Global shares sink as pessimism dominates over virus impact

World shares have slipped after a sharp drop on Wall Street, as pessimism prevailed over hopes for central bank action to counter the virus outbreak

TOKYO —
World shares slipped Friday after a sharp drop on Wall Street, as pessimism prevailed over hopes for central bank action to counter the virus outbreak. Rumors that Chinese officials might be overstating the extent to which local businesses are getting back to work also were undermining confidence, traders said.

France’s CAC 40 shed 1.78% in early trading to 5,265.28, while Germany’s DAX fell 2.1% to 11,696.84. Britain’s FTSE 100 shed 1.4% to 6,614.02. U.S. shares were set to drift lower with Dow futures down 0.9%, at 25,815.00. S&P 500 futures lost 1.1% to 2,983.50.

Markets have endured roller coaster ups and downs for weeks amid uncertainty over how much damage the outbreak of the new coronavirus will do to the global economy.

“At this point no one can really explain why the markets behave the way they do, and what may be next. The only thing we can say is this high volatility is bad, whether it is positive or negative,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

“Bulk holiday cancellations and a significant drop in all-purpose travels added to anxiety of disrupted supply chains and rumors that China may be lying about the resumption of activity explain why the issue goes beyond governments’ and central bankers’ control this time,” she said in a commentary.

After shutting down most business and ordering tens of millions of people to stay home in the most stringent mass quarantine efforts ever, the Chinese government has been gradually urging companies to get back to work while taking precautions to protect their employees.

But it’s virtually impossible to know just close to normal the situation has become in such a vast country. Communist Party officials have a long tradition of embellishing on statistics to fit official targets.

The financial magazine Caixin reported some companies are leaving lights and air conditioners running in empty offices and faking work records.

Japan’s benchmark Nikkei dived 2.7% to finish at 20,749.75. Australia’s S&P/ASX 200 lost 2.8% to 6,216.20. South Korea’s Kospi dropped 2.2% to 2,040.22. Hong Kong’s Hang Seng declined 2.3% to 26,146.67, while the Shanghai Composite skidded 1.2% to 3,034.51. Shares also dropped in Taiwan and Southeast Asia.

On Wall Street on Thursday, major indexes lost roughly 3.5%, nearly wiping out the rally from a day before that was fueled by hopes authorities around the world will move to cushion the economic fallout. Such swings look likely to continue as long as the outbreaks continue to expand.

In China, shares have been steadying along with the outbreak, with the Shanghai benchmark gaining nearly 12% since scraping bottom on Feb. 3. But there are doubts about just how quickly businesses will recover.

“Markets have shifted from pricing temporary China weakness to a more protracted global event, which will see a good chunk of global GDP go up in smoke,” Stephen Innes of AxiCorp. said in a report. That has goaded central bankers into action, but no amount of easy credit will “get people on a flight to Milan or cruise ships to Venice and visiting St. Marks Square,” he said.

As is often the case, investors are taking refuge in the Japanese yen, which has surged against the U.S. dollar, and in bonds, pushing prices higher and yields lower.

The yield on the 10-year Treasury note went as low as 0.78% on Friday for the first time in history, according to Tradeweb. Tumbling yields have brought the average rate on a 30-year fixed mortgage to a record low of 3.29%.

ENERGY: Benchmark U.S. crude gave up 74 cents to $45.15 in electronic trading on the New York Mercantile Exchange. It lost 88 cents to $45.90 per barrel on Thursday. Brent crude, the international standard, shed 87 cents to $49.12 per barrel.

CURRENCIES: The dollar fell to 105.76 Japanese yen from 106.13 yen on Thursday. The euro strengthened to $1.1278 from $1.1140.