Wall Street on firm footing after virus-driven selloff

Darnell Taylor
February 27, 2020

This follows news on Monday about a spike in cases in other countries in Asia, the Middle East and Europe, outside the virus's epicenter in China.

And in NY 83 people are in self-quarantine over concerns that they were exposed to the virus.

Macy's dropped 4.9 perc ent as it warned that the coronavirus was a concern to its supply chain and sales from overseas tourists.

"Cases are popping up right, left and centre outside of China, with the infection and fatality rate in Iran causing particular concerns for the middle east. Italy and South Korea are the other two countries that have been highlighted as being problematic but other countries are far from immune and Tuesday seemed to bring updates of new cases nearly on the hour, every hour". The CAC 40 in France was down 0.5% at 5,761.

The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched technical indicators.

The sharp drops, which wiped out the market's gains for the year, were brought on by worries over economic fallout from the virus outbreak that originated in China.

The Chinese government has promised tax cuts and other aid but economists say it is likely to be at least mid-March before automakers and other companies return to full production.

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The source of the patient's exposure is unknown - it is still unclear if the patient was exposed to a traveler who was infected. South Korea has confirmed nearly 300 new coronavirus infections as the country struggles to deal with the growing crisis.

The mood in markets was not as bad on Tuesday but the selling momentum was clear, particularly on Japan's main Nikkei index, which slumped 3.3% to 22,605.41 after reopening from a holiday on Monday.

Hong Kong's Hang Seng index dipped slightly, while South Korea's Kospi edged up less than 1%. In Australia, the S&P ASX/200 shed 1.6% to 6,866.60.

Financial and currency markets are starting to price in expected future easing of monetary policies by the major central banks of the world, due to the covid-19 outbreak. "Markets will be very jumpy until there's increasing confidence the virus is abating and that it won't be a global pandemic", Draho said. Shares also rose in Singapore, Taiwan and Bangkok.

ENERGY: Benchmark crude oil shed 81 cents to $49.09 a barrel in electronic trading on the New York Mercantile Exchange while Brent crude oil, the global standard, shed $1.19 to $53.76 a barrel.

The oil price fell despite US weekly crude inventories increasing less than had been expected.

The April gold contract was down US$6.90 at US$1,643.10 an ounce and the May copper contract was down 0.85 of a cent at US$2.57 a pound. The yen strengthened against the dollar for a third day. The euro weakened to $1.0844 from $1.0853. As of 10:03 p.m. ET Monday, futures on the Dow Jones Industrial Average had been up by 156 factors, implying a gap acquire of 178.2 factors for the index on Tuesday.

The Dow and S&P 500 are off 5.5% and 3.5%, respectively, in 2020. The Nasdaq dropped 3.7% to 9,221.28 - its biggest loss since December 2018.

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