By Herbert Lash
NEW YORK (Reuters) – Yields on U.S. Treasuries plunged to historic lows on Friday as fear the coronavirus outbreak will slam the global economy drove investors to snap up risk-adverse assets and dump equities, overshadowing data highlighting a strong U.S. labor market.
The 10-year Treasury
Gold prices rose more than 1% at one point, on course for their biggest weekly gain since January 2009, while declining U.S. government bond yields weakened the dollar and pushed it toward its worst week since 2016, down more than 2%.
The number of people infected with the new coronavirus across the world surpassed 100,000 on Friday as its economic toll intensified, with business districts beginning to empty and companies bracing for slower sales.
A U.S. jobs report showed employers maintained a robust pace of hiring in February, driving solid wage growth and the unemployment rate to fall back to near a 50-year low of 3.5%.
Upward revisions also were made to hiring in December and January but this month’s report failed to fully capture the impact of the coronavirus, which led the Federal Reserve to cut interest rate by a half percentage point earlier this week.
“If you have a really strong jobs report and there’s no one around to hear it, does it make a noise?” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“Today’s an example that it doesn’t. There are many other things that investors are focused on besides the jobs report this morning,” he said.
Since the end of January when the coronavirus started to make headlines worldwide, markets have sold off as investors are unwilling to go into the weekend holding too many risky positions, Arone said.
“That pattern has held true and we’re observing it in today’s market as well,” he said.
The flu-like virus emerged late last year in central China and has spread to more than 80 countries, killing more than 3,000 people. Travel restrictions and factory closings aimed at curbing the virus are expected to pressure global growth.
MSCI’s gauge of stocks across the globe <.MIWD00000PUS> shed 1.87% and emerging market stocks lost 2.43%.
In Europe, the pan-regional STOXX 600 index <.STOXX> fell 3.35%. The travel & leisure sub-index <.SXTP> slid 3.9% to trade firmly in bear market territory, seen as a 20% drop from recent peak.
Rate-sensitive U.S. financial stocks <.SPSY> nursed some of the biggest losses among the 11 S&P sectors on Wall Street. The banking sub-index <.SPXBK> fell 3.3%.
The Dow Jones Industrial Average <.DJI> fell 391.96 points, or 1.5%, to 25,729.32. The S&P 500 <.SPX> lost 52.69 points, or 1.74%, to 2,971.25 and the Nasdaq Composite <.IXIC> dropped 143.20 points, or 1.64%, to 8,595.40.
Money markets are pricing in another 25 basis-point cut at the Fed meeting on March 18-19, and a 50 basis-point cut by April. Minneapolis Federal Reserve President Neel Kashkari said Thursday the Fed could cut rates further if needed.
Gold prices rose about 6.3% so far for the week but fell after initial gains. Spot gold Treasury prices soared but the strong U.S. non-farm payrolls report lifted the yield a bit from their lows.
Benchmark 10-year notes Germany’s benchmark 10-year Bund yield fell to a six-month low of -0.739% Oil prices tanked more than 7% to their lowest levels since mid-2017 after Reuters reported that Russia balked at the Organization of the Petroleum Exporting Countries proposed steep production cuts to stabilize prices. Brent (Graphic: Global stocks’ performance vs reported coronavirus cases: https://fingfx.thomsonreuters.com/gfx/mkt/13/2961/2926/globalstocks.png) (Reporting by Ritvik Carvalho; additional reporting by Tommy Wilkes in London and Stanley White in Tokyo; editing by Larry King)
