Global stocks had their worst day in two years as new coronavirus cases outside China dashed hopes that the outbreak had been contained and raised fears of slowing global growth.

Following steep declines in Asia and Europe, the benchmark S&P 500 plunged 3.4 per cent, erasing its gains for the year in its biggest fall since trade tensions rattled markets in February 2018. The FTSE All-World index lost 3 per cent.

Investors flocked to the safety of government debt, pushing the yield on the US 10-year Treasury bond down 10.2 basis points to 1.369 per cent, just above its record low, as expectations grew that the Federal Reserve would be pushed to cut interest rates by April.

Energy stocks led the stock market decline, driven by a weakening oil price, followed by technology shares. Advanced Micro Devices dropped 7.8 per cent amid concerns the outbreak would disrupt computer-chip supply chains.

Transport stocks were also battered, with American Airlines, Delta and FedEx all dropping more than 5 per cent, while the KBW index of US banks fell 3.6 per cent — its worth day since August.

President Donald Trump responded by tweeting that the coronavirus was “very much under control in the USA”, adding: “Stock Market starting to look very good to me!”

Line chart of S&P 500 index showing US stocks drop on virus worries

Earlier, European bourses had borne the brunt of the sell-off on fears about the impact of the virus on the global economy. UK stocks had their worst day for five years and Italy’s MIB index dropped 5.4 per cent in its largest fall since 2016.

“This is no longer solely an Asia issue,” said Robert Carnell, chief Asia-Pacific economist at ING.

In Europe, the continent-wide Stoxx 600 fell 3.8 per cent, while the UK’s FTSE 100 dropped 3.3 per cent. Airlines and tour operators were hit hard, with shares in easyJet falling 17 per cent and Ryanair sliding 13 per cent.

Line chart of FTSE MIB index showing Italian stocks fall sharply

This followed heavy falls in Asia where Seoul’s Kospi index fell 3.9 per cent, its worst day since late 2018.

The market turmoil came after new evidence that the virus was spreading globally. Italy imposed a quarantine across at least 10 towns over the weekend in an effort to contain the biggest outbreak of the virus outside Asia, with 229 confirmed infections and six deaths.

South Korean authorities reported 231 new cases of the virus, bringing the total number of infections to 833. The government added it had put 7,000 troops under quarantine after 11 had tested positive for the virus.

Line chart of (%) showing Yield on 10-year Treasury bonds nears record low

Iran said there had been 12 deaths and 61 confirmed coronavirus cases in the country, a sharp rise from the eight fatalities and 43 infected patients it reported a day earlier. Turkey closed its borders with Iran, while Iraq, Afghanistan, Armenia and Pakistan have imposed restrictions on border crossings and trade.

Despite the outbreak in Italy, EU authorities said there were no plans to suspend travel across the 26-country Schengen area of visa-free travel.

“We need to take this situation extremely seriously — but we must not give in to panic and of course to disinformation,” said Stella Kyriakides, the EU’s health commissioner.

Bruce Aylward, head of the World Health Organization team of foreign experts in China, praised the country’s response to the crisis, telling a press briefing in Beijing that authorities had implemented “the only successful measures we have seen”. He said the turning point in Wuhan, the centre of the outbreak, had been reached, with more people leaving hospital than going in.

However, concerns about the outbreak have continued to weigh on commodities.

The price of Brent crude, the global oil marker, fell 4 per cent to $56.19 a barrel. Gold rallied 1 per cent to $1,659.57 per troy ounce. The activity sent the Cboe Vix index that measures US equity volatility — commonly known as Wall Street’s “fear gauge” — to 25, its highest level since January last year. The dollar ended the day flat.

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Reporting by Daniel Shane in Hong Kong, Sun Yu in Beijing, Tom Mitchell in Singapore and Adam Samson, Katie Martin and Joe Rennison in London, Michael Peel in Brussels and Richard Henderson in New York

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