Stocks retreat as China steps up virus response

LONDON — Investor nerves over the spread of a deadly new virus from China hammered Asian equities and oil benchmarks on Thursday, as authorities moved to contain the disease, while losses for European stock markets were less sharp, awaiting the outcome of a European Central Bank (ECB) interest-rates meeting.

"Traders are cutting their exposure to stocks for fear the health crisis will spread," said David Madden, market analyst at CMC Markets UK.

China on Thursday locked down two major cities in a province at the centre 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. 

The respiratory virus has claimed 17 lives since emerging from a seafood and animal market in Wuhan, infected hundreds of other people nationwide and been detected as far away as the United States.

Shanghai's stock market tumbled 2.8 per cent 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 of the contagion spreading further.

It was the biggest pre-Lunar New Year fall on record for the bourse.

Hong Kong slightly pared losses to finish down 1.5 per cent while Tokyo lost 1 per cent.

Approaching the half-way stage in Europe, London's benchmark FTSE 100 index was down 0.2 per cent and Frankfurt's DAX 30 dropped 0.3 per cent. 

Wall Street finished flat on Wednesday, with indices barely stirred by either strong local earnings reports or the rising death toll in the coronavirus outbreak.

OANDA senior market analyst Jeffrey Halley said it was "quite understandable that some money would be taken off the table until the true extent of the coronavirus issue becomes obvious".

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

"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 per cent.

"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.

Focus on Thursday was also on the European Central Bank, with markets looking for hints about the ECB's strategic review and an updated assessment of risks facing the eurozone economy.

"The European Central Bank meeting on Thursday is likely to produce some clues about future monetary policy direction, but nothing concrete," said Neil Wilson, chief market analyst for Markets.com. 

"The focus will be on the strategy review as it gets under way, which is buying new boss Christine Lagarde some breathing space."