Coronavirus Douses Stocks Rally; Europe, U.S. Futures Lower

European shares fell again on Thursday, taking their cue from U.S. equity futures, which implied a lower open for Wall Street as cases of the coronavirus surged in the U.S.

European markets snapped a three-day winning streak. Frankfurt and Paris fell 0.3% and Milan, which is at the heart of Europe’s coronavirus outbreak, and London slipped 0.5% as evidence mounted of the damage the coronavirus outbreak was inflicting.

Futures for U.S. stocks pointed to more pain ahead. E-Minis for the S&P 500 fell 0.6% after California declared a state of emergency as coronavirus cases increased. “European stocks are now catching with the downward trend, dragged by a wave of profit warnings,” said Stephane Ekolo global equity strategist at TFS Derivatives. “U.S. futures are down due to fears the situation could worsen after California declared a state-wide emergency.”

Europe’s losses came after MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.7% for a fourth day of gains. The Dow and S&P 500 surged more than 5% and the Nasdaq nearly matched their gains.

U.S. stocks soared after the U.S. House of Representatives approved an $8.3 billion funding bill to combat the spread of the coronavirus. The emergency legislation followed a surprise rate cut by the U.S. Federal Reserve on Tuesday.

Wall Street also seemed to find relief in Joe Biden’s performance in the campaign for the Democratic presidential nomination. Biden is considered less likely to raise taxes and impose new regulations than rival Bernie Sanders.

The coronavirus epidemic showed no signs of slowing, with deaths mounting globally.

“There is little doubt that the COVID-19 outbreak will slow global growth considerably this quarter, and we expect it to actually produce a rare non-recessionary contraction in GDP,” said JPMorgan economist Joseph Lupton.

He noted the bank’s all-industry PMI measure of activity for February slumped 6.1 points, the largest one-month drop on record, and at 46.1 was at its lowest since May 2009.

The Federal Reserve and Bank of Canada have both responded by cutting interest rates by 50 basis points. Markets in the euro zone are pricing in a 90% chance that the European Central Bank will cut its deposit rate, now minus 0.50%, by 10 basis points next week.

“We have to get past the threshold where COVID-19 shifts from panic to headline exhaustion and subsequent news on it becomes more and more of a fade,” Tom Porcelli, chief U.S. economist at RBC Capital Markets. “Then risk assets can move higher in earnest.”

Ten-year Treasury yields fell below 1% again before recovering. Yields had fallen for 10 straight days, the longest slide in at least a generation.

The dollar held steady, with the euro dropping back to $1.1137 from a two-month high of $1.1212 earlier in the week.

The dollar stood at 107.28 yen, up from a five-month low of 106.84. The dollar index held steady at 97.329.

Gold steadied after jumping when the Fed cut rates. It was last at $1,638.97 per ounce.

Oil gained before an OPEC meeting where Saudi Arabia is expected to push the group and its allies, including Russia, to cut output further. Brent crude futures stood at $51.44 a barrel; U.S. crude at $47.03.