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World stocks sink on coronavirus shock, oil price crash

Stock MarketsMar 09, 2020 03:12AM ET
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By Wayne Cole and Sumeet Chatterjee

SYDNEY/HONG KONG (Reuters) - Global share markets plunged on Monday as panicked investors fled to the safety of bonds and the yen to hedge the economic trauma of the coronavirus, while oil plunged more than 30% after Saudi Arabia opened the taps in a price war with Russia.

Saudi Arabia had stunned markets with plans to raise its production significantly after the collapse of OPEC's supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that sent prices down by about two thirds.[O/R]

The shock in oil was seismic as Brent crude (LCOc1) futures slid $12 to $33.20 a barrel in chaotic trade, while U.S. crude (CLc1) shed $11.80 to $29.48. [O/R]

In Asia, stocks tumbled, the safe-haven yen surged and emerging market currencies with exposure to oil tumbled in volatile trade. [FRX/]

Heavy selling was set to continue, with European futures sharply lower and U.S. futures hitting their down limit.

Investors drove 30-year U.S. bond yields beneath 1% on bets the Federal Reserve would be forced to cut interest rates by at least 75 basis points at its March 18 meeting, despite only just having delivered an emergency easing.

"Wild is an understatement," said Chris Brankin, Chief Executive at stockbroker TD Ameritrade Singapore.

"Not just us, but across the globe you would have every broker/dealer raising their margin requirements...trying to basically protect our clients from trying to leverage too much risk or guess where the bottom is."

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) lost 4.4% in its worst day since August 2015, while Shanghai blue chips (CSI300) fell 2.9%.

EuroSTOXX 50 futures (STXEc1) last traded down 6%, German DAX futures (FDXc1) dropped 5.6% and FTSE futures (FFIc1) fell 6.5%.

Japan's Nikkei (N225) dropped 5.1% and Australia's commodity-heavy market (AXJO) closed down 7.3%, it's biggest daily fall since the 2008 global financial crisis.

E-mini futures for the S&P 500 (SPX) hit their lower limit of 2,819 in Asia morning trade, pointing to Wall Street's rout deepening as investors priced in growing risks of a U.S. recession.

The number of people infected with the coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic carnage.

Italy's markets are sure to come under fire after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

Not helping the mood was news North Korea had fired three projectiles off its eastern coast on Monday.

"After a week when the stockpiling of bonds, credit protection and toilet paper became a thing, let's hope we start to see some more clarity on the reaction," said Martin Whetton, head of bond & rates strategy at CBA.

"Dollar bloc central banks cut policy rates by 125 basis points, not as a way to stop a viral pandemic, but to stem a fear pandemic," he added, while noting many had little scope to ease further.

BOND BUBBLE

A tectonic shift saw markets fully price in an easing of 75 basis points from the Fed on March 18, while a cut to near zero was now seen as likely by April.

The European Central Bank meets on Thursday and will be under intense pressure to act, but rates there are already deeply negative.

"The onus is falling, perhaps inevitably on the actions of governments to abandon budget surpluses and reinvigorate the demand side of the economy," said Whetton.

Urgent action was clearly needed with data suggesting the global economy toppled into recession this quarter. Figures out from China over the weekend showed exports fell 17.2% in January-February, from a year earlier.

Analysts at BofA Global Research estimated the latest sell-off had seen $9 trillion in global equity value vaporised in nine days, while the average 10-year yield in the developed world hit 16 basis points, the lowest in 120 years.

"The clearest outcome of the exogenous COVID-19 shock is a collapse in bond yields, which once panic fades can induce huge rotation to 'growth stocks' and 'bond proxies' in equities," they wrote in a client note.

The yield on 10-year U.S. Treasuries (US10YT=RR) last sat at 0.4900%, after having plunged to a once-unthinkable 0.4690%, having halved in just three sessions.

Yields on the 30-year long bond (US30YT=RR) dived 35 basis points on Friday alone, the largest daily drop since the 1987 crash, and slid under 1% on Monday to reach 0.96%.

The fall in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it crashing to the largest weekly loss in four years (=USD). [USD/]

The dollar extended its slide in Asia to as far as 101.60 yen , depths not seen since late 2016. It was last down 2.4% at 102.80 in wild trade.

The euro likewise shot to the highest in over 13 months at $1.1492 (EUR=), to be last at $1.1406.

