NEW YORK (Dow Jones) As if worries about a global economic downturn in the wake of the Corona epidemic hadn’t been a burden enough for the stock markets – the drop in oil prices is now triggering panic sales on the stock market and causing Wall Street to collapse at the beginning of the week. Shortly after the opening, trading was suspended for 15 minutes after the S&P 500 collapsed 7 percent.
Oil prices are in free fall after Saudi Arabia announced last weekend that it would lower prices and significantly increase production. Attempts to win Russia over for a joint cut in production failed last week. A price war is now emerging. The price of a barrel of WTI falls by 19.8 percent to $ 33.11, Brent falls by 20.7 percent to $ 35.90. In Asian trade, prices were even a good 30 percent down.
Against this backdrop, the Dow Jones Index fell 6.3 percent to 24,238 points at midday in the US East Coast time – but can thus recover somewhat from its daily low of 23,819 points. The S&P 500 loses 5.9 percent and the Nasdaq composite bends 5.2 percent.
The move from Saudi Arabia will plunge oil markets into a period of great uncertainty, “said Stephen Innes, chief market strategist at AxiCorp. Goldman Sachs warned last weekend that an oil price war could push the WTI price down to $ 20 Goldman Sachs warns that these price levels could then result in “financial stress for companies and a decline in shale oil production.”
In addition, there are weak economic data from Asia. Chinese exports slumped somewhat more than expected in the first two months because of the corona crisis. There was also a downward revision of Japanese gross domestic product for the fourth calendar quarter of 2019.
“Black Monday” on the stock markets – fear of recession is over
The recent crash in the wake of the corona crisis is accelerating. “The fear of a global recession is at stake,” said Thomas Hayes, chairman of hedge fund manager Great Hill Capital. There was a “black Monday” on the stock exchanges in Asia and Europe, some country indices such as Italy dropped in double digits, many others by around 8 percent. The large-scale quarantine in Italy is causing great uncertainty. Northern Italy and the country’s economic center are particularly affected.
As a result of these developments, investors are rushing to safe havens. Exploding prices meanwhile meanwhile the ten-year yield on the US government bond market has dropped to an all-time low of 0.34 percent. It is currently down 24.2 basis points to 0.52 percent. In the foreign exchange market, the US dollar loses 1.6 percent to 102.17 yen. The euro climbs to $ 1.1462. The US currency is under pressure because the Fed still has a lot of room for interest rate cuts. Further rate cuts are expected on the market.
The gold price returns from its morning high of over $ 1,700 a troy ounce and loses 1.5 percent from late Friday to $ 1,671.
Energy values massively under pressure
As expected, the main losers in the sectors are energy values. The sector in the S & P-500 slides to its lowest level since 2004. The discount is currently 17.6 percent. Diamondback Energy and Apache Corp. by 44.1 and 45.6 percent. Marathon Oil are reduced by 43.3 percent.
Bank stocks are the second largest losers, down 12.6 percent. Looming loan defaults are weighing on the sector as well as falling bond yields. Selling cyclical sectors such as automotive, capital goods and semiconductor stocks are also sold.