Spot gold prices rose for a fifth straight session and touched a 7-year high while the U.S. 30-year Treasury bond yield set a record low. MSCI's global gauge of stocks fell 3% and the three major U.S. indexes also fell more than 3%.
Despite the spike in coronavirus cases reported in Italy, South Korea and Iran, the head of the World Health Organization said that "using the word 'pandemic' now does not fit the facts but may certainly cause fear.
"We must focus on containment while preparing for a potential pandemic," Tedros Adhanom Ghebreyesus told reporters in Geneva, adding that the world was not witnessing an uncontained spread or large-scale deaths.
Concerns over the hit to economic growth and uncertainty over the stress to supply chains triggered selling in stocks and other high-risk assets.
"It is not as though the numbers have changed dramatically; but what has changed is the geography, which adds a new level of concern," said Art Hogan, chief market strategist at National Securities in New York.
"What the market is trying to predict here is 'How large will this get globally, and when will it start to peak?'"
The Dow Jones Industrial Average fell 1,031.61 points, or 3.56%, to 27,960.8, the S&P 500 lost 111.86 points, or 3.35%, to 3,225.89 and the Nasdaq Composite dropped 355.31 points, or 3.71%, to 9,221.28.
The pan-European FTSEurofirst 300 index <.FTEU3> lost 3.76% with Milan's stock market down more than 5% after a spike in cases of the virus left six dead in Italy and parts of the country's industrial north in virtual lockdown. [.EU]
MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 2.97%, its biggest single-day decline since June 24, 2016.
Emerging market stocks lost 2.67%. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> closed 2.52% lower, while futures in Japan's Nikkei fell over 4%.
The virus has now killed more than 2,500 people in China, which has reported some 77,000 cases, and spread to 29 other countries and territories, with a death toll of more than two dozen outside of China, according to a Reuters tally.
Iran, which announced its first infections last week, said it had confirmed 61 cases and 12 deaths, with most cases in the holy city of Qom. Kuwait, Bahrain, Oman, Afghanistan and Iraq reported their first new coronavirus cases, all in people who had been to Iran.
"The idea that the coronavirus has been fully contained has been firmly banished," said Chris Beauchamp, chief market analyst at IG. "This means the economic forecasts of the impact, such as they are, will need to be revised, with a greater impact now to be expected."
SURGE TO SAFETY
Benchmark 10-year notes last rose 29/32 in price to yield 1.3738%, from 1.47% late on Friday. The 30-year bond touched a record low yield of 1.811.
In currency markets the Japanese yen strengthened 0.77% to 110.74 per dollar. The dollar index <=USD> fell 0.13%, with the euro up 0.08% to $1.0852.
"Ultimately this is all a risk-off trade," said Marvin Loh, senior global markets strategist at State Street Global Markets.
"When you look at the yen, when you look at the Swissie, when you look at rates, it is risk-off. It's probably reflective, to a certain degree, of the market being a little too sanguine up until now ... so there's an adjustment process around it."
Korea's won was down 1% and emerging-market currencies, from Mexico's peso and Turkey's lira to Poland's zloty and Russia's ruble, were all in the red.
Oil pared some of its early losses. U.S. crude fell 3.8% to $51.35 per barrel and Brent was last at $56.18, down 3.97% on the day. Both had fallen more than 5% during Monday's session.
Among the main industrial metals, copper lost 1.33 percent to $5,688.50 a tonne. [MET/L]
"As the virus spreads globally, additional downside revisions in oil demand for this year may be required," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
"The accelerated sell-off in the stock market has become difficult for the oil market to ignore," he said.
Yields on top-rated, tax-exempt U.S. municipal bonds fell to all-time lows of 1.01% in 10-year paper and 1.6% in 30-year debt, according to Municipal Market Data.
(Reporting by Rodrigo Campos in New York; Additional reporting by Marc Jones in London, Stephanie Nebehay and Michael Shields in Geneva, Medha Singh in Bengaluru, Ross Kerber in Boston, Stephanie Kelly and Kate Duguid in New York and Karen Pierog in Chicago; Editing by Dan Grebler and Matthew Lewis)
By Rodrigo Campos