to “thoroughly eliminate infection sources”.

South Korea places 7,000 soldiers in quarantine

Song Jung-a reports from Seoul

South Korea has placed more than 7,000 soldiers under quarantine to prevent the new coronavirus from spreading further into barracks as 11 soldiers have tested positive so far, the defence ministry said on Monday.

The ministry added that about 350 soldiers were believed to have been in contact with the infected or are showing symptoms, raising fears that the number of new cases could increase sharply in barracks. All military bases in the country have been in lockdown since three soldiers tested positive on Friday.

“We are basically placing all of the 350 soldiers under quarantine individually,” a ministry spokesman told a briefing. “About 7,000 soldiers are also under quarantine as a prevention measure as military barracks are all about collective life.”

In a drastic effort to contain the viral outbreak, the 600,000-strong military has also suspended its physical examinations for potential conscripts for the next two weeks.

However, concerns grew over the possibility of mass contagion in the military, where the soldiers under quarantine are held in close quarters and indoors with mass catering.

Health experts cautioned that barracks, where a group of soldiers live together, could be more conducive to mass contagion and result in a rapid spread of the virus like in the case of the Diamond Princess cruise ship, where nearly one-fifth of its 3,711 passengers and crew became infected.

“Soldiers could be more vulnerable to the spread of this virus as they spend 24 hours with their colleagues in barracks so more care and caution are needed to prevent contagion,” said Kim Woo-joo, a professor of infectious medicine at Korea University Guro Hospital. “But it is too much to compare it to the cruise ship case because barracks are not like an isolated camp on the sea”.

Primark says it is well stocked to weather short-term impact of virus

Discount clothing retailer Primark has said it does not expect any immediate impact from the coronavirus shutdown in China because it had already refreshed its stocks ahead of the outbreak.

In a statement this morning, the retailer’s owner, Associated British Foods, said:

Primark sources a broad assortment of its product from China. We typically build inventories in advance of Chinese New Year and, as a consequence, are well stocked with cover for several months and do not expect any short-term impact.

The group said it was in touch with its suppliers in China to determine the impact on its supply chains. If production delays are extended, it could face supply shortages later in the year. It said it was looking at strategies to deal with this – including ramping up production from suppliers in other regions.

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Ten-year Treasury yield hits lowest level since 2016 in rush to safety

US sovereign bonds and gold have rallied strongly amid growing concern over the spread of the novel coronavirus outside of China.

The 10-year Treasury yield dropped as much as 4.6 basis points (0.046 percentage points) to 1.424 per cent, the lowest level since July 2016. Yields on two and 30-year Treasuries fell by similar margins.

The drop in yield, which points to a rally in price, comes as investors shift into assets perceived to be havens and away from riskier assets.

Gold jumped 1.6 per cent to $1,669 a troy once. MSCI’s broad measure of equities in Asia was down 1.3 per cent in recent trade. Seoul’s Kospi index was under intense pressure, closing down 3.9 per cent.

In Europe, stock-index futures pointed to falls of around 2 per cent in Germany, the UK and France. US S&P 500 futures were down 1.6 per cent.

Afghanistan confirms first case of virus

The first case of Covid-19 has been confirmed in Afghanistan, the country’s health minister said this morning, according to a report by Reuters.

The confirmation comes after Afghan health officials in a border province next to Iran detected three suspected cases of coronavirus.

Afghanistan, along with neighbouring Pakistan, has closed its borders with Iran, where cases have jumped in recent days. At least 43 cases of the disease have been confirmed in Iran, with eight deaths linked to the disease, forcing officials there to shut schools and universities.

Pakistani officials had earlier expressed concern that the heavy border trade and traffic between Iran and Afghanistan could have led to the virus reaching the country before the border closure.

Cases detected in Kuwait and Bahrain as Iran outbreak spreads

Kuwait and Bahrain reported their first coronavirus cases as an outbreak in Iran spreads across the Gulf, reports Simeon Kerr in Dubai.

Kuwait’s state news agency on Monday reported that three people, including a Kuwaiti and Saudi national, who had returned from the Iranian city of Mashhad had contracted the virus. Kuwait has airlifted more than 800 nationals back from Iran since the spread of the virus surged there last week.

The health ministry in Manama said a Bahraini citizen arriving from Iran had been transferred to hospital for treatment under isolation.

Iran, which confirmed its first cases last week, says the number of infections has risen to 43 and eight deaths. Most of the cases have been reported in the holy Shia city of Qom, an important religious pilgrimage site. The virus has since spread to other cities.

Most of Iran’s neighbours have closed land borders and suspended air traffic with the Islamic republic.

The United Arab Emirates, the first Gulf state to report cases from among a group of Chinese tourists, has 11 cases of the virus, three of whom have recovered.


European stocks drop sharply at the open

European equity markets have followed their Asian counterparts sharply lower as trading begins following a surge in new coronavirus cases over the weekend in Italy, South Korea and Iran.

• The broad Stoxx Europe 600 fell 2.4 per cent.

• Paris’s Cac 40 shed 2.5 per cent.

• London’s FTSE 100 dropped 1.8 per cent.

• Frankfurt’s Dax 30 slipped 2.6 per cent.

The move in European markets follows an earlier sell-off in Asian equities as the spread of the coronavirus outbreak outside China sends investors in search of safer assets.

Gold, traditionally seen as a haven in times of market stress, has risen 2.1 per cent this morning to $1,678 a troy ounce.

Airlines especially EasyJet hammered at European open

European airline shares took a hammering at the open in Europe, with EasyJet the worst hit in the composite Stoxx 600, as fears over the spread of the coronavirus intensified in the travel business.

Shares in EasyJet fell 11.5 per cent, while those in International Airlines Group, owner of British Airways and Iberia, shed 8 per cent. Air France-KLM stock dropped 7.7 per cent while Germany’s Lufthansa slid 6.4 per cent. Ryanair fell about 10 per cent.

The Dutch-French group last week warned the impact from the Covid-19 virus would hit operating profits from February to April by as much as €200m. Long-haul forward booking load factors are down in that time period, the group said last week.

German holiday group Tui fell about 10 per cent in early trading on Monday.

Haven rally picks up steam after European open

A rally in perceived havens has picked up momentum as European dealings get underway.

• US 10-year Treasury yields are down 8.9 bps at 1.3822 per cent. The yield, which moves in the opposite direction of the price, is at its lowest level since 2016. Two year and 30 year yields also fell sharply.

