Oil prices and stocks collapsed today as investors piled into safe havens in a bid to escape the fallout of a fresh spread of coronavirus.
Oil prices plunged around 30 per cent after Saudi Arabia signalled its intention to ramp up production.
And investors knocked 30-year US bond yields below one per cent as they bet the Federal Reserve would slash rates by 0.75 percentage points when it meets on 18 March. The Fed cut rates by 0.5 percentage points at its last meeting, but stocks still plunged.
Meanwhile Asian stocks plunged by a huge margin overnight. Japan’s Nikkei fell to a 14-month low to fall over five per cent. And Hong Kong’s Hang Seng slumped a massive 3.8 per cent.
Oil prices crash after Opec-Russia fallout
Brent Crude plummeted 25 per cent $33.95 while West Texas Intermediate crashed 27 per cent to $30.19.
Prices collapsed after Saudi Arabia shocked markets by planning to ramp up production. That marked the failure of oil cartel Opec’s agreement with Russia to slash supply, with neither party coming to a compromise.
That left Saudi Aramco trading below its recent IPO price.
“Markets are completely out of luck because there is no good news coming from anywhere which can help the current sell-off,” Naeem Aslam, chief market analyst at Ava Trade, said.
“Markets were expecting that Saudi Arabia and Russia would be able to put their differences on the side and act in a way that is better for the markets. However, their failure dragged the energy stocks lower and yesterday we saw a massive massacre of energy stocks over in the Middle East.”
“Today’s price action puts at risk the fiscal health of the vast majority of sovereign producers and budget cuts and increased debt loads are now looming in the event of a prolonged period of low prices,” Helima Croft, head of global commodity strategy at RBC Capital Markets, added.
PM to chair Cobra meeting after Italy coronavirus lockdown
It came after Italy put 16m people into lockdown in a bid to curb the spread of coronavirus.
And last night a third Brit was confirmed to have died from coronavirus as UK infections rose to 273.
Now Prime Minister Boris Johnson will chair another meeting of the government’s emergency committee, Cobra.
Johnson and his most senior health and Whitehall staff will decide whether to harden the UK’s response to the virus.
So far the UK has resisted bans on large gatherings and travel restrictions.
Coronavirus fears wiped £59bn off the FTSE 100 on Friday, a week after the spread of the virus knocked £200bn off London’s blue-chip index.
And Aslam said worse could be in store for Europe today with no good news coming on the coronavirus outbreak.
FTSE 100 pegged to sink on open
“The fact that Crude oil prices are trading below the $30 mark is going to punish the European markets even more,” he said.
“A real panic mode is on and there is no place to hide for investors because the Dow Jones futures are also trading lower by nearly 1,000 points.”
Chris Beauchamp, chief market analyst at online trader IG, predicted a steep fall in the FTSE 100 when it opens.
“IG expects the FTSE 100 to lose 400 points on the open, beginning the session just above 6,000, its lowest level since the days following the Brexit referendum,” he said.
“It is a similar picture for the Dax, which we expect to begin Monday’s session at 10,899, down over 600 points and hitting its lowest level in a year.”