Coronavirus shock, oil crash sinks world stocks

[snoop1130]

Coronavirus shock, oil crash sinks world stocks

By Karin Strohecker, Wayne Cole and Sumeet Chatterjee

 

FILE PHOTO: Passersby wearing protective face masks, following an outbreak of the coronavirus, are reflected on a screen displaying stock prices outside a brokerage in Tokyo, Japan March 6, 2020. REUTERS/Issei Kato

 

LONDON/SYDNEY/HONG KONG (Reuters) - Global stocks plunged on Monday and prices for crude oil tumbled as much as 33% after Saudi Arabia launched a price war with Russia, sending investors already panicked by the coronavirus fleeing for the safety of bonds and the yen.

 

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.

 

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

 

European markets suffered hefty losses in early trade with London <.FTSE> dropping more than 8%, Frankfurt <.GDAXI> falling more than 7% and Paris <.FCHI> almost matching those losses.

 

The pan-regional STOXX 600 <.STOXX> tumbled into bear market territory -- a drop of more than 20% from recent peaks. Oil stocks suffered massive losses with Tullow <TLW.L> down 57% and BP <BP.L> down 27% in early trade.

 

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

 

Heavy selling was set to continue on Wall Street with U.S. futures <EScv1> 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, after having already delivered an emergency easing last week.

 

"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%.

 

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

 

The number of people infected with the coronavirus topped 110,000 across the world as the outbreak reached more countries and caused more economic carnage.

 

Most of Italy's stocks failed to open 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 that many central banks had little scope to ease further.

 

BOND BUBBLE

 

A tectonic shift saw markets <0#FF:> 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.

 

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.

 

The yield on 10-year U.S. Treasuries <US10YT=RR> last sat at 0.4624% having halved in just three sessions.

 

Yields on the 30-year 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 0.7020%.

 

The fall in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it at some point crashing to the largest weekly loss in four years <=USD>.

 

The dollar extended its slide in Asia to as far as 101.58 yen <JPY=>, depths not seen since late 2016. It was last down nearly 3% at 102.28 in wild trade.

 

The euro likewise shot to the highest in over 13 months at $1.1492 <EUR=>, to be last at $1.1422.

 

Gold initially cleared $1,700 per ounce <XAU=> to a fresh seven-year peak, only to fall back to $1,676.55 amid talk some investors were having to sell to raise cash to cover margin calls in stocks.

 

-- © Copyright Reuters 2020-03-09

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[spidermike007]

Oil prices dropping is a lovely thing. Few will mourn the losses to big oil. Sure, alot of jobs will be lost, and money will be lost in the stock markets. And many jobs will be lost in fracking, but that might not be a terrible thing for the environment. Witnessing the Arab producers and Russia, wrestle with this, is a beautiful thing to watch. Especially Russia. Oil and gas sales help to fuel their overseas misadventures. They are a bad actor on the world stage, and have not worn their power lightly. Putin is beyond evil. He is malicious, and his intentions are heinous. The Russians tolerate him. But, should we?

 

In my opinion the economy was way overheated, and needed to calm down, and correct. This precipitated the correction. In the long run, it may be a good thing. I predicted the DOW dropping to 15,000 a year ago. People said I was nuts. Many said it was headed toward 50,000. The masses always seem to forget that the economy is always cyclical. 

 

Russia has an abundance of oil, natural gas and precious metals, which make up a major share of Russia's exports. As of 2012, the oil-and-gas sector accounted for 16% of GDP, 52% of federal budget revenues and over 70% of total exports. “The revenue from oil and gas is also very important for Russia as the country is carrying out military activities in several regions such as Ukraine, Crimea and Syria,” Kocaman told TRT World. 

 

https://www.trtworld.com/europe/how-oil-prices-impact-russia-s-economy-22067

 

 

Edited March 10, 2020 by spidermike007

[zydeco]

This one isn't on China or Islam. It's on the central bankers. They created this worldwide bubble of $250 trillion in debt. They printed money, lowered rates to zero and negative, bought treasuries and even ETFs, allowed corporations to balloon their debt, which they used to buy back their own stocks, and stepped in each and every time the markets caught a cold and pushed them to new highs, when what was needed was for stocks to correct and weed out the zombies. If you're looking for someone to blame, in particular, look no further than the Marriner Eccles Building.

