On Monday (9 March), a vicious selloff was triggered due to world oil prices crashing, which was already compounded by the fears mounting as a result of Covid-19 outbreak.
The global oil market plunged 30 per cent at one stage, resulting in stocks tanking. This is due to the main oil exporter Saudi Arabia cutting the prices to buyers after the ruckus with Russia over the production cuts of crude oil.
A seven per cent drop led to a 15-minute halt to trading early in the session, after which major US indices sank more than seven per cent. The Dow index finished at more than 2,000 points lower, which was the worst session since 2008.
In Paris, the Dax blue-chip index in Frankfurt dropped the sharpest in a single decline since 2001, whereas the CAC-40 index fell over eight per cent, making it the worst daily decline since the 2008 financial crisis.
As for Brazil, the Ibovespa index slid by more than 12 per cent.
“The markets have passed from panic mode into pure hysteria…Markets were at the breaking point before Saudi Arabia’s decision to launch an oil price war but this latest development has taken them beyond that,” said Ayush Ansal, Chief Investment Officer of Crimson Black Capital.
Following Russia’s refusal last Friday (6 March) to band together with oil producers to reduce output to defend prices, Saudi Arabia increased output supply yesterday, causing oil prices to plummet.
The price crash is the lowest since the 1991 Gulf War resulted in investors to flee for safety even as concerns thicken over the worsening situation of Covid-19, with the new development being Italy quarantining its population in the north.
Black Monday?
Analyst of Markets.com, Neil Wilson remarked that “this will be remembered as Black Monday”.
The quarantine of 16 million population that was decreed on the Italy’s northern region to curb the spread of Covid-19, including Venice and Mlilan, has sent the country’s stock market on a downward spiral.
After a volatile trading day, Milan’s FTSE MIB index closed at a value that was more than 11 per cent lower.
As the death toll from Covid-19 mounts across the world, investors are switching from riskier assets to safe haven investment. This has led to the Japanese yen and gold values appreciating while driving down US Treasury yields to record lows. Even the dollar’s value has lowered against the euro, yen, and other currencies.
The spread of Covid-19 has negatively impacted economies and fuelled fears of a global recession, even as central banks and governments all over the world release – or will release – stimulus packages to revitalise their economies.
Bourses in Asia have also not been spared. Sydney lost more than seven per cent, Tokyo sank more than five per cent, and Hong Kong plummeted more than four per cent.
In the Middle East, the Dubai, Kuwait, and Abu Dhabi exchanges also saw steep drops while Saudi Arabia equities tanked, due to the plummet of the shares of Aramco, the oil giant.
The furious wave of selling primarily hit oil majors the hardest, but other commodities firms also suffered heavy losses.
In Sydney, Woodside Petroleum and Santos sank 18.4 and 27 per cent respectively. Tokyo’s Inpex plummeted 13 per cent whereas Hong Kong-listed CNOOC and PetroChina slid 17 per cent and more than nine per cent each respectively.
In the US, Halliburton sank 37.6 per cent, Occidental Petroleum plunged 52.0 per cent, and Exxon Mobil plummeted 12.2 per cent.
Key figures around 2050 GMT:
Brent Crude: DOWN 24 per cent at US$34.36 per barrel
West Texas Intermediate: DOWN 25 per cent at US$33.13 per barrel
New York – Dow: DOWN 7.8 per cent at 23,851.02 (close)
New York – S&P 500: DOWN 7.6 per cent at 2,746.56 (close)
New York – Nasdaq: DOWN 7.3 per cent at 7,950.68 (close)
London – FTSE 100: DOWN 7.7 per cent at 5,965.77 (close)
Frankfurt – DAX 30: DOWN 7.9 per cent at 10,625.02 (close)
Paris – CAC 40: DOWN 8.4 per cent at 4,707.91 (close)
Milan – FTSE MIB: DOWN 11.2 per cent at 18,475.91 (close)
EURO STOXX 50: DOWN 8.5 per cent at 2,959.07 (close)
Tokyo – Nikkei 225: DOWN 5.1 per cent at 19,698.76 (close)
Hong Kong – Hang Seng: DOWN 4.2 per cent at 25,040.46 (close)
Shanghai – Composite: DOWN 3.0 per cent at 2,943.29 (close)
Dollar/yen: DOWN at 102.42 yen from 105.39 yen at 2200 GMT
Euro/dollar: UP at US$1.1448 from US$1.1284
Pound/dollar: UP at US$1.3112 from US$1.3048
Euro/pound: UP at 87.28 pence from 86.48 pence
