* U.S. 10-year Treasury note yield hits record low
* World FX rates in 2020 tmsnrt.rs/2egbfVh
* Global assets year-to-date tmsnrt.rs/2jvdmXl (Updates prices)
By Rodrigo Campos
NEW YORK, Feb 25 (Reuters) – Stocks and oil prices tumbled on Tuesday and the benchmark U.S. debt yield hit a record low on growing concern about the effects of the spread of the novel coronavirus on the global economy.
The market sell-off accelerated after the U.S. Centers for Disease Control and Prevention said Americans should begin to prepare for community spread of the virus.
The Japanese yen strengthened against the dollar for a third session running, in a sign that traders were in search of relatively safer assets.
The flu-like virus has now infected more than 80,000 people, 10 times more cases than the SARS coronavirus. Several European countries were dealing with their first infections, feeding worries about a pandemic.
The World Health Organization, however, has said the epidemic in China, where it began in December, peaked between Jan. 23 and Feb. 2 and has been declining since.
On Wall Street, where stocks fell the most in two years on Monday, indexes shed over 3% at session lows.
“For the first time in a while we’re finally waking up to the fact that this issue could go on for a while and have a significant impact on Chinese and global economic growth and potentially the United States,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.
“When people react to it because they don’t travel or go to restaurants or go shopping, that’ll have an immediate impact on the economy. It depends how long it goes an how wide the spread,” he said.
The Dow Jones Industrial Average fell 739.32 points, or 2.64%, to 27,221.48, the S&P 500 lost 79.28 points, or 2.46%, to 3,146.61 and the Nasdaq Composite dropped 192.51 points, or 2.09%, to 9,028.77.
The pan-European STOXX 600 index lost 1.76% and MSCI’s gauge of stocks across the globe shed 1.98%.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.14% higher, while Japan’s Nikkei futures lost 0.56%.
BET ON RATE CUTS
The risks are such that bond markets are betting that central banks will have to ride to the rescue with new stimulus.
Futures for the Federal Reserve funds rate have surged in the last few days to price in a 50-50 chance of a quarter-point rate cut as early as April. In all, they imply more than 50 basis points of reductions by year end.
The indication of falling U.S. rates hit the dollar against a basket of its peers.
“Signs of the USD being penalized for having a central bank with some capacity to cut rates raises the question of whether rate spreads are likely to become a key driver any time soon,” said Alan Ruskin, chief international strategist at Deutsche Bank.
The dollar index fell 0.345%, with the euro up 0.22% to $1.0876.
The yen strengthened 0.56% versus the greenback at 110.12 per dollar. Sterling was last trading at $1.3, up 0.56% on the day.
The rush to bonds dragged yields on 10-year U.S. Treasury notes to a record low of 1.307%. The U.S. benchmark last rose 15/32 in price to yield 1.3271%, from 1.377% late on Monday.
The 30-year bond set a fresh record low at 1.786 and last rose 29/32 in price to yield 1.7983%.
Gold ran into profit-taking after hitting a seven-year peak overnight, and last dropped 0.8% to $1,647.81 an ounce.
Oil prices continued to fall as demand concerns linked to the virus’ spread outweighed supply cuts.
U.S. crude fell 3.07% to $49.85 per barrel and Brent was last at $54.75, down 2.75% on the day.
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