North American markets tumbled on Friday as the spreading coronavirus outbreak coupled with sluggish U.S. economic data and a mixed batch of corporate earnings fueled concerns about global growth.
Gold headed to its best month in five, while yields on U.S. and euro zone government debt fell to three-month lows as the United States, Japan and other countries tightened travel curbs to China, where the death toll from the virus rose to 213.
Crude prices fell, with Brent poised for its biggest monthly decline since November 2018, as supply chains disruptions and travel curbs look to crimp Chinese growth, leading economists to temper their outlook for the world’s second-largest economy.
Citigroup revised its full-year forecast for China’s GDP growth to 5.5 per cent in 2020 from 5.8 per cent. The bank also cut first-quarter growth expectations to 4.8 per cent from 6 per cent in the fourth quarter of 2019.
JPMorgan shaved its forecast for global growth by 0.3 percentage point for this quarter.
U.S. consumer spending rose steadily in December, the Commerce Department said, but tepid income gains pointed to moderate consumption growth this year.
The Chicago Purchasing Management index fell to a lower-than-expected 42.9, the lowest since December 2015, as new orders and production tumbled and producers forecast tepid activity in 2020.
“The Chicago PMI was very weak,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
The recently signed U.S.-China trade deal had been expected to lift the global economy, but the coronavirus outbreak has dampened that outlook, he said.
“Market expectations are for a big push in growth. It’s being put off every quarter, especially the industrial side of the economy,” Ghriskey said. “Bond yields have plummeted. The bond market is trying to tell us something.”
Yields on the benchmark 10-year U.S. Treasury note slid to a low of 1.508 per cent.
Canada’s main stock index also fell on Friday.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 172 points, or 0.98 per cent, at 17,318.49.
The energy sector dropped 3 per cent, as crude prices were down.
Both industrial and financial stocks lost 1.1 per cent.
MSCI’s gauge of stocks across the globe shed 1.21 per cent, while emerging market stocks lost 1.17 per cent.
In Europe, the pan-European STOXX 600 index closed down 1.07 per cent. Losses for the week were 3 per cent, its worst in almost six months, while the 1.2 per cent monthly loss was the worst January since 2016.
Early gains in Europe quickly soured as headlines of more cases and deaths, travel bans and factory shutdowns due to the virus were compounded by disappointingly weak economic data.
The big blow was that both the French and Italian economies unexpectedly shrank at the end of last year, with Eurostat also confirming that the euro zone as a whole grew slower than analysts had forecast.
On Wall Street, the Dow Jones Industrial Average fell 603.41 points, or 2.09 per cent, to 28,256.03, the S&P 500 lost 58.14 points, or 1.77 per cent, to 3,225.52 and the Nasdaq Composite dropped 148.00 points, or 1.59 per cent, to 9,150.94.
The poor data reading and fears of a spreading virus obscured relatively solid fourth-quarter earnings reports.
Amazon.com Inc surged 7.5 per cent after it trumped Wall Street’s estimates for holiday-quarter results, bolstering the online retailer’s market capitalization to more that $1 trillion.
Asia-Pacific shares outside Japan extended their fall, dropping 0.4 per cent. Japan’s Nikkei bounced 1 per cent, but was off 2.6 per cent for the week. Hong Kong’s Hang Seng drifted 0.3 per cent lower and has shed 9 per cent in two weeks. Korea’s Kospi had its worst week in 15 months, losing 5.6 per cent.
Sterling extended gains after jumping on Thursday when the Bank of England confounded market expectations by not cutting interest rate cut.
Sterling traded at $1.3199, up 0.80 per cent on the day. The yen strengthened 0.52 per cent versus the greenback at 108.41 per dollar.
The dollar index fell 0.47 per cent, with the euro up 0.53 per cent to $1.1088.
The Australian dollar fell to a four-month low against the U.S. dollar, while China’s offshore yuan struggled to find a footing in the wake of the virus outbreak.
The 10-year Treasury note rose 12/32 in price to yield 1.5136 per cent.
Spot gold rose 0.87 per cent at $1,587.5 an ounce, while U.S. gold futures settled 0.1 per cent lower at $1,587.90.
Oil prices fell, on track for a fourth straight weekly loss.
Brent crude slid 13 cents to settle at $58.16 a barrel. U.S. West Texas Intermediate (WTI) settled down 58 cents at $51.56 a barrel.