[Oxx]

5 minutes ago, zydeco said:

This one isn't on China or Islam. It's on the central bankers.

 

The latest shock was nothing to do with "central bankers".  It was all about Saudi Arabia dropping the price of its oil.

 

The Saudis are not nice people.  They want to wipe out competition in the oil industry (e.g. America's tar sands oil production, by making it uneconomic).  Then they'll hike the oil price enough to make your eyes bleed.  They've used the same strategy before.

[zydeco]

18 minutes ago, Oxx said:

The latest shock was nothing to do with "central bankers".  It was all about Saudi Arabia dropping the price of its oil.

So you think stocks were fairly priced a few weeks ago? QE hadn't monetized the debt. And the BOJ buying up ETFs larger than the country's GDP didn't blow a bubble. They are going to try and throw more money at it tomorrow. The Fed and Trump have promised to use all their "tools," which means, of course, just printing money and going to ZIRP, while giving direct cash bailouts to banks and the likes of Boeing. Just a few years ago, oil was at $144/barrel. Recently, before yesterday's crash, it had dipped into the upper $40s, a loss of around $100/barrel. And the markets didn't crash; they soared because of the Fed and CBs.

[Isaan sailor]

China, central bankers, Russians and the Saudis:  the evil axis.  I’m cool with that.

[zydeco]

8 minutes ago, Isaan sailor said:

China, central bankers, Russians and the Saudis:  the evil axis.  I’m cool with that.

Well, the Chinese have certainly done their part to blow a debt bubble, too. 

[CGW]

1 hour ago, Oxx said:

 

The latest shock was nothing to do with "central bankers".  It was all about Saudi Arabia dropping the price of its oil.

 

The Saudis are not nice people.  They want to wipe out competition in the oil industry (e.g. America's tar sands oil production, by making it uneconomic).  Then they'll hike the oil price enough to make your eyes bleed.  They've used the same strategy before.

Thats how I see it, they saw an opportunity to get market share again - failed - Russia would not play ball, well done Russia ???? 

[metisdead]

Some off topic trolling posts and replies have been removed. 

[Chomper Higgot]

Rising stock prices and booming economies produce positive outcomes for political incumbents, a fact often mentioned here on TVF world News.

 

But its a two edged sword, the negative political outcomes from collapsing stock prices, dwindling dividends and economic slowdown are inevitable.

 

Whatever the causes of the current collapse in markets and economic slowdown, there absolutely will be a political price to pay.

[Eric Loh]

Those countries that will survive this economic onslaught will be those who has low debts, high foreign reserves and enough of dry powder in their interest rate for eventualities. US, Europe (some) and Japan are extremely vulnerable to all these aspects. When the dust settle, we may see dollar collapse and lose its reserves currency status. I see a paradigm shift becoming real soon. 

[spiekerjozef]

Yes ! Time to buy...

[zydeco]

The official Trump response to yesterday's market collapse is a proposal to cut payroll taxes. That means, I suppose, a cut on the largest single item in the payroll tax, the Federal Insurance Contributions Act tax, which includes Social Security and Medicare. So Trump's response to yesterday's stock market debacle is to gut Social Security and Medicare???

[Chomper Higgot]

3 hours ago, spiekerjozef said:

Yes ! Time to buy...

That’s right, you saw this coming and got out of the market in January, now flush with cash you are going to make a killing.

 

Well done Speiker.

[Chomper Higgot]

3 hours ago, zydeco said:

The official Trump response to yesterday's market collapse is a proposal to cut payroll taxes. That means, I suppose, a cut on the largest single item in the payroll tax, the Federal Insurance Contributions Act tax, which includes Social Security and Medicare. So Trump's response to yesterday's stock market debacle is to gut Social Security and Medicare???

He knows his time is up.

[zydeco]

1 minute ago, Chomper Higgot said:

He knows his time is up.

One thing I do want to know is that if indeed they do pass some new stimulus bill that directs bailout money to businesses, will someone please check to see this time if the Trump family is among the beneficiaries? Until and unless that is cleared--no bill. And even if there is a bill, it should be accompanied with a rollback of the corporate/bankster tax cuts for the one percent Trump got in 2017.

