Australia

Australian shares are poised to fall when trade begins after the long weekend amid fears the spread of the deadly coronavirus will hurt global markets.

The SPI200 futures contract was down 89 points, or 1.27 per cent, at 6913 at 8am Sydney time on Tuesday.

Australia's benchmark S&P/ASX200 index finished Friday up 2.5 points, or 0.04 per cent, at 7090.5 points, despite worry about the coronavirus.

The broader All Ordinaries index closed 4.2 points higher, or 0.06 per cent, at 7203.2.

IG market analyst Kyle Rodda says risk aversion continued to be fuelled on Monday, when local markets were closed, as the reported number of cases of the virus in China climbed towards 3000, and the number of official fatalities leapt above 80.

"China remains in a state of shutdown as authorities look to contain the viruses spread. China's financial markets will not re-open, as it currently stands, until February 3rd," he said.

On Wall St, the Dow Jones Industrial Average fell 1.57 per cent to 28,535.8, the S&P 500 lost 1.57 per cent, and the Nasdaq Composite dropped 1.89 per cent.

Locally this week, investors are waiting to see the Reserve Bank of Australia's quarterly consumer price index data for the three months to December.

Inflation is a crucial consideration for the RBA in setting the cash rate - and many analysts are still expecting two rate cuts this year.

ANZ research says the recent strength in employment gives the RBA breathing space. They tip April as the likely date for the next rate cut, with another a few months later.

The Australian dollar was buying 67.6 US cents, down from 68.46 US cents at the market close on Friday.

Asia

Japan’s Nikkei share average posted its biggest one-day loss in five months on Monday, with tourism-related stocks under pressure amid fears that the virus outbreak in China could be more deadly and harder to contain than initially thought.

The Nikkei share average slumped 2.03 per cent, its biggest percentage fall since 26 August, to end at 23,343.51 points, the lowest finish since 8 January. The broader Topix lost 1.61 per cent to 1702.57.

A Tokyo-listed China proxy, ChinaAMC CSI 300 index ETF, fell 2.2 per cent. Many markets in Asia were closed for the lunar new year holiday.

Europe

Potential damage to business from the coronavirus knocked more than 2 per cent off European stocks on Monday, after the world’s second biggest economy ramped up travel bans and extended the Lunar New Year holidays.

More than 97 per cent of stocks in the STOXX 600 were trading in the red with many toppling from record highs, wiping out around €180 billion of market capitalisation from the European share index.

The biggest jolt was felt by luxury, airlines and hotel issues, which see big demand from Chinese consumers. Europe’s major luxury players have lost more than $50 billion in market value since the outbreak last week.

Meanwhile, safe-haven investment options such as gold and government bonds rose as the death toll from the outbreak in China increased to 81 and the number of cases of infection jumped by about 30 per cent in a day.

A small number of cases linked to people who travelled from the outbreak’s epicentre have been confirmed in more than 10 countries, including Thailand, France, Japan and the US. No deaths have been reported elsewhere.

Led by a steep sell-off in luxury retailers, France's CAC lagged all regional bourses falling 2.2 per cent. LVMH, Christian Dior, Hermes and Gucci owner Kering, which are heavily reliant on Chinese demand, fell more than 3 per cent.

Other companies in the luxury space such as Burberry Group, Moncler, Swiss watchmakers Swatch and Richemont declined between 2.7 per cent and 4.6 per cent while airport retailer Dufry was set for its steepest one-day drop in more than a year.

North America

US stocks suffered their worst day in over three months on Monday as China extended the Lunar New Year holiday due to a virus outbreak, fuelling worries about the economic impact of containment efforts in the world’s second largest economy.

The benchmark S&P 500 suffered its worst weekly performance since September last week as China locked down several cities and curbed travel, reminding investors of the deadly SARS virus that killed nearly 800 people in 2002-03 and cost the global economy billions.

Still, some investors viewed any long-term economic impact as unlikely, given past experiences with viral outbreaks.

“This whole thing is way overblown,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

“It seems to me Chinese are doing a much better job of containing it than with SARS and what did SARS ultimately lead to? Did it lead to some sort of economic catastrophe - no.”

After the 2003 SARS (Severe Acute Respiratory Syndrome) outbreak, the S&P rallied more than 10 per cent from the start of the outbreak to the announcement of its containment.

Travel-related stocks, including airlines, casinos and hotels, were among the hardest hit on Wall Street, while shares of sectors exposed to China’s growth, including technology, materials and energy, pressured the markets.

Adding to downside pressure was the sluggish start to corporate earnings season with indexes near record levels.

Earnings are now expected to show a decline of 0.5 per cent for the fourth quarter, according to Refinitiv data. Of the 87 companies that have reported though Monday morning, 67.8 have topped expectations, below the 74 per cent rate from the past four quarters.

The Dow Jones Industrial Average fell 453.93 points, or 1.57 per cent, to 28,535.8, the S&P 500 lost 51.84 points, or 1.57 per cent, to 3,243.63 and the Nasdaq Composite dropped 175.60 points, or 1.89 per cent, to 9,139.31.

The Dow and S&P has their biggest one-day percentage drop since 2 October while the Nasdaq’s fall was its largest since 23 August. Wall Street’s fear gauge, the CBOE Volatility index, reached 19.02, its highest since 10 October.

Technology and internet heavyweights that have powered the recent rally including Apple Inc, Microsoft Corp, Alphabet Inc and Amazon.com, which account for about 15 per cent of the S&P 500 weighting, lost at least 1.6 per cent.

Wynn Resorts Ltd, Melco Resorts & Entertainment Ltd and Las Vegas Sands Corp, which have large operations in China, plunged at least 5 per cent. The NYSE Arca Airline index dropped 3.32 per cent.

Yum China Holdings Inc tumbled 5.27 per cent after the company said it had temporarily closed some of its KFC and Pizza Hut stores in Wuhan, the epicentre of the outbreak.

The rush to safe-haven assets sank US Treasury yields, with the benchmark 10-year note falling as low as 1.603 per cent, its lowest since 10 October, and the yield curve between the two-year and 5-year inverting for the first time since 4 December, putting pressure on lenders. The S&P 500 banks index was down 1.42 per cent.

The S&P energy index dropped 2.76 per cent as crude prices settled down about 2 per cent on fears the outbreak would dent demand.

Fourth-quarter earnings will kick into high gear this week with 141 of the S&P 500 companies, including Apple, Microsoft Corp and Boeing Co, reporting.