Gold rose and the Dollar hit a four-month high against the Euro on Monday as the death toll from coronavirus outbreak passed that of the SARS epidemic two decades ago, boosting demand for safe havens. Wall Street, however, rebounded on a strong U.S. economic outlook, with the Nasdaq hitting a record high.
According to Reuters News, weak economic data in the eurozone made the Dollar relatively more attractive than the single currency, especially considering Friday’s U.S. non-farm payrolls report showing an acceleration in job growth in January. Data on Monday showed Italian industrial output was much weaker than expected in December, another setback for the Euro after data on Friday showed German industrial output suffered its biggest fall since the recession-hit year of 2009.
A gauge of global equity markets traded little changed, paring most losses after Wall Street rebounded in contrast to declining share prices in Europe, which also fell on concerns about the extent of the coronavirus. “We have the safe-haven bid from the coronavirus. That is killing EM and really benefiting the Dollar, and to a lesser extent the Yen and Swiss,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.
MSCI’s gauge of stocks across the globe gained 0.06 per cent while the pan-European STOXX 600 index rose 0.06 per cent. On Wall Street, the Dow Jones Industrial Average rose 101.67 points, or 0.35 per cent, to 29,204.18. The S&P 500 gained 14.36 points, or 0.43 per cent, to 3,342.07 and the Nasdaq Composite added 67.76 points, or 0.71 per cent, to 9,588.27. Investors continued to monitor the advance of the deadly coronavirus, which has killed more than 900 people as of Sunday, mostly in China’s provincial capital of Wuhan, the epicentre of the outbreak.
Electric carmaker Tesla Inc rose 2.6 per cent as its Shanghai factory returned to service. People across China trickled back to work after the extended Lunar New Year holiday. The government eased restrictions imposed to counter the coronavirus but the World Health Organisation said the number of cases outside China could be just “the tip of the iceberg.” The Dollar index rose 0.18 per cent, with the Euro down 0.29 per cent to $1.0911. The Japanese Yen weakened 0.01 per cent versus the greenback at 109.79 per Dollar.
Bond yields fell. The benchmark 10-year U.S. Treasury note rose 5/32 in price to yield 1.5593 per cent. The full economic impact of the virus is still unknown but is expected to exacerbate a slowdown in the Chinese economy. Treasury debt, which serves as a safe-haven investment in times of geopolitical and economic volatility, has been in demand since the start of the year. The 10-year Treasury yield, which moves inversely to price, has fallen 17.8 per cent since December 31.
Shares overnight in Asia mostly fell. Japan’s Nikkei was off 0.6 per cent, South Korea’s KOSPI was 0.5 per cent weaker while Australia’s benchmark index eased 0.14 per cent. China’s indexes were the only ones in the black in Asia, with the blue-chip index adding 0.4 per cent and Shanghai’s SSE Composite up 0.5 per cent. Oil prices dipped on weaker Chinese demand due to the coronavirus outbreak and as traders waited to see if Russia would join other producers in seeking further output cuts.