 

[Nyezhov]

1 minute ago, zydeco said:

One thing I do want to know is that if indeed they do pass some new stimulus bill that directs bailout money to businesses, will someone please check to see this time if the Trump family is among the beneficiaries?

Have they been the beneficiaries before?

[zydeco]

3 minutes ago, Nyezhov said:

Have they been the beneficiaries before?

Ask and you shall receive: https://www.cnbc.com/2017/12/01/heres-how-trump-stands-to-benefit-from-the-republican-tax-bill.html

[Nyezhov]

24 minutes ago, zydeco said:

Ask and you shall receive: https://www.cnbc.com/2017/12/01/heres-how-trump-stands-to-benefit-from-the-republican-tax-bill.html

sorry I dont read cnbc  tax billanalyses. This should be an easily verifiable fact: what bailout money has the Trump family received? Amounts, when, how?

[placnx]

4 hours ago, Eric Loh said:

Those countries that will survive this economic onslaught will be those who has low debts, high foreign reserves and enough of dry powder in their interest rate for eventualities. US, Europe (some) and Japan are extremely vulnerable to all these aspects. When the dust settle, we may see dollar collapse and lose its reserves currency status. I see a paradigm shift becoming real soon. 

China is reported to have debt of 325% of GDP, so it is also vulnerable, particularly since Xi Jin Ping has been suppressing grey market lending that supports small & medium businesses. It's reported elsewhere that 60% of small business cannot survive more than 2 months if the Chinese economy continues to experience blockages. This no doubt explains why the leadership is intent on portraying the Coronavirus epidemic as easing so people will return from the provinces to get back to work. For good reason many people do not believe government propaganda, so economic revival is not assured.

[Chomper Higgot]

24 minutes ago, Nyezhov said:

sorry I dont read cnbc  tax billanalyses. This should be an easily verifiable fact: what bailout money has the Trump family received? Amounts, when, how?

It’s a bit o of challenge presenting you with anything at all if you refuse o read what you don’t want to acknowledge.

[Nigel Garvie]

18 minutes ago, placnx said:

China is reported to have debt of 325% of GDP, so it is also vulnerable, particularly since Xi Jin Ping has been suppressing grey market lending that supports small & medium businesses. It's reported elsewhere that 60% of small business cannot survive more than 2 months if the Chinese economy continues to experience blockages. This no doubt explains why the leadership is intent on portraying the Coronavirus epidemic as easing so people will return from the provinces to get back to work. For good reason many people do not believe government propaganda, so economic revival is not assured.

In order to balance this I think you should take into account how much China is owed. Currently about 6% of world GDP, including 1 Trillion in US treasury bonds. I think there are more convincing clients for the countries in most trouble from the economic effects of the virus.

 

https://hbr.org/2020/02/how-much-money-does-the-world-owe-china 

[Oxx]

1 hour ago, Nyezhov said:

sorry I dont read cnbc  tax billanalyses. This should be an easily verifiable fact: what bailout money has the Trump family received? Amounts, when, how?

 

You're about as likely to get that as the people are to see Trump's tax returns.

 

[lannarebirth]

9 hours ago, zydeco said:

One thing I do want to know is that if indeed they do pass some new stimulus bill that directs bailout money to businesses, will someone please check to see this time if the Trump family is among the beneficiaries? Until and unless that is cleared--no bill. And even if there is a bill, it should be accompanied with a rollback of the corporate/bankster tax cuts for the one percent Trump got in 2017.

 

 

Why wouldn't you just give the stimulus to people, including the people who own a business? How does this help people on disability or caregivers or the infirmed or people laid off from work? If the government doesn't exist to serve people why have it at al?

[placnx]

23 hours ago, Nigel Garvie said:

In order to balance this I think you should take into account how much China is owed. Currently about 6% of world GDP, including 1 Trillion in US treasury bonds. I think there are more convincing clients for the countries in most trouble from the economic effects of the virus.

 

https://hbr.org/2020/02/how-much-money-does-the-world-owe-china 

Cash is getting scarce these days. The problem for China's debtor countries will come when they cannot pay, so China will take resources, port facilities, etc. China has large currency reserves, but that doesn't hold a candle to 325% of their GDP which was USD 14.4 tn in 2019.