* Asian stock markets: tmsnrt.rs/2zpUAr4
* China says virus ability to spread getting stronger
* Safe-haven assets in demand; oil drops sharply
* Some Asian markets closed for Lunar New Year holiday
By Tomo Uetake
TOKYO, Jan 27 (Reuters) - Stocks tumbled on Monday as investors grew increasingly anxious about the economic impact of China’s spreading virus outbreak, with demand spiking for safe-haven assets such as the Japanese yen and Treasury notes.
Japan’s Nikkei average suffered a steep 1.8% loss, on track for the biggest one-day fall in three weeks.
U.S. S&P 500 mini futures was last down 0.9%, having fallen 1.3% in early Asian trade.
“All you see is headlines about the coronavirus, giving investors a reason to sell the markets,” said Takeo Kamai, head of executions services at CLSA in Tokyo.
The ability of the coronavirus to spread is getting stronger and infections could continue to rise, China’s National Health Commission said on Sunday, with more than 2,700 people globally infected and 80 in China killed by the disease.
China announced it will extend the week-long Lunar New Year holiday by three days to Feb. 2 and schools will return from their break later than usual. Chinese-ruled Hong Kong said it would ban entry to people who have visited Hubei province in the past 14 days.
Market participants kept a wary eye on developments around the virus, which the World Health Organization (WHO) last week deemed “an emergency in China,” but not, as yet, for the rest of the world.
MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.2%, although trade in the region has already slowed for the Lunar New Year and other holidays, with financial markets in China, Hong Kong and Australia closed on Monday.
All three major Wall Street indexes closed sharply lower on Friday, with the S&P 500 seeing its biggest one-day percentage drop in over three months.
The S&P 500 lost 0.9%, the Dow Jones Industrial Average fell 0.6% and the Nasdaq Composite shed 0.9% after the Centers for Disease Control and Prevention confirmed a second case of the virus on U.S. soil.
U.S. Treasury prices advanced, pushing down yields further, with the benchmark 10-year notes dropping to a 3-1/2-month trough of 1.627% in early Asian trade.
In the currency market, the concerns about the virus supported the yen, often perceived as a safe haven because of Japan’s net creditor status.
The Japanese currency strengthened as much as 0.5% to 108.73 yen per dollar, its 2-1/2-week high.
The euro last stood at $1.1033 versus the dollar, having fallen to its eight-week low of $1.1019 on Friday.
The offshore yuan dropped more than 0.3% to 6.9625 against the dollar, its weakest level since Jan 8.
The heightened fears of the economic impact of the coronavirus also pressured oil and other commodity prices, except safe-haven gold.
U.S. West Texas Intermediate (WTI) crude futures plummeted more than 3% to hit a 3-1/2-month low of $52.15 in early trade.
“Investors will react quickly to any sign of negativity and this is no exception as China announces that the issue has become an emergency. This could keep oil prices fragile until the coronavirus shows signs of slowing down,” said Mihir Kapadia, chief executive at Sun Global Investments.
Reporting by Tomo Uetake; editing by Richard Pullin & Shri Navaratnam