Hong Kong / New York (CNN Business) – World stocks fall and bond yields sink after the implosion of a major oil alliance that caused oil prices to fall to historic lows.
S&P 500 (SPX) futures fell to 5% on Sunday night, which triggered a restriction that prevents futures from trading below that mark. Dow futures (INDU) fell more than 1,200 points, or about 4.7%. Nasdaq Composite (COMP) futures fell 4.8%.
The settlement was moved to Asia Pacific, where Australia’s S&P / ASX 200 finished 7.3% lower on Monday, the largest drop in the index since October 2008. Japan’s Nikkei 225 (N225) sank 5, 1%, its lowest closing in more than one year. South Korea’s Kospi (KOSPI) fell 4.2%, its biggest loss since October 2018.
READ: Oil records its worst fall since 1991 after Saudi Arabia started a price war
The Hong Kong Hang Seng (HSI) lost 3.5% in the afternoon’s operations, leading the index to its biggest decline in more than a year. Shanghai Composite of China (SHCOMP) had the best performance among the main indexes in Asia, and still fell 2.9%.
Meanwhile, the 10-year Treasury bond yield fell below 0.5%, reaching historical lows. The panic began after Saudi Arabia shocked the oil markets by launching a price war against its former ally, Russia. The kingdom is pushing and trying to regain its market share after Russia refused to accept OPEC’s efforts to rescue the oil market affected by the coronavirus by cutting production.
US oil prices UU. they fell 27% overnight and were last traded at US $ 30.04 per barrel, while world-reference Brent crude fell 26%, trading at US $ 33.28 per barrel. Both are on their way to their worst day since 1991, according to Refinitiv.
To make matters worse, the new coronavirus continues to weigh on investors, while causing an unexpected shock in the economy. The virus has infected more than 108,000 people and is causing confusion in many countries. Italy placed almost 16 million people under closure amid a growing outbreak across Europe.
‘Total pandemonium’
Investors are waking up “shocked,” wrote Stephen Innes, chief market strategist at AxiCorp, in a note on Monday. He described panic as “full pandemonium.”
The double blow of the Saudi Arabian oil price war and the deepest fears about the coronavirus in Europe added “another level of unwanted panic to a market that is already full of fear,” Innes said, noting that Investors have begun to accumulate safe haven assets. The Japanese yen rose against the US dollar to its strongest level in more than three years, while gold traded briefly above US $ 1,700 per ounce and reached its highest levels since 2012.
Wall Street has faced heavy losses in recent weeks due to fears around the coronavirus. During the last week of February, US stocks had their worst week since the financial crisis, and the economic disruption caused by the virus does not seem to be diminishing.
Minute by minute: Markets fall due to the outbreak of the coronavirus that already counts 108,000 cases worldwide
World markets have also been affected in recent days. About $ 9 billion was erased from world stocks in nine days, Bank of America said in a research note after US markets closed again in red figures on Thursday.
Innes warned that the oil market could remain under pressure in the foreseeable future. And he said it seems inevitable that American cases of coronaviruses continue to increase, “possibly explosively” once the tests are conducted on a large scale.
The scale of the coronavirus outbreak rose rapidly in the United States last week. At least 33 states in the country now have cases of the virus, and many of the major American companies have begun to encourage or allow employees to work from their homes.
China’s slow recovery
China’s bleak data also paint a bleak picture for the world’s second largest economy. China’s exports fell 17% in the period from January to February compared to the previous year, according to customs data published over the weekend. Imports fell 4%. The government blamed the decline of the Lunar New Year holidays and the outbreak of coronavirus.
China also recorded its first deficit since its commercial war with the United States began two years ago.
“The return to economic normality in China has been very slow since the outbreak of the coronavirus,” Louis Kuijs, head of Asia’s Economics at Oxford Economics, wrote in a research note, pointing out poor trade data and activity surveys of last week in the country’s manufacturing and services sector.
Oxford Economics now expects China’s economic growth to contract 2% in the first quarter compared to the previous quarter, although Kuijs wrote that there should be a “solid recovery” during the rest of the year.
Kuijs wrote that the situation should “pass the bump” soon when people return to work and businesses catch up with lost activity.
But others pointed to the spread of coronavirus abroad as a continuing cause of concern.
“China may be slowly returning to work, but manufacturers will likely face an international drop in demand,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.
– Matt Egan contributed to this report.
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