• German Bunds and French OATS, two prominent European safety plays, are also gaining in price, sending yields slipping.

• Gold is up 2.5 per cent at $1,683 a troy ounce.

Read more: Stocks sink as as haven assets rally on coronavirus worries

China’s Clover and GSK work on virus vaccine together

China-based Clover Biopharmaceuticals said it is to collaborate with UK drugmaker GlaxoSmithKline over a potential coronavirus vaccine and could produce large quantities to combat the virus that is rapidly spreading globally.

GSK will provide the Chengdu-based biotechnology group with its pandemic adjuvant system to evaluate the Covid-19 S-Trimer in pre-clinical studies. Clover said it could rapidly expand and produce large quantities of the vaccine.

An adjuvant is added to vaccines to enhance the immune response, creating a stronger and longer lasting protection against infections than the vaccine on its own.

“The use of an adjuvant is of particular importance in a pandemic situation since it may reduce the amount of vaccine protein required per dose,” Thomas Breuer, chief medical officer of GSK Vaccines, said, which will enable the production of more doses.

Nearly 80,000 have been affected by the coronavirus, with more than 2,600 dying. China has been by far the most affected with South Korea the country second-most hit. Italy detected dozens of cases this weekend to become the worst infected in Europe.

“At Clover we look forward to evaluating the combination of GSK’s pandemic adjuvant system and our S-Trimer as a vaccine candidate,” Joshua Liang, Chief Strategy Officer and Board Director at Clover, said.

Clover’s latest technology has detected antibodies produced by previously infected coronavirus patients and its S-Trimer is being developed to support “global efforts in combating this current and any future coronavirus outbreaks”, the Chinese company said.

Stock drop accelerates; Stoxx 600 sinks 3%

The fall in European stocks has accelerated:

• The composite Stoxx 600 index is down 3 per cent
• Germany’s Dax is down 3.3 per cent
• France’s CAC 40 is off 3.3 per cent
• The UK’s FTSE 100 is down 2.7 per cent

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China delays annual parliament session for first time since 1990s

The standing committee of China’s parliament announced that its annual session, which convenes in early March for two weeks, would be postponed, according to China Central Television, reports Sun Yu in Beijing.

The decision to delay one of China’s most significant political events had been expected after it was announced this month that the standing committee of the National People’s Congress would meet this week to consider a delay.

CCTV also reported that the NPC had passed an expected measure banning the trade and consumption of unregulated wildlife, which has been blamed for sparking the disease outbreak, reports Tom Mitchell.

Italy reports fourth coronavirus death

Miles Johnson in Rome reports:

A fourth person has died in Italy from the country’s coronavirus outbreak as the number of diagnosed cases continued to rise on Monday. The 84 year-old man from Bergamo was the third person to die in the region of Lombardy, the wealthy northern region of Italy where the majority of the cases so far are located, to die so far.

Attilio Fontana, regional governor of Lombardy, said the man was “an elderly person with other pathologies”. All of the dead so far in Italy have been elderly, with some also suffering from existing health conditions.

The total number of cases in the region, which has closed schools and cancelled public events as well as placing a cluster of small towns under quarantine conditions, has risen to 165, he said.

Mr Fontana also called on residents to not rush to supermarkets to panic buy food and supplies.

“The race for food makes no sense. Supplies are assured,” he said, following a rush by shoppers in Milan and other locations in the region to stock up as the infection count continued to rise on Sunday.


231 new cases confirmed in South Korea as infections surge

Jung-a Song reports from Seoul:

South Korea has today confirmed 231 new cases of the novel coronavirus.

The number of new cases has jumped more than 27-fold over the past week, with the total number of infected patients now reaching 833.

WHO and EU to send emergency mission to Italy to assess outbreak

Michael Peel reports from Brussels:

An emergency mission of the World Health Organization and the EU’s European Centre for Disease Prevention and Control is to go to Italy on Tuesday to assess the coronavirus outbreak in the country, the European Commission announced on Monday.

Brussels said it was coordinating closely with EU countries but stressed that border closures were a matter for member states and said there were no current plans for a coordinated suspension of the European Schengen free travel zone.

EU health commissioner Stella Kyriakides said:

We need to take this situation extremely seriously but we must not give into panic and of course to disinformation.

EU crisis management commissioner Janez Lenarcic announced a €230m package for the global fight against the coronavirus, including funding for vaccine research. “This is a global challenge and it requires the cooperation of the entire international community,” he said.

Taiwan’s confirmed cases of those infected rise to 30

Taiwan reported two more confirmed cases on Monday, bringing its total to 30, reports Kathrin Hille.

These two cases are family members of two that were reported on Sunday and represent Taiwan’s third family cluster infection. Like the previous two, this latest cluster started locally.

The country’s epidemic management centre said one of the cases had no recent foreign travel history but frequent contact with Taiwanese who work in China.

Italian stocks worst hit in Europe

Italian equities have been the worst affected by this morning’s Europewide sell-off as the country rushes to stem the spread of coronavirus in the northern region of Lombardy.

Italy’s benchmark stock index, the FTSE MIB, was off 4.3 per cent — the biggest move of any European index — as investors dart for safety after authorities put a cluster of small towns in the wealthy northern region under quarantine.

Italian lenders have been under particular pressure, with the Milan index tracking banks down 5.2 per cent. Banco BPM and Fineco led the declines, each shedding 5.8 per cent. Intesa Sanpaolo and Mediobanca slipped 4.9 and 4.7 per cent, respectively. Unicredit was down 3.8 per cent.

Authorities in Lombardy have closed schools and cancelled public events in the region, with cases rising to 165 according to the most recent figures.

The spread of the virus in Europe has sent investors seeking the safety of so-called haven assets this morning. Gold has risen 2.5 per cent to $1,684 per troy ounce.

A shift into safer government debt has sent yields, which move inversely to price, on the Italian 10-year up 5.5 basis points (0.05 percentage points) to 0.954 per cent.

Wuhan retracts notice that allowed some to leave stricken city

Wuhan, the city at the centre of the coronavirus outbreak, has revoked a notice hours after publication on easing traffic restrictions, reports Sun Yu in Beijing.

In a statement posted on its social media account, the city government retracted an earlier announcement that allowed certain people, including healthy non-locals and patients with special needs, to leave the city, saying local transportation official officials made the call without getting approval from the city leadership.

“We will strictly control traffic leaving the city,” the statement said, “and resolutely prevent the disease from spreading elsewhere.”

