Coronavirus is impacting the gold, oil, tourism crop markets. Virus fears has driven sell-off in stocks, oil, yuan.

The death toll from the virus has risen to at least 80, and confirmed cases in the U.S. rose to five on Sunday. Case has been detected in Canada also. Thailand has so far confirmed eight cases, with five already discharged and the remainder hospitalized. Thai officials said about 48 people are being monitored for possible infection. The outbreak spread rapidly over the last seven days. It has infected people in Hong Kong, Australia, Malaysia, Thailand, France, Japan, Taiwan, Vietnam, Singapore, South Korea, Macao and Nepal. There have also been three confirmed cases in the U.S., the Centers for Disease Control and Prevention said.

As of Friday, the Chinese government has issued a travel ban, which means a severe economic impact on China and its business partners is inevitable. China has expanded travel ban to 16 surrounding cities of Wuhan, the center of the virus-“storm”, with a combined population of more than 50 million people, including Huanggang, a neighboring city to Wuhan with 7.5 million people.

Gold

Gold prices rose to their highest in more than two weeks on Monday as equities slipped on growing concerns that a China virus outbreak could impact China’s economy, prompting investors to dump riskier assets and look for safe havens.

Spot gold rose 0.6% to $1,579.11 per ounce by 0433 GMT. Earlier in the session, prices rose to their highest since Jan. 8 at $1,586.42.

U.S. gold futures climbed 0.4% to $1,578.30.

Asian stocks slipped with residents of Hubei province, where the disease originated, banned from entering Hong Kong amid global efforts to halt the rapid spread.

Investors are “looking out for the new risk (coronavirus) coming into the markets and running for the exits in equity markets, that’s the cause for gold to move higher,” Stephen Innes, chief market strategist at AxiCorp, said.

“The virus is going to hurt the Chinese economy to a certain degree,” he added.

“The continuation of the gold rally will rely on developments for good, or for ill, of the Wuhan virus situation,” Jeffrey Halley, senior market analyst, OANDA, said in a note.

“From a resistance point of view, the next level to watch is $1,600 an ounce.”

“Any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalization,” Stephen Innes, chief Asia market strategist at Axitrader, wrote in a note Monday. “I’m starting to think cash is the right place to be for the next few weeks.”

Investors now await the U.S. Federal Reserve’s first policy meeting of the year scheduled on Jan. 28-29, where it is widely expected to keep rates unchanged.

Hedge funds and money managers cut their bullish positions in COMEX gold contracts in the week to Jan. 21, data showed on Friday.

Silver rose 0.6% to $18.20, having earlier touched its highest since Jan. 8 at $18.32.

Palladium dipped 1.9% to $2,382.12 an ounce, while platinum fell 0.7% to $994.91.

Stocks, Oil, Yuan

Deepening fears about the economic and human impact of the deadly coronavirus sent stocks, crude oil and yuan tumbling Monday, and spurred haven assets higher.

Futures on Chinese shares fell more than 5% and the yuan erased this month’s trade-deal driven gains in wake of news that the virus continues to spread, with no peak in sight.

Contracts on the S&P 500 Index fell more than 1% before paring losses, while Japanese equities and European futures retreated over 1%. Ten-year Treasury yields and West Texas crude both hit their lowest levels since October. The yen climbed.

Beijing also suspended the sales of package tours, hitting firms around the world that rely on Chinese travelers’ spending. Air transport providers were the worst performers in Japan’s session, while stocks in Thailand slid as much as 3%.

The moves come on a day with limited trading options in Asia, as holidays closed markets in locations including China, Hong Kong, South Korea and Australia.

Fears over the global economic impact of the deadly virus sent oil prices plunging more than two percent on Monday to extend last week’s sell-off.

Crude prices fell more than 2% to multi-month lows on Monday.

Saudi Arabia’s energy minister sought to calm the market.

The Saudi Energy Minister Prince Abdulaziz bin Salman Al-Saud said on Monday he was watching developments in China and said he felt confident the new virus would be contained.

Markets are being “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite (the virus’s) very limited impact on global oil demand,” he said.

“Such extreme pessimism occurred back in 2003 during the SARS outbreak though it did not cause a significant reduction in oil demand,” Prince Abdulaziz said.