Gold initially cleared $1,700 per ounce to a fresh seven-year peak, only to fall back to $1,669.93 amid talk some investors were having to sell to raise cash to cover margin calls in stocks. [GOL/]

World stocks sink on coronavirus shock, oil price crash
 

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Comments (16)
John Klan
John Klan Mar 11, 2020 8:06AM ET
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an hourly
John Klan
John Klan Mar 11, 2020 8:04AM ET
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Making people aware and telling us what precautions to take is fine but reporting a hourly rolling body count is counterproductive and irresponsible on the medias part.
Herbert Booker
Herbert Booker Mar 09, 2020 5:43AM ET
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Redistribution of wealth - Round 2
Abe Lincoln
Abe Lincoln Mar 09, 2020 3:13AM ET
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Nothing but SCare Tactics!!  What a continued Bogus non Event perpetrated by the m-e dia
Abe Lincoln
Abe Lincoln Mar 09, 2020 1:04AM ET
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Reuters is tne New Fake News Leader aroung the world Now! Congratualtions you Total Joke!
Andrew Paeth
Andrew Paeth Mar 08, 2020 11:55PM ET
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Chickens coming home to roost and all that jazz...Overinflated market is easily popped..who guessed? Odey and the pimpettes are riding high this week.We all knew it would happen eventually. Say hello to 20k in 6 weeks...
Am Chinese
Am Chinese Mar 08, 2020 11:17PM ET
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i don't care
Hello Oil
Hello Oil Mar 08, 2020 11:10PM ET
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Boomers will be coming out of retirement and back to work
Henry Garcia
Henry Garcia Mar 08, 2020 10:52PM ET
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People should take the day off tomorrow to sell their entire portfolios. We are in trouble and this is just the beginning!
Chris Sundo
Chris Sundo Mar 08, 2020 10:52PM ET
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Warren Buffet will buy your portfolios tomorrow and sell them with a handy profit either next month or sooner or later. Weren't you around on April 4, 2000? A couple of months later you could sell the crash items for 30% higher. Do some nibbling, some small buying, just to be shoulder to shoulder with Warren when the wash-out low excels into its crescendo
Henry Garcia
Henry Garcia Mar 08, 2020 10:52PM ET
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This time is different. We won't recover till the coronavirus panic is over. Then companies will start reporting losses and lower guidance, thus the market will continue crashing. I don't see a recovery before the Summer. We are going to see high volatility and price swings for the weeks to come.
Christos Rammos
Christos Rammos Mar 08, 2020 10:36PM ET
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We will die from heart attack not from the virus we are all dead already...
Chris Sundo
Chris Sundo Mar 08, 2020 10:36PM ET
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Your heart maybe needs to take it easy, do some yoga, go hiking in the forest, drink water instead of coffee, eat a salad, go to sleep at 10:30 pm, do homework with your kids,  all those things that you're long overdue on. -- THIS TOO SHALL PASS! --. How long did the market decline into end of 2018? Less than 3 mos. The markets will come back and bigger so. Remember 2018 FEB, 2018 OCT, 2015 AUG? -- It never took longer than 7 mos of turn-around. -- I came down with the bacterial twin of cv19. So it wasn't as tough as cv19 but IMO I could handle the real McCoy if it came, coz I've practiced on its little bro. -- It's all about procedures, procedures, to kindle your immune system in the direction you want it to go. -- We have ONE MARVELLOUS IMMUNE SYSTEM, I can tell you. More than the virus, our immune system adapts to existing conditions to pull ahead of the curve. -- The fear-mongers won't tell you about our marvelous immune system: They only wanna make you sell at the bottom, man. GL!
Guy Shmuel
Guy Shmuel Mar 08, 2020 10:27PM ET
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Just like I said no way to stop stocks from falling
Neetesh Jain
Neetesh Jain Mar 08, 2020 10:02PM ET
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People will die more due to debt
Santos Martinez
Santos Martinez Mar 08, 2020 9:34PM ET
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Playing Long.. no problem...
Brady Murray
Brady Murray Mar 08, 2020 8:27PM ET
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Gotta trade this market both ways and trade bullish by looking a year out. Long term.
Samuel Fornari
Samuel Fornari Mar 08, 2020 8:03PM ET
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The fake news virus spreads quickly. People with the virus die of something else and are counted in the statistics. one more big lie
James Holmgren
James Holmgren Mar 08, 2020 7:13PM ET
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But my President told me the Coronavirus was a hoax
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Jan Buyle
Jan Buyle Mar 08, 2020 7:13PM ET
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this bull market became a bubble... it had to burst... it will go down much more...
Xin Zhang
Xin Zhang Mar 08, 2020 7:13PM ET
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Samuel Fornari  You can have all the longs, my man! Lmao, time will tell.
Samuel Fornari
Samuel Fornari Mar 08, 2020 7:13PM ET
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Xin Zhang  And you will know the truth and the truth will set you free
Luis Cortes
Luis Cortes Mar 08, 2020 7:13PM ET
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it's a chinese hoax, just like climate change
Abe Lincoln
Abe Lincoln Mar 08, 2020 7:13PM ET
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He said a political hoax **** It's real but it's NO Big Deal get it Morry?
 
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