Southern Italian region imposes quarantine on arrivals from north

Miles Johnson reports from Rome:

The southern Italian region of Basilicata has become the first to impose a quarantine on people arriving from the northern Italian areas hit by the coronavirus outbreak.

Vito Bardi, president of Basilicata, said on Monday that anyone arriving from the northern regions of Piedmont, Lombardy, Veneto, Emilia Romagna and Liguria, or those who have been there in the last fortnight, will be placed into quarantine for 14 days.

Virus ‘no longer solely an Asian issue’ as cases rise outside China

A jump in cases of the novel coronavirus outside of China has sent a shudder through global markets this morning, causing equities across Europe and Asia to tumble.

The sharp rise in cases, notably in South Korea (833), Italy (157) and Iran (43), has provoked fears that disruption to the global economy may last longer than anticipated.

Robert Carnell, chief Asia-Pacific economist at ING, said:

Markets [are] likely to show extreme caution in the face of [the] global spread of the coronavirus — this is no longer solely an Asia issue.

This above chart is courtesy of Steve Bernard, Interactive Design Editor.

Analysts forecast debilitating effect on tourism from virus

Analysts predict lost tourism revenue to the tune of billions of dollars as the spread of the coronavirus outbreak beyond China’s borders has roiled markets this morning.

Cases over the weekend surged in Italy, the worst hit European country, Iran and South Korea. The overall tally is closing in on 80,000 while the illness has claimed more than 2,600 lives, mostly in China where the outbreak began. Tourism will be severely affected, with an impact in lost revenues running in the region of as much as $115bn, predict some.

“The impact of the coronavirus on economies in Asia is potentially huge, as tourism in the region takes a beating,” said Robert Carnell, chief Asia-Pacific economist at ING.

If we assume that tourism to and from China basically grinds to a halt in 2020, and extra-regional tourism also diminishes, then the cost to the region from lost tourism revenues alone is approximately US$105bn-$115bn.

Airline and tourism shares were hit in Europe on Monday as EasyJet, down nearly 12 per cent, and Ryanair, about 10 per cent lower, were the worst hit on the Stoxx 600. German holiday group Tui fell 7.7 per cent while Carnival was down nearly 7 per cent.

Covid-19 will hit oil markets harder than Sars outbreak did, analysts say

The Covid-19 coronavirus epidemic will have a bigger impact on oil markets than the Sars outbreak in the early 2000s, said Warren Patterson, ING’s head of commodity strategy.

A drop in oil demand means a cut to ING’s benchmark Brent forecast to $55/barrel for the first quarter, from a previous forecast for the three-month period of $60. For the full year, Mr Patterson said, he estimates $59 a barrel, down from an average of $62 a barrel over 2020. He added that OPEC, the oil producers’ cartel, needs to extend production cuts, which are due to expire at the end of March.

Oil prices fell, with Brent crude shedding 3.6 per cent in mid-morning trading to trade at $56.43 a barrel.

“Travel restrictions and factory shutdowns caused by Covid-19 are already leading to big problems for oil-producing countries,” said Mr Patterson.

We believe the virus’ effect on oil demand will shave some 400,000 barrels a day from global consumption growth, taking us to the lowest level in nearly a decade.

Iraq reports first coronavirus case

Chloe Cornish, Middle East Correspondent, reports:

Iraq has discovered its first coronavirus patient, an Iranian student at a religious establishment who has been diagnosed with the virus in the Shia holy city of Najaf.

The local directorate of health on Monday said that the patient had arrived in Iraq before authorities imposed temporary emergency measures decreed on Thursday, halting entry of travellers from neighbouring Iran.

Iraq, which is rich in oil but has poor infrastructure, including a weakened health system, has jumped to prevent the spread of the virus from its neighbour, with whom it shares close commercial and cultural ties.

According to an order seen by the Financial Times, the country’s caretaker health minister has also banned the entry of Chinese staff members unless they obtain a clean bill of health in Doha or Dubai, and after having spent a month in unaffected countries. There are thousands of Chinese employees working in Iraqi oil fields.

Spokesperson for UK PM says country ‘well-prepared’ to deal with virus

A spokesperson for the UK prime minister Boris Johnson has said the UK’s National Health Service is “well-prepared” to deal with the coronavirus outbreak, according to a report by the Reuters news agency.

The spokesperson added that the risk to the UK from the virus remains low.

Italy confirms fifth death from coronavirus as disease spreads

The commissioner in charge of managing Italy’s coronavirus outbreak said that the number of confirmed cases in the country had risen to 219, reports Miles Johnson in Rome.

Angelo Borrelli said five people have died, four in Lombardy and one in Veneto. One person, a researcher in Rome, has recovered.

Mr Borrelli said that, as of midday local time on Monday, 99 have been hospitalised, 23 are in intensive care and 91 at home and displaying no serious symptoms.

Pandemic ‘still not inevitable’, says expert

It is still not a certainty that the coronavirus outbreak will turn into a global pandemic, one expert has insisted, but it is becoming increasingly likely.

Paul Hunter, professor in medicine at the University of East Anglia, told Sky News that “it’s still not inevitable” that the outbreak reaches pandemic status – which the World Health Organization defines as the “worldwide spread of a new disease”.

However, Prof Hunter said that such a classification was becoming increasingly likely.

Certainly after the last 48 hours or so it’s beginning to look like we are getting to the point beyond which we will no longer be able to prevent a global spread and indeed a global pandemic.

“We’re not quite there yet but it’s looking a lot closer than it did,” he added.

Key US yield curve measure flashes warning signal

US medium-term bond yields have fallen further below their short-term counterparts in a fresh sign of growing market angst over the coronavirus outbreak.

The 10-year Treasury yield is now 0.16 percentage points below that of the three-month yield — a roughly 0.07 point decline from the end of last week. The fall on Monday points to a firmer inversion of the yield curve, an important measure of investor sentiment over the path of the US economy.

The 10-year three-month portion of the yield curve first inverted in late January as concerns over the coronavirus outbreak began bubbling. It is now at its most inverted point since last October, according to Refinitiv data.

An inversion of this portion of the yield curve has preceded every recession of the past 50 years.

For more on the yield curve, and what it means to investors, read my colleague Colby Smith’s piece from January 30.

WHO panel says no evidence virus has mutated

Yuan Yang reports from Beijing:

A joint team of Chinese and World Health Organization experts has completed an assessment of the coronavirus spread in Beijing, Guangdong, Sichuan and Hubei, according to China’s National Health Commission.

