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Wednesday, May 22, 2024

US stocks steady as WHO says new China virus not an emergency

Stocks fell sharply on leading European and Asian bourses, but sentiment on Wall Street shifted following the WHO statement.

Global stocks were under pressure again Thursday amid nervousness surrounding the spread of a deadly new virus from China, although US markets strengthened after the World Health Organization stopped short of declaring a global emergency.

China on Thursday locked down two major cities in a province at the center of a deadly virus outbreak, banning planes and trains from leaving in an unprecedented move aimed at containing the disease that has spread to other countries.

Stocks fell sharply on leading European and Asian bourses, but sentiment on Wall Street shifted following the WHO statement.

“This is an emergency in China, but it has not yet become a global health emergency,” WHO chief Tedros Adhanom Ghebreyesus told reporters in Geneva.

The Nasdaq edged to a record, while the Dow finished slightly negative.

The respiratory virus has claimed 18 lives since emerging from a seafood and animal market in the central city of Wuhan, infected hundreds of other people and been detected as far away as the United States, where authorities are investigating a second case.

The virus has caused alarm because of its similarity to SARS (Severe Acute Respiratory Syndrome), which killed hundreds of people in 2002-2003.

“We started down in the morning because of the move the Chinese made to quarantine cities in varying degrees,” said LBBW’s Karl Haeling. “And then equities recovered after the WHO failed to declare a bigger crisis than it is,” he added.

Shanghai’s stock market tumbled 2.8 percent in the final day of trading before a week-long market holiday for the Lunar New Year, when hundreds of millions of people travel across China — raising fears the contagion could spread further.

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It was the biggest pre-Lunar New Year fall on record for the bourse. Hong Kong lost 1.5 percent and Tokyo 1.0 percent. In Europe, London’s benchmark FTSE, Frankfurt’s DAX 30 and the Paris CAC-40 were all off at least 0.7 percent.

“China’s importance in the overall global supply chain and the fact they are a huge export market for many countries… opens up a more unfavourable global outcome this time around,” Stephen Innes, chief market strategist of AxiCorp, said in a client note.

Oil prices were hit hard, shedding around 1.5 percent.

“Given the importance of China for oil demand and having the outbreak falling on the cusp of peak domestic travel season, the timing is particularly damaging,” Innes said.

Read more: afDeadly virus threatens lives in China, US and elsewhere

The European Central Bank, as expected, left interest rates at historic lows and maintained “quantitative easing” (QE) bond-buying purchases at Thursday’s meeting, the second chaired by former IMF chief Christine Lagarde since taking the helm in November.

Risks to the euro area “remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is receding,” Lagarde told reporters in Frankfurt.