Worries about the economic consequences of the new coronavirus epidemic hit financial markets on Monday, with uncertainty among investors noticeably on the rise.
The nervousness on the markets was being fuelled by the increasing spread of the Wuhan virus, with fast rising infection numbers in South Korea and Italy of particular concern.
U.S markets followed peers around the world, dropping sharply on the open.
The S&P 500 was down about 2.8 per cent, while the Dow Jones Industrial average lost about 900 points, or just more than 3 per cent. The tech-heavy Nasdaq faced similar declines, while bonds considered a safer investment rallied.
In Germany, Frankfurt’s main DAX index dropped by 3.31 per cent, while the eurozone’s blue-chip Eurostoxx 50 fell by 3.27 per cent.
In Italy, which is facing Europe’s worst coronavirus outbreak, the main FTSE MIB index on the Milan stock exchange was down by around 6 per cent in afternoon trading.
“It is clear that the economic consequences of the corona epidemic will be substantial,’’ DZ bank analyst Michael Bissinger said.
“Investors are for now pulling the emergency brake,’’ market observer Andreas Lipkow of the Comdirect Bank added.
In Italy the outbreak was affecting the two highly industrialised northern regions of Lombardy and Veneto, and their slowdown could further depress a stagnant national economy.
In Germany, the shares of sectors sensitive to the economic cycle were under particular pressure, the airline Lufthansa took a hit of more than 7 per cent, while the shares of Deutsche Bank and the automotive supplier Continental fell by more than 5 per cent.
Investors were also pulling back from the European luxury industry, with the shares of LVMH falling by 4.2 per cent in Paris. LVMH Moet Hennessy Louis Vuitton is the world’s leading luxury goods group.
The decline in international tourism associated with the spread of the coronavirus was mostly to blame, according to UBS bank analyst Zuzanna Pusz, as 43 per cent of the luxury sector’s sales comes from purchases by tourists.
The safe haven investment of gold saw its price rise to a new seven-year high on Monday, reaching 1,679 dollars per troy ounce (about 31.1 grams).
Oil prices came under pressure, with the world oil benchmark Brent falling in the morning to 57.13 dollars per barrel.