The team conducted genomic sequencing over a period of time and found there is no evidence that the virus has mutated, said Liang Wannian, an NHC expert who was in the WHO joint team.

The team said it had not confirmed an animal host, but research has suggested that bats could be a host, and pangolins an intermediate host.

The NHC conceded that the personal protective equipment used by doctors was not enough and that the long hours worked by medical professionals meant they developed fatigue.

The fatality rate across China is 3 to 4 per cent, but excluding Hubei, is 0.7 per cent, said Mr Liang.

He added that the average interval between the onset of the disease and laboratory confirmation has decreased from 12 days in early January to five days in early February across the country, which he said shows that diagnostic efficiency has increased.

European round-up

It has been a busy morning in Europe as fears have intensified over the spread of the coronavirus, roiling markets from oil to equities. Investors have fled to perceived safety, sending gold and bonds higher.

So, if you are just waking up in the Americas or have been away at meetings all morning, here’s a roundup for you:

Tally: 2,619 deaths: China, and specifically its province Hubei where the virus was first detected, has borne the brunt of the illness. Authorities have recorded a total of 79,434 cases globally while 25,044 have recovered.

Italy: 5 deaths, 219 cases. The southern region of Basilicata has imposed isolation measures on anyone coming from the northern region hit by the coronavirus outbreak. Venice carnival was cut short as cities went into lockdown with schools being closed and events cancelled.

Other countries:
Taiwan: 30 cases
Iran: 43 cases and eight deaths
Afghanistan: One case
South Korea: 833 cases, including additional 231 on Monday
Kuwait: 3 cases. They include a Kuwaiti and Saudi national, who had returned from the Iranian city of Mashhad. Kuwait has brought more than 800 nationals home from Iran since last week. Most of Iran’s neighbours have closed land borders and suspended air traffic with the Islamic republic.
United Arab Emirates: 11 cases, three recovered.

Stocks: Europe’s Stoxx 600 fell 3.3 per cent, with airlines and tourism making the biggest moves. Hong Kong’s Hang Seng index closed down 1.8 per cent while China’s CSI 300 was less affected with a 0.4 per cent drop. US futures point to the S&P 500 picking up 2.3 per cent when Wall Street opens.

Travel stocks: Shares in EasyJet have declined nearly 14 per cent in midday trading while its low-cost rival Ryanair has dropped more than 11 per cent. German holiday operator Tui is down 8 per cent. Italian markets were the worst hit this morning.

Commodities: Oil prices have fallen, with the benchmark Brent crude 4 per cent lower at $56.17 a barrel.

Havens: Gold is 1.3 per cent higher at $1,679 a troy ounce. The 10-year Treasury yield, which moves inversely to price, is 7.6 basis points down to 1.395 per cent, close to its lowest level since 2016. Germany’s 10-year Bund fell 5 basis points to minus 0.488 per cent. The dollar index rose 0.14 per cent.

Vaccine hopes: China-based Clover Biopharmaceuticals and UK drugmaker GlaxoSmithKline plan to collaborate over a potential vaccine.

UK government says risk to country from virus remains low

George Parker, Political Editor, reports:

Downing Street has insisted Britain is “well prepared” to deal with the possible spread of the new coronavirus to the UK, adding that the risk to individuals remained low.

Boris Johnson’s spokesman said that 99 per cent of those people tested in the UK had been negative, and played down suggestions of imminent new restrictions in the face of the outbreak in Italy.

“We will be led by the advice from public health and medical experts and will take steps which they feel are required to best protect the British public,” Mr Johnson’s spokesman said.

We are well prepared for UK cases, we are using tried and tested procedures to prevent further spread and the NHS is extremely well prepared and used to managing infections.

We continue to work closely with the World Health Organization and international partners as the situation develops and we remain prepared for all eventualities.

Primark insists virus will not lead to ’empty shelves’

Jonathan Eley, Retail Correspondent, reports:

Discount fashion chain Primark said it was unlikely that the coronavirus outbreak would result in serious disruption to supplies because of its timing and the availability of alternative manufacturers.

“We are not going to have empty shelves,” said John Bason, finance director of the retailer’s parent company, Associated British Foods.

“If the disruption continues for some months then will some product lines be affected? Probably. Will customers notice? Probably not,” he said, adding that in clothing only around 35 per cent of what the group sold came directly from China.

Only a small number [of Chinese factories] are currently back at full production but it’s improving all the time. We are continuing to get product out of China.

Primark and other retailers have explored the possibility of moving more production to other geographies, including south and southeast Asia, Turkey and north Africa.

“We have the benefit of some time to work with our Chinese suppliers and explore possible alternatives,” Mr Bason said.

Shares in AB Foods were down 1.4 per cent in mid-morning London trade, although this was because of a slightly softer-than-expected trading update.

Singapore cases rise to 90

Stefania Palma reports from Singapore:

Singapore has reported one new confirmed case, taking the country’s total to 90.
It involves a 75 year old Singaporean woman with no recent travel history to China. She is linked to the cluster of cases involving The Life Church and Missions Singapore.

The city state currently has the fifth most confirmed cases of the virus, after mainland China (77,150) , South Korea (833), Italy (157) and Japan (147).

Two additional cases have fully recovered and have been discharged from hospital, taking the total to 53. Seven patients are in critical condition while most of the 37 cases still in hospital are stable or improving.

Singapore on Sunday advised travellers to avoid non-essential travel to Daegu city and Cheongdo county in light of the jump in the number of confirmed cases in South Korea.

WHO expert praises China for ‘only successful’ containment measures

Yuan Yang reports from Beijing:

The head of the WHO’s team of foreign experts in China praised the country’s responses as “the only successful measures we have seen so far to contain Covid-19”, criticising the rest of the world for “not being ready enough” to use similar measures.

Bruce Aylward, a Canadian expert at the WHO who led the foreign experts’ visit to China, emphasised the need to restart China’s economy, echoing President Xi Jinping’s recent calls for business as normal to resume.

Mr Aylward recognised that there had been “challenges” in gathering statistics, but said that “the decline [in cases] that we see is real”.

Over the past two weeks, there has been a roughly 80 per cent decline in daily new cases, according to China’s government figures.

Mr Aylward said:

We have looked carefully at different sources of information to have confidence this is declining. When you get out into the field, there’s a lot of compelling data and observations to support this decline.

