Investors flocked to safe-haven assets such as gold and US Treasury bonds, as the selling spree which started during the Australian session yesterday spread to stock markets in Europe and the US.
The US 30-year Treasury bond yield hit a fresh record low as buyers flooded in, while 10-year Treasury yields were near the lowest level since 2016.
The rise in coronavirus cases in Iran, Italy and South Korea shook investor confidence that the outbreak would be contained within China.
“It is not as though the numbers have changed dramatically but what has changed is the geography, which adds a new level of concern,” National Securities chief market strategist Art Hogan told Reuters.
“What the market is trying to predict here is how large will this get globally, and when will it start to peak.”
More than 1,000 points wiped off Wall Street
On Wall Street, the Dow Jones ended down 1,031 points or 3.6 per cent, its biggest one-day loss since February 2018, with all 30 stocks on the blue chip index falling.
The energy and technology sectors led the falls on the S&P 500, while travel stocks were also hard hit.
Shares in Norwegian Cruise Line Holdings (-9.4pc), Carnival (-9.4pc), American Airlines (-8.5pc) and Royal Caribbean Cruises (-9pc) were among the worst performers of the session.
On Monday, the All Ordinaries index lost $51 billion in value and little relief looks likely this session, with SPI 200 futures deep in negative territory.
“The likelihood that the coronavirus will take a greater toll on China’s economy and spread more widely around the world than we had initially assumed suggests that there are downside risks to our current forecasts for equities and bond yields,” Capital Economics senior economist Jonas Goltermann said.
Mr Goltermann said it had looked as though the worst of the outbreak’s impact on financial markets had passed but “that view no longer looks plausible”.
“Today’s falls in European and US equity markets are among the largest in a single day since the aftermath of the UK’s Brexit referendum in mid-2016,” he said.