World's stock markets head for worst week since 2008 financial crisis

Hideyuki Sano, Reuters

Posted at Feb 28 2020 08:44 AM

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, US, Feb. 27, 2020. Brendan McDermid, Reuters

TOKYO -- Global share prices headed for the worst week since the darkest days of the world financial crisis in 2008 as investors braced for the coronavirus to become a pandemic and rapidly spread around the world.

Hopes that the epidemic that started in China would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China.

"The coronavirus now looks like a pandemic. Markets can cope even if there is big risk as long as we can see the end of the tunnel," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But at the moment, no one can tell how long this will last and how severe it will get."

MSCI all country world index fell 3.3 percent on Thursday to bring its losses so far this week to 8.8 percent, on course for its biggest weekly decline since a 9.8 percent plunge in November 2008.

Wall Street shares led the rout as the S&P 500 fell 4.42 percent, its largest percentage drop since August 2011.

It has lost 12 percent since hitting a record close on Feb. 19, marking its fastest correction ever in just six trading days while the Dow Jones Industrial Average fell 1,190.95 points, its biggest points drop ever.

In Asia, Australian shares dropped 2.8 percent to a six-month low while futures suggested Japan's Nikkei is on course to fall more than 2 percent.

Fears of a major economic slump sent oil prices to their lowest level in more than a year. US crude futures fell to $46.28 per barrel.

As investors flocked to the safety of high-grade bonds, US bond yields have plunged, with the benchmark 10-year notes yield hitting a record low of 1.241 percent. It last stood at 1.274 percent.

That is well below the three-month bill yield of 1.439 percent, deepening the so-called inversion of the yield curve. Historically an inverted yield curve is one of the most reliable leading indicators of a US recession.

As investors rushed to safe assets, gold stood at $1,646.4 near seven-year high of $1,688.9 hit earlier this month.

In currency markets, the yen rose to a three-week high of 109.33 to the dollar and last stood at 109.54.

The euro stood at $1.1005, having jumped over 1 percent in the previous session, the biggest gain in more than two years.