Epidemiologist Prof Neil Ferguson said that evidence suggested the reduction in cases in Wuhan was real, but that there was “a little more uncertainty” for the reduction in infections in the rest of China, as most testing is still focussed on people with travel history to Wuhan.

“Nevertheless, I don’t think there is evidence for a rapidly growing epidemic outside Wuhan,” he told the FT in an email. “At worst, transmission is ongoing but growth is being limited by the current interventions in place.”

Buffett says virus should not affect what investors do with stocks

Billionaire investor Warren Buffett said the coronavirus is “scary stuff” but added ” I don’t think it should affect what you do with stocks”.

The so-called Oracle of Omaha said, “If you’re buying a business, and that’s what stocks are… you’re gonna own it for 10 or 20 years,” he said. “The real question is: Has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours?” Mr Buffett said in an interview with CNBC.

He added that Berkshire remains a net buyer of stocks over time and that most people should want stocks to go down so they can buy in at a lower price.

His remarks came as US stock futures tumbled on Monday, with S&P 500 futures off about 2.4 per cent and Nasdaq 100 futures down about 2.6 per cent.

Mr Buffett said in the interview that a significant number of Berkshire Hathaway’s businesses were hit by the Covid-19 outbreak, which has seen a jump in cases outside China in recent days.

“We have maybe 1,000 Dairy Queen franchises in China … a great number of them are closed. But the ones that are open aren’t doing any business to speak of,” he added. “I’ll guarantee you that a very significant percentage of our businesses one way are affected by it. But they’re being affected by a lot of other things, too.”

Read more: In his annual letter to stockholders Mr Buffett stood by his strategy of pouring cash into stocks.

Italian and German yield spread widens most since November

The spread between German and Italian bonds has widened the most in about three months as fears have intensified over the effects of the coronavirus contagion on the eurozone’s third-largest economy.

Yields on Germany’s 10-year Bund, often perceived as a European safety asset for investors in times of duress, fell 4.5 basis points to minus 0.487 per cent. The spread between that yield and its Italian counterpart widened 7.2 basis points to 142 bps. That marks the widest difference in the two since November.

Italy has borne the brunt of infected cases in Europe, as the illness has spilled beyond Asia. Authorities recorded five deaths from Covid-19 and 219 cases by Monday. The outbreak has exacerbated Italy’s woes as its economy, already shrinking, faces a technical recession in the first quarter.

Most diagnosed cases have been focused in the wealthy regions of Lombardy and Veneto that make up about a third of the country’s output. Milan, Italy’s finance capital, is at the heart of the contagion and has shut down schools, offices and tourist attractions in response. Some businesses have asked workers in affected areas to stay at home. Venice carnival was cut short.

The Italian economy contracted 0.3 per cent in the final three months of last year, versus the previous quarter, the steepest such decline in six years. Fears are rising that the global economic impact of coronavirus could drive a further contraction in the second quarter. A technical recession is defined as two consecutive quarters of contraction.

Italy has quarantined at least 10 northern towns and the southern region of Basilicata has imposed a quarantine on people arriving from the northern regions of Piedmont, Lombardy, Veneto, Emilia-Romagna and Liguria.

Hong Kong bans entry of travellers from South Korea

Nicolle Liu reports from Hong Kong:

Hong Kong has said it will ban entry of travellers from South Korea and warned that people should not travel to the country unless necessary.

The Hong Kong government on Monday issued a red outbound travel alert “in view of the persistent and rapid increase in the number of Covid-19 cases in Korea and the close contacts between Hong Kong and Korea.”

John Lee, Hong Kong secretary for security, said the territory would enact a ban beginning on Tuesday at 6am on non Hong Kong residents who had been to South Korea in the past two weeks from entering the city. Hong Kong residents returning from the country will be subject to medical surveillance.

The move comes as South Korea faced a sharp jolt higher in the number of infections to 833, the largest number of cases outside China.

Virus spread could accelerate de-globalisation, Capital Economics says

The coronavirus outbreak presents a new risk to globalisation since it highlights the vulnerability of complex, international supply chains, according to Capital Economics.

“The big threat to globalisation in the past couple of years has come from tensions between the US and China,” which extends beyond Donald Trump and reflects China’s emergence as a superpower according to Vicky Redwood, senior economic adviser at the London-based research consultancy.

The Covid-19 outbreak “could accelerate a process of de-globalisation” by highlighting the vulnerability of long and complex global supply chains. Companies have warned about a shortage of components as a result of factory closures in China.

While the spread of the infection is unlikely to prompt an overhaul of supply chains, Ms Redwood argued it adds to a list of reasons for companies that are rethinking their logistics, including “environmental concerns about transporting goods long distances and the development of new technologies making it profitable to reshore some production”.

The chart below shows flows of trade and foreign direct investment — a proxy for globalisation — has flattened as a share of gross domestic product. “We expect this process to turn into a period of outright de-globalisation,” Ms Redwood said.

Emoticon

US stocks tumble on virus fears

Wall Street fell sharply at the open on Monday as a jump in coronavirus cases outside China renewed fears about the economic fallout from the outbreak and rattled investors.

The S&P 500 fell 3 per cent at the open dragged down by tech and consumer discretionary stocks, which were the hardest hit. Meanwhile, the Nasdaq Composite was down 4 per cent.

Treasuries rallied with the yield on the US 10-year down 10.8 basis points to 1.363 per cent. Yields move inversely to price.

China faces hit to first-quarter growth, say analysts

UBS analysts see a battering to gross domestic product in China, where nearly all of the coronavirus cases have been detected. Beijing has recorded 77,150 people infected while, in Hubei province, where the virus was first reported, nearly 2,500 people have died.

“Our base case for China is for a 1–2 percentage point hit to GDP growth in the first quarter, pulling down the annualised rate of expansion to between 4 per cent to 5 per cent,” said Mark Haefele, chief investment officer, UBS Global Wealth Management.

Factories across China are restarting operations after a nationwide shutdown aimed at stemming the spread of the virus but manufacturers could take months to recover from the hit to the supply chain, some have said. Hubei has extended a shutdown of non-essential businesses to March 11. Many are quarantined at home and unable to return to work.

“Assuming the virus is brought under control in the region by the end of March, we would expect only a 40–70 basis points hit in the year in China, as pent-up demand, inventory restocking and policy supports drive a V-shaped recovery,” Mr Haefele said in a note to investors.

The People’s Bank of China this month cut interest rates by 10 basis points on Rmb200bn ($28.6bn) of loans offered via its medium-term lending facility, a key rate for interbank lending.

