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Traders work during the opening bell at the New York Stock Exchange (NYSE) on Feb. 28.JOHANNES EISELE/AFP/Getty Images

Canada’s main stock index flirted with correction territory on Friday as an increase in global coronavirus cases unsettled investors worried about its economic impact.

Investors typically consider a technical correction in a security or index to be a drop of 10 per cent or more from its recent peak.

The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 454.39 points, or 2.72 per cent, at 16,263.05.

Canada’s energy sector dropped 0.7 per cent as oil prices plummeted amid fears of slowing economic growth.

The financials sector slipped 2.6 per cent. The industrials sector fell 2.2 per cent.

Leading the index were SNC-Lavalin Group Inc., up 10.0 per cent, Artis Real Estate Investment Trust, up 5 per cent, and Crescent Point Energy Corp., higher by 3.4 per cent.

Lagging shares were Seabridge Gold Inc., down 19.8 per cent, OceanaGold Corp., down 15.9 per cent, and Wesdome Gold Mines Ltd., lower by 15.6 per cent.

The S&P 500 fell for the seventh straight day on Friday and the benchmark index suffered its biggest weekly drop since the 2008 global financial crisis on growing fears the fast-spreading coronavirus could lead to a recession, although stocks cut losses at the end of the day’s session.

The Dow Jones Industrial Average fell 356.88 points, or 1.39 per cent, to 25,409.76, the S&P 500 lost 24.7 points, or 0.83 per cent, to 2,954.06 and the Nasdaq Composite added 0.89 points, or 0.01 per cent, to 8,567.37.

Federal Reserve Chair Jerome Powell on Friday said the central bank will “act as appropriate” to support the economy in the face of risks posed by the coronavirus epidemic, though he said the economy remains in good shape overall.

“The fundamentals of the U.S. economy remain strong,” Powell said in a statement released as stocks headed for their worst week since the financial crisis.

“However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The statement, flagging the Fed’s willingness to move if the health emergency posed by the illness known as COVID-19 continues to spread and impact the economy, came in response to soaring expectations that the Fed will cut interest rates at its upcoming March meeting.

Yields on U.S. government bonds, widely seen as the world’s most secure asset, posted fresh record lows.

Disruptions to international travel and supply chains, school closures and cancellations of major events have all blackened the outlook for a world economy that was already struggling with fallout from the U.S.-China trade war.

Hopes the epidemic, first detected in China in December, would be over swiftly and economic activity quickly return to normal have been shattered as the World Health Organization warned it could spread worldwide.

“The uncertainty hovering over the markets will only be alleviated when there is a sense that the worst is almost over,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “Until then it is risk off.”

MSCI’s gauge of stocks across the globe shed 2.42 per cent for a weekly loss near 11 per cent, its second largest on record.

The over $5 trillion lost in market cap is roughly equivalent to Japan’s yearly GDP, the third-largest in the world.

In Asia, MSCI’s regional index excluding Japan shed 2.6 per cent. Japan’s Nikkei slumped 3.7 per cent on rising fears the July-August Tokyo Olympics may be called off due to the coronavirus.

The CSI300 index of Shanghai and Shenzhen shares dropped 3.5 per cent bringing its weekly loss to 5 per cent, the largest since April.

About 10 countries have reported their first virus cases over the past 24 hours, including Nigeria, the biggest economy in Africa.

Expectations the Fed will cut interest rates to cushion the blow are rising in money markets and Powell’s remarks reinforced the sentiment. Fed funds futures are now fully pricing in a rate cut next month, with the question only being how large it will be.

The European Central Bank historically lags the Fed but it is now seen cutting by another 10 basis points by June.

The yen’s luster shined, with the Japanese currency rising by the most for any week since mid-2016.

On Friday the yen strengthened 1.61 per cent versus the greenback at 107.88 per dollar.

The dollar index fell 0.32 per cent, with the euro up 0.27 per cent to $1.1028. Sterling was last trading at $1.279, down 0.73 per cent on the day.

The appeal of guaranteed income sent high-grade bonds rallying. U.S. yields - which move inversely to the price - plunged, with the benchmark 10-year note yield hitting a record low of 1.126 per cent.

“The market is pricing in a rate cut by March and three rate cuts this year, which is a huge turnaround from the start of the year. But the fact that it looks like coronavirus has a long way to go means this is not surprising,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.

Benchmark 10-year notes last rose 1-9/32 in price to yield 1.1257 per cent, from 1.299 per cent late Thursday. The 30-year bond last rose 2-24/32 in price to yield 1.6676 per cent, from 1.783 per cent.

Oil prices slumped again and were set for their steepest weekly fall in years on fears of drooping demand.

U.S. crude fell 3.89 per cent to $45.26 per barrel and Brent was last at $50.50, down 3.22 per cent on the day.

Palladium led a free fall in precious metals as coronavirus drove panic-stricken investors to liquidate assets across the board.

Spot gold dropped 3.5 per cent to $1,584.51 an ounce after touching a 7-year high on Thursday. Palladium dropped 9.9 per cent to $2,564.01 an ounce after hitting a record high on Thursday.

Among industrial metals, copper rose 0.34 per cent to $5,634.85 a tonne. Three-month aluminum on the London Metal Exchange rose 0.68 per cent to $1,701.50 a tonne.