Gold rises as global stocks plunge on China virus economic fears

NEW YORK (Reuters) – Global stocks posted their biggest weekly and monthly losses since August on Friday, as growing concerns over the economic fallout from the coronavirus outbreak in China dented risk appetite and boosted The safe-haven yen and Swiss franc.

FILE PHOTO: Trader Michael Urkonis works at the New York Stock Exchange (NYSE) in New York, U.S., January 28, 2020.REUTERS/Bryan R Smith/File Photo

Gold posted its best performance in five months, while U.S. Treasury yields fell to near five-month lows as the U.S., Japan and others tightened travel restrictions on China, where the virus death toll rose to 213 .

Brent, the global crude benchmark, posted its biggest monthly drop since November 2018. Economists have downgraded their outlook for the world’s second-largest economy as travel restrictions and supply chain disruptions could dampen growth in China.

Citigroup revised its full-year forecast for China’s GDP growth in 2020 to 5.5% from 5.8%. The bank also lowered its first-quarter growth forecast to 4.8% from 6% in the fourth quarter of 2019.

JPMorgan cut its forecast for global economic growth for the current quarter by 0.3 percentage points.

“Unless you make it clear that spreads have subsided and are slowing down, or there’s a surefire cure, I think the market is going to be stuck,” said Lou Brien, market strategist at DRW Trading in Chicago.

Stocks fell more than 1% as disappointing U.S. and European data pointing to economic weakness and mixed corporate earnings added to the pessimism.

U.S. consumer spending rose steadily in December, but tepid income growth pointed to moderate consumption growth this year, the Commerce Department said.

The Chicago purchasing management index fell to a weaker-than-expected 42.9, the weakest level since December 2015, as new orders and output fell and producers forecast tepid activity in 2020.

“The Chicago PMI is very weak,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The recently signed U.S.-China trade deal was expected to boost the global economy, but the coronavirus outbreak has dampened that prospect, he said.

“The market is expecting a big boost to growth. Every quarter is being pushed back, especially the industrial side of the economy,” Griski said. “Bond yields are down significantly. The bond market is trying to tell us something.”

The yield on the benchmark 10-year U.S. Treasury note fell to a low of 1.508%.

MSCI World Equity Index .MIWD00000PUS It fell 1.21%, with emerging market stocks down 1.11%. The world index fell 1.2 percent in January after rising 2.6 percent earlier in the month.

In Europe, the pan-European STOXX 600 index .STOXX It closed down 1.07%. The 3% drop for the week was the worst in nearly six months, while the monthly loss of 1.2% was the worst January drop since 2016.

Early gains in Europe quickly deteriorated as headlines from the coronavirus led to more cases and deaths, travel bans and factory closures, combined with disappointingly weak economic data. (.European Union)

The biggest blow was that the economies of France and Italy both unexpectedly shrank late last year, and Eurostat confirmed that the euro zone as a whole grew faster than analysts expected.

On Wall Street, the Dow Jones Industrial Average .DJI It fell 603.41 points, or 2.09%, to 28,256.03.S&P 500 Index .SPX The Nasdaq Composite fell 58.14 points, or 1.77%, to 3,225.52 .IXIC It fell 148.00 points, or 1.59%, to 9,150.94.

Poor data interpretation and concerns over the spread of the virus overshadowed a relatively solid fourth-quarter earnings report.

Amazon amazon The online retailer’s market value surged 7.4% to more than $1 trillion after beating Wall Street expectations for holiday-quarter results.

Asia Pacific Equities ex Japan .MIAPJ0000PUS The losses extended, falling 0.4%.Nikkei .N225 It rebounded 1%, but fell 2.6% for the week.Hong Kong Hang Seng Bank .Hang Seng Index It fell 0.3 percent and is down 9 percent in two weeks. Korea Kospi .KS11 It was the worst week in 15 months, falling 5.6%.

Sterling rose on Thursday before extending gains after the Bank of England failed to cut interest rates, defying market expectations. (GBP/)

GBP GBP = It was trading at $1.3201, up 0.82% on the day.JPY Yen= Against the dollar it was up 0.57% at $108.37.

dollar index .DXY The euro fell 0.49% Euro = It rose 0.53 percent to $1.1089.

The Australian dollar fell to a four-month low against the U.S. dollar, while China’s offshore yuan struggled to gain a foothold.

10-Year Treasury Note US10YT=RR The price rose 15/32 for a yield of 1.5051%. Its yield earlier fell to 1.503%.

spot gold XAU= Up 0.87% to $1,587.5 an ounce, while U.S. gold futures GCv1 It closed down 0.1 percent at $1,587.90.

Oil prices fell and were on track for a fourth straight weekly loss.

Brent crude oil LCOc1 It fell 13 cents to settle at $58.16 a barrel. US West Texas Intermediate Crude Oil (WTI) CLc1 It closed down 58 cents at $51.56 a barrel.

Reporting by Herbert Lash, with additional reporting by Karen Brettell in New York; Editing by Andrea Ricci, Diane Craft and Sonya Hepinstall

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