We expect China to deliver another 100–300 basis points of cuts to the general reserve requirement ratio, and 10–20 points of cuts to the medium-term lending facility.

Sébastien Galy of Nordea Investment adds a slightly more upbeat note: “Over the next weeks, though, we expect the market to return to a Chinacentric economic rebound as policy decisions pay off, much as happened under Sars [outbreak of the early 2000s] though with more delays.”

Italian stocks set for worst day since Brexit vote

The Italian stock market has sustained heavy selling pressure all day as the coronavirus outbreak in the country drives fears it could enter into a technical recession in the first quarter of the year.

The benchmark FTSE Mib index in Milan has fallen 5.5 per cent, setting it up for its worst single day of trading since the UK voted to leave the EU in June 2016, which knocked it 12.5 per cent lower.

The only other comparable drop in the intervening period was in September 2018, when the country’s anti-establishment coalition government managed to force through a budget to fund its expensive election promises. That sent the Mib down 3.7 per cent.

Monday’s sell-off comes as an outbreak of coronavirus has hit the wealthy northern regions of Lombardy and Veneto that make up about a third of Italy’s output, prompting widespread quarantine and shutdown measures.

The potential ripple effects on Italian GDP add to market gloom on the same day that figures showed the country’s economy suffered its steepest decline in six years in the final three months of 2019, fuelling fears of a technical recession.

Traders think the Fed will move faster to cut rates

Investors believe the Federal Reserve will move faster to cut interest rates, amid growing expectations that coronavirus will slow global growth.

The market has placed 56 per cent odds on policymakers lowering the US benchmark rate by at least a quarter-point in April, according to CME Group’s FedWatch Tool, which tracks fed funds futures. Investors on Friday saw a 60 per cent chance of rates remaining unchanged.

Wall Street previously expected the Fed to wait until its June meeting to slash rates.

The chart below displays the probabilities for where the central bank will set its target rate in April. The current range is 1.5 per cent to 1.75 per cent.

US stocks tumble through market support levels

Mounting concerns about the global spread of the coronavirus sent Wall Street’s main stock gauges below a series of market support levels for the first time in more than four months.

The S&P 500, down about 2.5 per cent within the first 15 minutes of trade on Monday, fell through its 50-day moving average for the first time since October 10. The Nasdaq Composite, down 2.9 per cent, also fell through its 50-dma for the first time since that same date.

The Dow Jones Industrial Average tagged a longer-term support level, its 100-dma, for the first time since October 10.

Moving averages for traded assets are watched by technical analysts and are broadly seen as measures of support and momentum in markets.

Coronavirus not yet a pandemic – WHO

Clive Cookson in London

The WHO says coronavirus is not yet a pandemic. Director general Dr Tedros Adhanom Ghebreyesus told a teleconference in Geneva:

For the moment, we are not witnessing the uncontained global spread of this coronavirus, and we are not witnessing large-scale severe disease or death. Does this virus have pandemic potential? Absolutely. Are we there yet? From our assessment not yet.

He added:

What we see are epidemics in different parts of the world, affecting countries in different ways and requiring a tailored response. The sudden increase in new Covid-19 cases is certainly very concerning. I have spoken consistently about the need for facts, not fear. Using the word pandemic now does not fit the facts, but it may certainly cause fear.

Dr Tedros continued:

We do not live in a binary, black-and-white world. It’s not either-or. We must focus on containment, while doing everything we can to prepare for a potential pandemic.

Oman confirms first case of coronavirus

Simeon Kerr in Dubai

Oman reported its first coronavirus case on Monday, saying two women had contracted the disease while visiting Iran.

State television also said the sultanate would halt flights to Iran, which has seen a surge in cases since last week. Other neighbours have also suspended air traffic to, and closed land borders with, the Islamic republic.

Oman is the latest Gulf state to report new cases as the virus spreads from Iran, where officials on Monday put the death toll at 12 with up to 61 infected.

Kuwait and Bahrain reported four cases earlier on Monday from travellers who had been in the Islamic republic. Kuwait airlifted as many as 800 nationals from Iran, where most cases have centred on the holy city of Qom, a popular pilgrimage site.

The United Arab Emirates, which was the first Gulf state to report cases, on Monday said it would ban citizens from visiting Iran and Thailand “until further notice”.

Switzerland and Austria tighten checks along borders with Italy

Sam Jones in Zurich

Switzerland and Austria both announced enhanced checks and information campaigns along their borders with Italy on Monday.

In Switzerland, which has yet to report any confirmed cases, authorities announced a “substantial” increase in testing capacity on Monday afternoon, in anticipation of a deterioration of the situation in neighbouring Lombardy.

Switzerland now has the capacity to test up to 1,000 suspected carriers daily, director of public health Pascal Strupler said.

A minority of lawmakers in the country have already called for the country’s border to be closed. The Italian-speaking canton of Ticino – located south of the Gotthard Pass – is particularly close to the epicentre of the Italian outbreak. Around 70,000 commuters cross into Ticino daily from Italy to work.

Mr Strupler said that more aggressive testing of suspected cases – including individuals with any symptoms of respiratory illness, regardless of their recent travel – would now take place in the canton, alongside a major public awareness campaign.

Vienna has meanwhile issued a travel warning to all Austrian citizens advising them against visiting affected areas in Italy. The country is already on high alert: a train travelling over the Brenner pass late on Sunday evening was barred from entry, causing significant congestion on one of the main crossings of the eastern Alps, after two cases of feverish passengers on board were reported.

Speaking after a crisis meeting of Austrian health and interior ministry officials on Monday afternoon, Austrian chancellor Sebastian Kurz said it was important “that we should not panic”.

The coronavirus “will not sidestep our country”, he nevertheless warned, advising people to take precautions and stay calm. Austria has so far tested 187 of its citizens for suspected infection, but all have been negative.

WHO mission to China finds ‘no significant change’ in Covid-19 DNA

Clive Cookson in London

At the World Health Organization teleconference in Geneva, director-general Dr Tedros provided some findings from the WHO mission to China led by Bruce Aylward of Canada, supplementing what Dr Aylward himself said in Beijing earlier:

“They found that the fatality rate is between 2-4 per cent in Wuhan and 0.7 per cent outside Wuhan. For people with mild Covid-19 disease, recovery time is about two weeks, while people with severe or critical disease recover within three to six weeks. The Covid-19 epidemic peaked and plateaued between January 23rd and February 2 and has been declining steadily since then. They have found that there has been no significant change in the DNA of the coronavirus,” Dr Tedros said.