He also said he was confident the kingdom and other members of the Organization of the Petroleum Exporting Countries (OPEC), along with producers in a group known as OPEC+, had the capability to respond and steady the oil market if needed.

OPEC+, which includes Russia and other producers, has been withholding supply to support oil prices and recently increased its agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd through March.

Prince Abdulaziz said on Friday the aim of OPEC+ was to cut seasonal inventory builds that typically occur in the first half of the year. All options were open when OPEC+ meets in Vienna in March, he said.

“The outbreak of coronavirus is a risk,” Tim Leelahaphan, a Standard Chartered Bank economist in Bangkok, wrote in a note. “The strong Thai baht may also affect tourism growth. That is unlikely to help an already-slowing economy.”

The China government has closed all theme parks including Hong Kong Disneyland, Ocean Park, Shanghai Disneyland and Disneytown, and the country’s movie theaters are also shuttered. Concerts are not being held, and even McDonald’s and Starbucks are closed in certain cities. In the special administrative region of Macau, casinos are still open. However, dealers have to wear masks, and the government may soon shutter the venues, which are mostly owned by U.S.-based companies.

On Saturday, the trade association of Chinese travel agencies also said that it would suspend overseas tour groups and flight/hotel vacation packages for Chinese citizens, effective Monday.

The virus outbreak came at the worst possible time for the Chinese economy, as its weeklong Lunar New Year holiday is usually a time of mass migration by the population. Public celebrations have been scaled back or cancelled as a result of the disease outbreak.

Disney will offer refunds to those who booked tickets and resort stays through its official platform.

Airlines are still in service, although there are no flights directly from Wuhan, the epicenter of the virus outbreak. But cruise lines are also banning Wuhan residents or passers-by in that city to board.

Thai stocks drop most since 2016

Thailand’s stock market tumbled on the prospect of economic turbulence after China banned outbound group tours.

The SET index slid as much as 3% on Monday, the most since 2016, with tourism shares among those bearing the brunt of the drop. The baht weakened in line with emerging-market currencies on concern about the fallout from the virus.

Chinese holidaymakers – many on group tours – spent almost $18 billion in Thailand last year, more than a quarter of all foreign tourism receipts, government data show. The industry as a whole contributes 21% to gross domestic product, according to the World Travel & Tourism Council.

“There’s going to be a significant drop in the number of Chinese coming to Thailand in what should be a peak period,” said Win Udomrachtavanich, chairman of Ktb Securities (Thailand) Pcl in Bangkok.

Investors should avoid tourism-related stocks like Airports of Thailand Pcl and hotel operators, which are likely to under-perform the market in the next three months, Win said.

Airports of Thailand declined as much as 5.9%, the most since 2016. The nation’s Tourism & Leisure equity index fell to the lowest level in six years. Oil companies were under pressure too partly on the risk of weaker travel demand. Thai Oil Pcl slumped to the weakest price since 2015.

Thai tourism Minister Phiphat Ratchakitprakarn said tourism revenue losses could reach 50 billion baht ($1.6 billion) if China’s curbs are in place for three months.

Crop futures slump

Crop futures traded in Chicago sank amid reports that the infection was spreading more quickly, threatening demand in the world’s largest consumer of agricultural commodities and the biggest soybean importer.

Soybeans dropped below $9 a bushel for the first time since early December and have lost more than 6% this month.

Corn was down over 1% and wheat fell 2% as selling gripped global financial markets in a deepening risk-off mood.

The lockdown on movement and travel in many areas in China and the preference among the country’s people to stay at home looks set to hammer demand in a nation already ravaged by African swine fever, which has slashed hog herds, and reduced consumption of livestock feed, such as soybean and rapeseed meal.

China is the world’s top producer and consumer of rice and wheat, and the second biggest for corn.

The proliferation of the virus, the hit to demand and the disruption of transport and the economy add another blow to agricultural markets hoping for more Chinese purchases of the U.S. farm products after the signing of the U.S. trade deal earlier this month.

Hong Kong’s city leader Carrie Lam declared a state of emergency and said all primary and secondary schools would close until February 17, two more weeks in addition to next week’s Lunar New Year holiday.


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