Panic in global stock markets over the spreading coronavirus continued into the seventh day on Friday, with shares in the US tumbling following steep declines in Asia and Europe.

The S&P 500 index dropped more than 2 per cent in early trading on Friday. Before trading began, the index was already down more than 12 per cent from a record high reached just last week, and the drop has put the index on track for its worst week since the 2008 financial crisis.

The major selloff is fuelled mostly by worry that measures to contain the virus would hamper corporate profits and economic growth, and fears that the outbreak could get worse. The selling has dragged stock benchmarks around the world into a correction — a drop of 10 per cent or more that’s taken as a measure of extreme pessimism — in a matter of days.

A potential outbreak in the US represents a significant test for President Trump, whose presidential success has been deeply tied to the economy and a rising stock market.

Federal Reserve officials on Friday began to signal a willingness to cut interest rates if the outbreak worsens, laying out a scenario in which the central bank might respond as infections and quarantines spread globally.

But rate cuts may have a limited effect: They work by stimulating demand, which could help if consumers and investors get spooked and stop spending. But cuts will do little to restart factories and correct supply problems.

China, the site of the first cases and the world’s second largest economy, has ground to a halt as it struggled to contain the infection. Its factory shutdowns and quarantines have disrupted the global supply chain.

Companies such as Microsoft have warned that this will affect their sales, and Wall Street analysts have begun to factor those warnings into their expectations for profit growth this year.

“The economic implications of the coronavirus are difficult to ascertain as government and personal reactions to the epidemic are unprecedented,” analysts at Keefe, Bruyette & Woods wrote in a research note to their clients.

On Friday, the slide in Asia and Europe followed a 4.4 percent nose-dive in the S&P 500 index on Thursday, the worst day for American shares since 2011. In Europe, the FTSE 100 in Britain fell 3 percent, and the DAX in Germany fell 3.4 percent. In Asia, the Nikkei 225 in Japan closed down 3.7 percent, the Kospi in South Korea dropped 3.3 per cent and the Shanghai Composite in China dropped 3.7 per cent.