Asian stocks dropped for a third day on fears over the spread of the coronavirus epidemic outside of China as traders digested another sell-off on Wall Street.

The latest declines left most of the region’s indices in the red for the year to date. On Wednesday Japan’s Topix and South Korea’s Kospi each fell 1 per cent due to rising concerns over the impact of the Covid-19 outbreak on two of Asia’s biggest economies.

Overnight, Wall Street’s S&P 500 shed 3 per cent after the Centers for Disease Control and Prevention warned it was likely the outbreak would evolve into a pandemic that could cause “severe” disruptions to daily life in the US. 

But futures trading in Asia suggested the Wall Street sell-off could soon ease, pointing to gains of 0.7 per cent for the benchmark S&P 500. The price of brent crude, the international oil marker, rose 0.7 per cent to $55.35 a barrel. 

Bond yields also stabilised in a sign that the recent rally in haven assets could be losing steam. The yield on 10-year US Treasuries rose 1 basis point to 1.359 per cent, just above Tuesday’s record intraday low. 

Still, some economists warn that Covid-19 will have severe global ramifications for the world economy following new outbreaks in countries including Italy and Iran.

“The coronavirus . . . now threatens to take out the entire global economy,” said Mark Zandi, chief economist at Moody’s Analytics. “A global recession is likely if Covid-19 becomes a pandemic, and the odds of that are uncomfortably high.”

Mr Zandi said he expects the Chinese economy will shrink in the first quarter compared to the same period a year ago due to the impact of the virus. 

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Australia’s S&P/ASX 200 index fell 2 per cent on Wednesday. The country’s economy is heavily exposed to China which is its biggest export market.

China’s CSI 300 index of Shanghai- and Shenzhen-listed was flat. Some analysts said investors’ concerns were increasingly focused on whether the epidemic was progressing from a China-centric problem to global one.

“What worries us most is what’s happening to South Korea and Japan . . . [which] haven’t taken enough precautionary measures to contain the spread,” added Margaret Yang, a market analyst at CMC in Singapore.



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