Michael Ryan, WHO executive director for health emergencies, echoed Dr Tedros’s statement that a Covid-19 pandemic is not inevitable. “We’re still in the balance,” he said. “We are in a phase of preparing for a potential pandemic.”

Although Iran, Italy and South Korea have reported alarming recent increases in cases and deaths, Dr Ryan said he was encouraged that “China and some other countries with smaller events have managed to contain and suppress the infection.”

The final outcome, according to Dr Ryan, could lie anywhere between successful global containment of Covid-19 before a pandemic begins, the evolution of the disease into an “endemic” seasonal illness similar to flu and a severe worldwide pandemic.

Bharat Pankhania, an infectious diseases expert at the University of Exeter Medical School, commented: “We now consider this to be a pandemic in all but name, and it’s only a matter of time before the World Health Organisation starts to use the term in its communications.”

Like the WHO, he regards the future of Covid-19 as “a big unknown. The normal pattern of an outbreak like this is that warmer weather gets people outdoors and reduces the indoor crowding that brings about a lot of the spread of infection.

“We hope that will mean a reduction in the number of people being infected by coronavirus,” Dr Pankhania said. “It may come and go, or it may continue to circulate for a period, which could be six to 18 months at an estimate.”

Energy shares slip to weakest level in nearly a decade

Shares in S&P 500 energy groups have fallen to their lowest level in more than nine years, leading the sell-off on Wall Street as the spread of coronavirus beyond China has heightened worries of falling demand for fuel.

The energy sector has dropped 4.4 per cent, the worst performance among 11 S&P 500 sectors today and setting a pace for its largest single-day slide since January 2016.

It was recently trading at its weakest level since August 2010, having crossed its lows of 2016, a time when Brent crude was trading below $30 a barrel on a global supply glut fuelled by robust US shale production.

The declines on Monday come amid a broad sell-off in global equities in response to a rise in coronavirus cases outside China. The potential damage to economic growth sent oil prices tumbling. Brent crude was down more than 5 per cent at its lows for the day, and it was recently trading 5.3 per cent lower at $55.43 a barrel.

Oil majors showed heavy losses, with Exxon and Chevron each falling more than 3 per cent.

S&P 500 down 3.3% at session lows

US stocks were on course for their biggest one-day drop in two years at the halfway point of Monday’s session, with investors unnerved by the rising number of coronavirus cases outside China.

The S&P 500 was down 3.3 per cent at its low of the day. That puts it on course for its biggest one-day drop since February 2018, and its fourth-largest decline of the past five years.

Energy stocks were the worst performers, followed by the technology and consumer discretionary sectors.

The Nasdaq Composite was down 3.8 per cent, while the Dow Jones Industrial Average sank 3.3 per cent.

The yield on the benchmark 10-year US Treasury was down 11.2 basis points at 1.3588 per cent, according to Bloomberg data. That leaves it about 5bp above a record low from July 2016.

CDC confirms rise in cases among cruise evacuees

The Centers for Disease Control and Prevention said on Monday there were 14 confirmed cases of the coronavirus in the US, aside from 39 cases involving evacuees from Wuhan and the Diamond Princess cruise ship.

The agency on Friday counted 13 people infected in the US and 21 cases among repatriated Americans. During a press briefing last week, the CDC said it expected to confirm more cases among the passengers of the Diamond Princess.

The number of cases connected to the cruise ship has risen to 36, up from 18 last week.

S&P 500 down 3% as investors seek safety

US stocks remained sharply lower in afternoon trading, with the S&P 500 on pace for its worst day since December 2018.

The benchmark S&P was down 3 per cent, leaving it only 0.2 per cent higher on the year. The broad sell-off, which pulled all 11 sectors into the red, was led by shares in energy and technology groups.

The tech-heavy Nasdaq Composite fell 3.4 per cent. The Dow Jones Industrial Average lost 3.1 per cent.

Investors moved into perceived haven assets such as US government debt, dragging yields lower. The yield on the 10-year Treasury note sank 9.8 basis points to 1.372 per cent. Gold rose 0.9 per cent.

Brent crude was off its worst levels of the day but still traded more than 3 per cent lower.

Italy’s prime minister warns of ‘very strong’ economic impact

Italian prime minister Giuseppe Conte warned that the coronavirus outbreak could have a “very strong” impact on the country’s economy.

“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,” he said, according to Reuters.

The number of confirmed cases of coronavirus in Italy has jumped to more than 200, while six people have died.

Seventh Italian dies from coronavirus

Miles Johnson in Rome

A seventh Italian has died from coronavirus. The victim was a 62 year-old man, who had been transferred to hospital in Como early on Saturday morning and had existing health problems, according to Italian media.

On Monday three other men in their 80s were also announced by Italian authorities as having died from the virus. All of the seven dead in Italy so far have been elderly, and several have had other underlying health problems.

US stocks fall the most in two years

US stocks fell by the most in two years, and Treasury yields sank towards historic lows, after a jump in the number of coronavirus cases outside China triggered a bout of volatility and tumult for global markets.

The S&P 500 tumbled 3.4 per cent for its biggest one-day drop since February 2018, and the benchmark Nasdaq Composite sank 3.7 per cent. The Dow Jones Industrial Average fell 1,031.4 points, or 3.6 per cent.

The nervous mood sent investors scurrying for haven assets, such as gold and government bonds.

Demand for Treasuries drove the yield on the benchmark 10-year note down 10.5 basis points to 1.3655 per cent. At its session low of 1.3505 per cent, the yield sat less than 4bp from a record low struck in the summer of 2016.

Gold rose 1 per cent to $1,660.04 an ounce and its highest level in seven years.

Implied volatility, as measured by the CBOE’s volatility index, or Vix, jumped above 25, its highest level in about 14 months.

Coronavirus ‘under control’ in US, Trump says

The coronavirus outbreak is “very much under control” in the US, Donald Trump tweeted.

“We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart,” the president added, referring to the Centers for Disease Control and Prevention and the World Health Organization.

He also weighed in with a buy-the-dip view on the stock market, which he said is “starting to look very good to me”.

A rise in coronavirus cases outside China deepened investors’ concerns on Monday over the fallout from the outbreak. The S&P 500 erased its gain for the year, less than a week after notching a record high. After Monday’s sell-off, the S&P 500 is down 4.7 per cent from its high.

