By Chong Koh Ping and Anna Isaac 

Global equities, U.S. stock futures and oil slipped Wednesday as investors' concerns about the fast-spreading coronavirus and its economic fallout continued to roil markets.

Futures linked to the Dow Jones Industrial Average eased 0.2% lower, suggesting that the blue-chip index is likely to drop for a fifth straight day after the opening bell in New York. The Dow fell nearly 900 points on Tuesday to end at its lowest level since October after U.S. health officials said they expect a wider spread of the coronavirus and are preparing for a potential pandemic.

Investors' anxiety was also reflected in bond markets, where the yield on the U.S. 10-year Treasury dipped to 1.312% Wednesday before trading at 1.347%. On Tuesday, it had settled at an all-time low of 1.328% as fund managers sought the safety of government bonds, extending a decadeslong rally.

The U.S. yield levels reflect in part a growing expectation among investors that the Federal Reserve may cut interest rates at least two times later this year. But Federal Reserve Bank of Dallas President Robert Kaplan told The Wall Street Journal Tuesday that events were still too fluid around the coronavirus outbreak for the central bank to cut short-term interest rates.

Meanwhile, regional equity indexes also retreated across Europe. The pan-continental Stoxx Europe 600 dropped 1.2%, with travel companies and the financial sector leading losses. The U.K.'s equity benchmark FTSE 100 index shed 0.6% on Wednesday and briefly entered correction territory when it dropped over 10% from its Jan. 21 high.

"Investors do not want to catch this falling knife," said James Athey, a senior investment manager at Aberdeen Standard Investments. "The speed with which equities are declining here is something investors find very troubling. It's hard to see people willing to step in and buy."

Brent crude, the benchmark for global oil prices, fell 1.1% to $53.67 a barrel. Industrial metals including copper also waned, while gold, which is considered a haven asset, was mostly flat.

In Asia, markets closed lower. Japan's Nikkei 225 index shed 0.8% to reach its lowest level since October. Australia's S&P/ASX 200 dropped 2.3% and Korea's Kospi retreated 1.3%.

"The market is pricing in a significant slowdown in global growth and corporate earnings," said Ong Zi Yang, senior macro analyst at FSMOne.com in Singapore. "It is hard to quantify the economic impact now but there will definitely be a slowdown."

Deaths and confirmed cases of the coronavirus have continued to climb outside China -- notably in Italy, Iran, Japan and South Korea. Concerns among investors that the virus will spread further, disrupting the global economy, have triggered two sharp consecutive stock selloffs this week.

Many European and Asian benchmarks, including those in Germany, Japan, and South Korea are now solidly in negative territory for the year. Germany's DAX is down 4.9% year to date, while Hong Kong's Hang Seng Index and the Kospi in Seoul have both declined more than 5%, according to FactSet.

"This is a classic case of risk aversion," said Kelvin Tay, regional chief investment officer at UBS Global Wealth Management in Singapore, who added that markets were likely to remain volatile.

In currencies, the Australian dollar fell to its lowest level against the U.S. dollar since March 2009. Meanwhile, the ICE U.S. dollar index was up 0.1% Wednesday, taking its gains against other major currencies so far this year to 2.8%.

Write to Chong Koh Ping at chong.kohping@wsj.com and Anna Isaac at anna.isaac@wsj.com

 

(END) Dow Jones Newswires

February 26, 2020 05:51 ET (10:51 GMT)

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