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Equity markets around the world rose on Monday as the prospect that central banks will cut interest rates to soften the economic blow of the coronavirus heartened investors and drove U.S. government debt yields to record lows.

Global factories took a beating in February from the coronavirus, with activity in China shrinking at a record pace, surveys showed, raising the prospect of a coordinated policy response by central banks to prevent a global recession.

Coronavirus is now spreading much more rapidly outside China than within the country, leading the world into uncharted territory, but the outbreak can still be contained, the World Health Organization said.

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Almost nine times as many cases were reported in the past 24 hours beyond China than inside, WHO chief Tedros Adhanom Ghebreyesus said, adding that the risk of coronavirus spreading was now very high at a “global level.”

The dollar slipped to a fresh one-month low against a basket of currencies after the Federal Reserve, Bank of Japan and Bank of England all indicated a willingness to take action to confront the economic fallout from the coronavirus.

The yield on the benchmark 10-year U.S. Treasury note fell to an all-time low of 1.03 per cent The 10-year German bund , the benchmark for euro zone lending, slid to a six-month low of -0.67 per cent.

Oil prices jumped more than 4 per cent, reversing an early decline to multi-year lows, as hopes of a deeper output cut by the Organization of the Petroleum Exporting Countries and central banks’ policy measures countered fears of slower growth.

“There’s a growing sense that we’re going to see coordinated action by global central banks to try to offset the slowdown from the coronavirus,” said Phil Flynn, an analyst at Price Futures Group.

Equity markets rose after suffering their worst plunge last week since the depths of the 2008 financial crisis.

Asian markets initially fell after China reported a record slump in factory activity but the region rallied to finish higher.

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In Toronto, the S&P/TSX composite index closed unofficially up 290.21 points, or 1.78 per cent, at 16,553.26.

All of the index’s 11 major sectors were higher, led by a 3.3-per-cent gain by industrial stocks.

The materials sector added 2 per cent, while the energy sector gained just 0.2 per cent despite the jump in oil.

MSCI’s broadest index of world shares rose for the first time in eight sessions. The MSCI index gained 1.55 per cent and emerging market stocks rose 1.14 per cent.

On Wall Street, the the Dow Jones Industrial Average rose 1,296.81 points, or 5.1 per cent, to 26,706.17, the S&P 500 gained 136.3 points, or 4.61 per cent, to 3,090.52 and the Nasdaq Composite added 384.80 points, or 4.49 per cent, to 8,952.17.

In Europe, shares edged higher at the close after seesawing for most of the session. The broad STOXX 600 index rose 0.09 per cent. The FTSE 100 index closed up 1.1 per cent.

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The scale of losses last week - almost $6 trillion was wiped off world stocks - led financial markets to price in policy responses from almost every major central bank.

Traders now see a 100 per cent chance of a half percentage-point cut to the current 1.50 per cent-1.75 per cent target rate at the Fed’s March 17-18 meeting, according to the CME FedWatch tool, up from no chance of large cuts last week.

The disruption to supply chains, factory output and global travel caused by the coronavirus has worsened the outlook for a world economy trying to recover from the U.S.-China trade war.

In Paris, the Organization for Economic Cooperation and Development (OECD) warned the outbreak could cause the worst global downturn since the financial crisis. In a bleak scenario, growth could drop to just 1.5 per cent.

The OECD’s outlook and the likelihood for slower growth has investors and market analysts worried the worst is yet to come.

“Nobody knows how this is going to play out,” said Ed Clissold, chief U.S. strategist at Ned Davis Research.

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“There are going to be some nasty headlines in the next few weeks about people in various countries, including the United States, getting coronavirus,” he said.

Companies will issue profit warnings and some economic data will look scary, Clissold said, suggesting that despite the rally on Monday the market has not found a bottom yet.

A Ned Davis examination of previous global health scares since 2002 showed a far lower gauge of investor sentiment, he said. An average reading was about 13, and the coronavirus reading is only 27, he said.

The epidemic, which began in the Chinese province of Hubei, has killed 3,000 people worldwide as authorities race to contain infections in Japan, Iran, Italy, South Korea and the United States.

Gold rose. The precious metals market was routed by traders liquidating their positions during a sell-off across global markets on Friday, when gold fell as much as 4.5 per cent.

U.S. gold futures settled 1.8 per cent higher at $1,594.80.

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Oil rose after six sessions of losses for both crude benchmarks.

Brent crude futures rose $2.23 to settle at $51.90 a barrel. U.S. West Texas Intermediate (WTI) crude futures settled up $1.99 at $46.75 a barrel.

The dollar index fell 0.629 per cent, with the euro up 1.23 per cent to $1.1161.

The Japanese yen strengthened 0.21 per cent versus the greenback at 107.88 per dollar. Benchmark 10-year notes last rose 17/32 in price to yield 1.0719 per cent.

Reuters

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