US, European stocks extend losses on virus pandemic scare

White House economic advisor Larry Kudlow said he sees no downturn looming for the US economy.

US and European stocks suffered another rout Tuesday as the coronavirus continued to spread and public health officials warned of the increasing likelihood of a global pandemic.

Bourses in Europe and the US had initially climbed following Monday's rout, but the bargain-hunting quickly gave way to selling, with losses on Wall Street accelerating after American public health officials warned the coronavirus was likely to hit the world's biggest economy.

Although gold prices eased, the flight-to-safety boosted demand for US Treasury bonds, pushing the yield on the 10-year bond to its lowest level ever.

"Bit by bit, US investors are seeing the prospects for global growth diminish," said Gregori Volokhine of Meeschaert Financial Services.

"With the news of the last three or four days, it's hard to be optimistic."

Even as the number of fresh cases declines at the epicenter of the disease in China, there has been a sudden increase in parts of Asia, Europe and the Middle East.

Entire towns and cities in different parts of the world have been sealed off in an attempt to stop the contagion, while hotels in the Canary Islands and Austria were placed under lockdown on Tuesday because of suspected cases.

At the World Health Organization (WHO) headquarters in Geneva, Bruce Aylward, who headed up an international expert mission to China, told reporters that other countries were "simply not ready" to rein in the outbreak.

In spite of the spread of the illness, White House economic advisor Larry Kudlow said he sees no downturn looming for the US economy.

"The numbers are saying the US (is) holding up nicely," Kudlow told CNBC, adding, "China is going to take an awfully big hit."

But American health authorities urged local governments, businesses and schools to develop contingency plans for an expected larger outbreak in the US.

"Ultimately, we expect we will see community spread in this country," said Nancy Messonnier, a senior official with the Centers for Disease Control and Prevention (CDC).

"It's not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen, and how many people in this country will have severe illness."

Major US indices ended Tuesday down about three percent, leaving the Dow off around 6.5 percent, or almost 2,000 points, in just two days.

Earlier, European equities shed around two percent, smaller than the declines on Monday.

On Tuesday, Tokyo's main stocks index closed with a 3.3-percent loss as traders caught up with global counterparts after a Japanese public holiday on Monday.

Other Asian equity markets recovered a bit meanwhile, with Hong Kong and Seoul posting increases.