A fresh wave of selling pressure rippled across global markets on Tuesday as new evidence emerged about the coronavirus’s spread and the US, Japan and Italy issued warnings on the impact of the outbreak.

Wall Street’s three main indices each fell sharply, giving up opening gains on a day that saw investor sentiment swing on a near-hourly basis. The S&P 500 was down 1.9 per cent by early afternoon in New York, a day after it dropped 3.4 per cent in its biggest slide since trade tensions rattled markets in February 2018.

As stocks dropped, the US government warned people for the first time to prepare for the coronavirus to spread in the US.

Alex Azar, US secretary of health and human services, said the US must build up its stockpile of protective gear for healthcare workers. “We cannot hermetically seal off the United States to a virus, and we need to be realistic about that,” he said.

US Treasuries rallied, sending the yield on the 30-year bond to a fresh record low of 1.78 per cent. The yield on the benchmark 10-year note fall to 1.32 per cent, just shy of an all-time record low.

The equity losses were heaviest in Europe, where the Stoxx Europe 600 index closed 1.8 per cent down, bringing its declines this week to more than 5.5 per cent. The index, a benchmark of the region’s biggest companies, swung nearly 2.5 per cent between its intraday highs and lows, as traders struggled to price the likely economic disruption from the outbreak.

Stocks in Italy, the European country hit hardest with 322 confirmed infections and ten dead, closed down 1.4 per cent, extending losses this week to 6.5 per cent. London’s FTSE 100 fell to its lowest level since February 2019 as it slid 2.1 per cent.

The choppy trading came amid concerns over the wider disruption caused by the coronavirus, which has infected more than 80,000 and resulted in over 2,700 deaths worldwide. The health crisis has led to restrictions on how companies operate amid a breakdown of global supply chains.

Michael Arone, chief investment strategist at State Street Global Advisors, said investors increasingly believed the Federal Reserve would step in to shore up the US economy to fend off any negative impact on growth and earnings.

“Investors believe that [the coronavirus] has accelerated the Fed’s willingness to act,” he said. “History proves that central banks will often come in to help support markets at times of stress.”

Japan had earlier urged companies to adopt remote working, stagger shifts and hold online meetings to reduce the spread of the illness. An expert government panel said there had been 146 infections confirmed in more than 16 different prefectures, excluding cases from an infected cruise ship and Japanese evacuees from China.

“We are at the crossroads,” Shigeru Omi, head of the Japan Community Health Care Organization, said at a press briefing. “Local transmission is already going on.”

Line chart of % change since end of 2019 showing US and European stocks surrender 2020 gains

Prime Minister Shinzo Abe asked companies to adopt the new strategy after his cabinet on Tuesday approved an antivirus plan.

Italy warned that the EU should offer flexibility on its budget targets should the coronavirus outbreak in its industrialised northern regions have a prolonged impact on an economy already teetering on edge of a recession. The majority of cases were clustered in Lombardy and Veneto, regions which together make up a third of output for the eurozone’s third-largest economy and about half of its exports.

In Tenerife, authorities put a hotel with hundreds of guests and staff under quarantine after an Italian doctor staying there tested positive.

Switzerland also reported its first case, a pensioner who had visited Milan.

Iranian health officials said 95 had tested positive for the disease and 15 people had died in the country, the highest number of coronavirus deaths outside of China. The high mortality rate has sparked concerns that Iran is struggling to contain the outbreak and prompted neighbouring countries to impose border restrictions. Among those infected is Iran’s deputy health minister.

25 February 2020, South Korea, Seoul: South Korean President Moon Jae-in (2nd R) is seen wearing a face mask as he salutes the national flag during a meeting on the updates of the Coronavirus (COVID-19) meeting at the Daegu City Hall. Photo: -/YNA/dpa
South Korean president Moon Jae-in is pictured above (centre) wearing a face mask for a meeting in Seoul © YNA/dpa

A spike in cases in South Korea, where authorities say nine people have died and there have been 893 confirmed infections, prompted officials in Washington and Seoul to consider scaling back joint military exercises. US officials also raised the travel warning to South Korea to its highest level, warning Americans against all but essential travel to the country.

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The expert panel in Japan recommended changing its strategy of keeping the infection out altogether to containing it and slowing its spread. It no longer made sense to test everybody who might have been exposed to the virus, they said, as doing so would overwhelm the healthcare system.

Instead, Japan was asking anybody who felt ill to isolate themselves and said they should only seek medical help if they suffered severe symptoms.

“The biggest objective of our response from this point should be to control the speed of the infection’s spread and minimise the number of deaths and people with severe symptoms,” the panel said.

It also said that the next one to two weeks would be decisive in preventing the spread of the virus.

Additional reporting by Miles Johnson in Rome, Hannah Kuchler in New York and Adam Samson in London

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