U.S. stock markets are set to open sharply lower Monday, as the pneumonia-like virus in China continues to spread despite the concerted efforts of local authorities, which threaten to put a big near-term damper on the Chinese economy.
At 6:55 AM ET (1155 GMT), futures for the S&P 500 traded 49 points, or 1.5%, lower, futures for the Nasdaq 180 points, or 2%, lower, while the Dow 30 futures contract fell 449 points, or 1.6%.
Markets in mainland China and Hong Kong were closed, while Japan’s Nikkei index closed 2% lower. In Europe, Germany’s DAX, the FTSE 100 in the U.K. and France’s CAC 40 all dropped more than 2%.
Losses have also been severe in the oil complex, as traders fret about the impact on demand for crude from China, the world’s largest importer.
By 6:55 AM ET (1155 GMT), U.S. crude futures had slumped 3.1% to $52.52 and the international benchmark Brent contract had fallen 3% to $58.09.
The coronavirus outbreak in China has now killed 81 people and infected thousands and has already spread to more than 10 countries, including France, Australia and Singapore. The number of confirmed cases in the United States has risen to five.
The Chinese authorities have imposed travel restrictions, limited social gatherings and working hours and extended the Lunar New Year holidays nationally by three days to Feb. 2 to limit the spread of the virus.
“China’s health commission has said this morning that the epidemic is becoming more complicated to battle, said Peter Garnry, Head of Equity Strategy at Saxo Bank. “Our view is to respect the unknowns of viruses and that it comes with potential ugly nonlinearities.”
“From a tactical side traders should be on the short side in equities and the large gains from last year will likely be attempted to be locked in creating downside liquidity effects. For investors with a longer term view we believe reducing exposure somewhat or hedge market risk is a good precautionary step,” Garnry added.
That said, volumes could be limited Monday as the week ahead holds a number of key influences.
Tech giants Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google parent Alphabet (NASDAQ:GOOGL) are all due to release their earnings this week for the final quarter of 2019, starting with Apple Tuesday.
The Federal Reserve is set to hold a rate-setting meeting this week, concluding on Wednesday. The central bank is widely expected to keep monetary policy on hold as policymakers continue to assess how the three rate cuts from 2019 are percolating through the economy.
Additionally, the impeachment trial of President Donald Trump continues. At the weekend, a New York Times report cited an unpublished manuscript from former national security adviser John Bolton saying Trump told him he wanted to freeze military aid to Ukraine – already approved by Congress – until its officials helped with investigations into the Biden family.
First-tier economic data are thin on the ground Monday, with December’s new home sales the main release, at 1000 AM ET