Major Asian stock markets suffered heavy losses Monday, victims of the continuing spread of the global coronavirus epidemic and the collapse of the oil market, which caused the yen to soar against the dollar.
At the Tokyo Stock Exchange it was particularly panic: at the midday break shortly before 3am the star index Nikkei further widened its losses compared to the start of the session, dropping 6.15% to 19,473.07 points. The broader Topix index plunged 6.07% to 1,382.11 points.
The Chinese stock markets had also started in strong decline, especially that of Hong Kong where the Hang Seng index lost 3.87% from the first trade. Shanghai fell 1.56% and Shenzhen 1.66% at the start.
All the ingredients for a market panic were gathered Monday in Asia, according to Stephen Innes, strategist at AxiCorp. “The yen has surged (…), investors rushing to safe havens as Covid-19 cases accelerate in Europe and Saudi Arabia starts an oil price war“, He commented. All of this added another layer of panic to financial markets that were “already full of fear“, he added.
Oil drinks the cup
Oil prices collapsed by around 25% on Monday in Asia. Around 2 a.m., a barrel of American WTI crude fell 25.65% to 30.69 dollars and a barrel of Brent North Sea crude fell 24.54% to 34.16 dollars at the same time.
The black gold market was in dire straits after Saudi Arabia’s decision to cut prices drastically, adopting a scorched earth strategy after the failure of OPEC-Russia negotiations last weekend .
The latter have not managed to agree on additional cuts in their production in an attempt to stem the fall in consumption of black gold in the face of the coronavirus epidemic. The yen, a safe haven for investors, soared against the dollar, a currency movement very unfavorable for the Japanese economy, highly dependent on exports.
The Japanese currency was at its highest levels against the dollar since 2016, according to Bloomberg. Around 2:45 a dollar was exchanged for 102.60 yen, against 105.92 yen Friday after the close of the Tokyo Stock Exchange, benchmark of Japanese investors. The euro also fell to 117.05 yen, against 118.91 yen on Friday. The European currency also progressed significantly against the greenback, at the rate of one euro for 1.1405 dollars against 1.1318 dollars Friday at 8 p.m.
Among the heavyweights on the Japanese coast, SoftBank Group was rolled (-9.66% to 4,321 yen), Sony plunged 7.5% to 6,200 yen and Toyota 5.55% to 6,417 yen. The fall in prices in Tokyo was further aggravated by the more severe contraction of Japanese growth in the fourth quarter of 2019 (-1.8% on a quarter), according to data revised Monday by the government, against a decline initially estimated at 1, 6%. With the foreseeable impact of the coronavirus epidemic in the first quarter of 2020, Japan is heading straight for a recession, characterized by a contraction in GDP for at least two quarters in a row. It would be a first since 2015.
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