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Japan’s Nikkei Index Lower, Demand for Safe-Haven Yen Rises as Coronavirus Fears Increase

The Yuan fell in offshore trade on Monday as the death toll in China from the spread of a pneumonia-like virus mounted.
James Hyerczyk

Japanese shares are trading sharply lower early Monday as investors react to the rapidly-spreading China coronavirus. Stocks are also trading lower in the U.S. futures markets. Many Asia Pacific markets are closed due to the Lunar New Year holidays including the China, Hong Kong and South Korea. Australia is also closed.

At 06:43 GMT, Japan’s Nikkei 225 Index is trading 23343.51, down 483.67 or -2.03%. The Topix Index is down 1.47%.

In the U.S., the benchmark March E-mini S&P 500 Index is trading 3261.50, down 32.00 or -0.98%. The blue chip March E-mini Dow Jones Industrial Average is at 28667, down 266 or -0.92% and the technology-driven March E-mini NASDAQ-100 Index is trading 9030.75, down 113.75 or -1.24%.

Demand for Safe-Havens Rises

Demand for safe-haven assets like the Japanese Yen and Treasury notes is also spiking higher. U.S. Treasury prices advanced, pushing down yields further, with the benchmark 10-year notes dropping to a 3-1/2-month trough of 1.627% in early Asian trade.

In the currency market, the concerns about the virus supported the Japanese Yen, often perceived as a safe haven because of Japan’s net creditor status.

The heightened fears of the economic impact of the coronavirus also pressured oil and other commodity prices, except gold.

Yuan Tumbles as China Virus Fears Grow Amid Rising Death Toll

The Yuan fell in offshore trade on Monday as the death toll in China from the spread of a pneumonia-like virus mounted, raising worries authorities are struggling to contain the outbreak and sparking a bout of risk aversion. The Yuan fell to its lowest since January 8.

There are concerns that tourism and consumer spending could take a hit if the virus spreads further, which would discourage investors from taking on excessive risk.

Coronavirus Update – More Volatility is Coming

Chinese officials said, as of the end of Sunday, there are 2,744 confirmed cases, including 461 people in critical condition, as the death toll rose to 80.

The epicenter of the outbreak is the city of Wuhan in Hubei province. This is where the deadly pneumonia-like virus was first identified last month. Wuhan’s mayor said on Sunday that there could be about 1,000 more confirmed cases of the virus in the city.

In a press briefing, the National Health Commission said the incubation period for the virus is about 10 days and that it is contagious even during this state, putting additional pressure on prevention control. This likely means conditions are likely to worsen over the next 7 to 10 days, putting further pressure on the financial markets.

The World Health Organization is scheduled to visit China to assess the impact of the virus. Last week, it refused to acknowledge the coronavirus was a global emergency. Given the spread of the virus outside of China, it is expected to make the call early this week. This news should lead to heightened volatility in the financial markets.

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