Mr Trump is in India for a two-day visit.

https://twitter.com/realDonaldTrump/status/1232058127740174339

White House plans emergency funding request to combat virus

Brendan Greeley in Washington

The White House has let Congress know that it intends to send a supplemental appropriations request to Capitol Hill for money to combat the coronavirus outbreak in the US. Conversations about the request took place over the weekend, indicating the speed at which the administration’s perception of the threat posed by the virus has grown.

Until now, the Trump administration had funded its extra efforts to manage the virus in two ways. On January 25, it tapped the “Infectious Diseases Rapid Response Reserve Fund”, which Congress topped off with $50m in 2019 and another $85m for 2020. Since the beginning of February, the administration also used its authority to transfer funds internally to support the Centers for Disease Control and Prevention, the office of the Assistant Secretary for Preparedness and Response, and the Office of Global Affairs in the Department of Health and Human Services. Those transfers totaled roughly $135m.

Until the weekend, however, the White House had maintained to Congress that it would not need a “supplemental” — an emergency spending bill passed outside of the yearly appropriations process. That changed, as the extent of the virus’s spread outside of China became apparent over the weekend.

According to congressional aides familiar with the matter, the supplemental request could come as soon as this week.

Goldman lowers US economic growth forecast for the first quarter

Goldman Sachs cut its forecast for US growth in the first quarter, saying the economy will come under more pressure from the coronavirus outbreak than previously thought.

Economists at the bank have projected annualised growth of 1.2 per cent in the first quarter, down from a prior estimate of 1.4 per cent. They attributed the downgrade to a slower than expected recovery in Chinese economic activity and travel. Disruption to supply chains should have a “negligible” hit on the US, they said.

Goldman added that US growth will benefit in the ensuing quarters as activity normalises, including a boost of 0.3 to 0.4 percentage points in the third quarter.

“While this would imply a modest hit to annual-average GDP growth of 0.1pp, the risks are clearly skewed to the downside until the outbreak is contained,” chief economist Jan Hatzius wrote to clients.

United Airlines pulls 2020 guidance on coronavirus uncertainty

United Airlines withdrew its annual guidance because of uncertainty related to the impact of coronavirus.

The carrier said on Monday “the range of possible scenarios is too wide to provide earnings guidance at this time” beyond the first quarter. It previously expected to post adjusted earnings per share of $11 to $13 in 2020, and United said it “would expect to be tracking to deliver” earnings in that range if the virus were to run its course by mid-May and normal travel patterns on trans-Pacific routes resume gradually over five months.

“However, due to the heightened uncertainty surrounding this outbreak, its duration, its impact on overall demand for air travel and the possibility the outbreak spreads to other regions, the company is withdrawing all full-year 2020 guidance issued on January 21, 2020,” United said in a filing with the Securities and Exchange Commission.

United Airlines said near-term demand for flights to China has sunk approximately 100 per cent, in addition to a 75 per cent drop in demand on the rest of the company’s trans-Pacific routes. Like other airlines, United has suspended flights to mainland China and Hong Kong.

For the first quarter, United expects the decline in fuel prices and other cost savings to partially offset lower revenue on trans-Pacific routes. United maintained its outlook for first-quarter adjusted earnings of 75 cents to $1.25 per share.

“Despite these short-term impacts, the company continues to believe it will be in a strong position to deliver earnings growth in 2021 and beyond,” United said.

Mastercard cuts revenue outlook on global travel and commerce hit

Robert Armstrong in New York writes:

Mastercard has cut its financial outlook, citing the impact of the coronavirus on cross-border travel and commerce.

The payments company now expects its first-quarter revenues to grow 9 to 10 per cent, compared with a year ago, roughly 2 to 3 percentage points lower than the company forecast when it reported 2019 earnings a month ago.

The company expects full-year revenue growth to be at the “low end” of its previous outlook, which called for revenue growth in the low teens, but noted that “there are many unknowns as to the duration and severity of the situation.”

“The fundamentals of our business remain strong . . . However, cross-border travel, and to a lesser extent cross-border ecommerce growth, is being impacted by the coronavirus,” the company said in a statement.

Mastercard does not have a payments business in mainland China, which operates a national payments network, though the company has partnered with Chinese payment leaders Tencent and Ant Financial to let Chinese to use the Mastercard network when travelling abroad.

Mastercard’s revenue, adjusting for currency effects, grew 17 per cent last year. The company charges a fee of a fraction of a per cent of each transaction completed over its network. The fee is significantly higher for international transactions.

Mastercard’s warning on the virus impact follows those of other major companies. A week ago, Apple said it would miss its first quarter revenue targets. United Airlines withdrew its profit targets altogether on Monday.

Mastercard shares, which fell 4.4 per cent on Monday, dropped another 2.7 per cent in after-hours trading in the wake of the announcement.

Moderna sends first coronavirus vaccine for human testing

Hannah Kuchler reports from New York

Moderna has become the first company to release a potential coronavirus vaccine, with the Boston-based biotech start-up announcing on Monday that it had sent the vials to the US National Institutes of Health to be tested in humans.

Shares in Moderna soared 15.6 per cent to $21.33 in after hours trading in New York as the drugmaker said that its new way of making vaccines helped it rapidly create the candidate known as mRNA-1273, cutting the time it takes to develop a new potential vaccine to try to curb the impact of the coronavirus outbreak.

Juan Andres, chief technical operations and quality officer at Moderna, said it was an “extraordinary effort” responding to the global health emergency with a “record speed” of 42 days from when the virus’ genome was sequenced.

The vaccine still needs to be tested in humans, where it could fail, and if it succeeds, it will still take months until it is widely available. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, part of the NIH, told the Wall Street Journal that he expects a clinical trial of about 20 to 25 healthy volunteers to start in April, with initial results available in July and August.

Moderna uses a molecule called messengerRNA that transfers genetic information into cells, which the company says mimics a natural infection to stimulate a more potent immune response. This vaccine tries to mimic the spike protein found on the novel coronavirus and other coronaviruses such as Severe Acute Respiratory Syndrome and Middle Eastern Respiratory Syndrome.

The manufacture of the vaccine candidate was funded by the Coalition for Epidemic Preparedness Innovations, a group of governments and non-profits that launched a $1bn programme to cut vaccine development time in Davos in 2017.

Moderna had up to 100 employees working on the effort, including through the weekend. The first batch was finished on February 7th but it had to be tested over two weeks.