Global Market Report - 10 March
Investors are bracing for more massive losses with the Australian share market poised to plunge up to 5 per cent after panic selling smashed global markets overnight.
Australia
Investors are bracing for more massive losses with the Australian share market poised to plunge up to 5 per cent after panic selling smashed global markets overnight.
The SPI200 futures contract was down 284 points, or 4.97 per cent, to 5432 at 8am Sydney time on Tuesday.
Overnight, stocks on Wall Street plummeted so fast on what traders are now calling "Black Monday" they triggered the first automatic halt in trading in more than two decades.
The Dow Jones plunged more than 2000 points, or nearly 8 per cent, at one point as global trading entered panic mode as an oil price war compounded coronavirus woes.
European markets entered a bear market, with the heaviest losses since the darkest days of the 2008 meltdown as oil prices plunged amid a price war between Saudi Arabia and Russia.
The Australian stock market suffered its worst single day loss in nearly a dozen years on Monday.
The wider market shed about $155 billion in value as the benchmark S&P/ASX200 index plunged 7.33 per cent to a two-year low of 5760.6.
Prime Minister Scott Morrison will address business leaders in Sydney on Tuesday about a stimulus package to help the economy as the coronavirus threatens industry.
Morrison is expected to also reassure the public that the stimulus, worth about $10 billion, will not be funded by cuts to essential services such as schools, hospitals and the National Disability Insurance Scheme.
The package is expected to be issued later this week.
The NAB business survey due out on Tuesday is expected to reflect the hit to business confidence and conditions that has resulted from the virus.
The Aussie dollar was buying 65.85 US cents at 8am on Tuesday, up from 65.46 US cents at the market close on Monday.
Asia
China stocks slumped on Monday, as fears over the economic impact of the global coronavirus epidemic were exacerbated by a crash in oil prices that battered financial markets around the world.
The CSI300 index skidded 3.4 per cent to close at 3,997.13 points, while the Shanghai Composite Index slid 3.0 per cent, to 2,943.29 points.
Sectors fell across the board, dragged down by materials and consumer firms.
The Hang Seng index dropped 3.5 per cent to 25,230.55, the lowest since 15 August 2019, while the Hong Kong China Enterprises Index lost 3.8 per cent to 10,056.49.
Energy stocks dragged the most after Saudi Arabia slashed crude oil prices, with the energy index in Hong Kong falling by more than 10 per cent.
Japan’s Nikkei share benchmark tumbled to 14-month lows on Monday, on rising fears that the widening reach of the coronavirus epidemic could severely disrupt the global economy.
The Nikkei average shed 5.1 per cent to 19,473.07, its lowest closing level since 4 January 2019. It marked the biggest one-day fall since 24 June 2016.
Europe
European shares ended at an eight-month low on Monday, sinking into bear market territory after a crash in oil prices deepened concerns that a global recession could follow the coronavirus outbreak.
The oil and gas subindex bore the brunt of losses, plunging nearly 17 per cent after oil prices lost a third of their value on worries over a price war between Saudi Arabia and Russia.
The pan-European STOXX 600 index closed down 7.4 per cent, marking its worst day since the 2008-09 financial crisis. The drop called for a flip into a more negative “bear” environment, implying a more than 20 per cent drop for the index from recent peaks.
European firms have now lost nearly $3 trillion in value since the rapid spread of the coronavirus sparked a worldwide selloff in February, as the outbreak seemed likely to disrupt economic activity across the globe.
“The shock to oil compounds what the coronavirus is doing to the global economy,” said Andrea Cicione, head of strategy at TS Lombard in London.
“In the short term, whoever feels the pain from the shock to prices - they act immediately, they cut their spending, cut their investment, and the winners, they react a lot more gradually.”
Trading on Wall Street was halted after steep losses in early trade.
Norwegian stocks exposed to crude oil plummeted 9.4 per cent, their worst day in more than 30 years, while London's commodity-heavy FTSE 100 shed 7.7 per cent.
Oil majors BP and Royal Dutch Shell both lost almost 20 per cent, while Norway’s Panoro Energy plummeted 39 per cent.
Tullow Oil wallowed at the bottom of the STOXX 600 after a nearly 32 per cent loss.
All European sub-sectors were deep in the red, with growth-sensitive miners, automakers and banks falling around 10 per cent.
Bank stocks were pressured by yields on 10-year US Treasuries, the benchmark for global borrowing costs, dropping to a record low, and German 10-year bond yields fell further into negative territory.
Only four stocks were trading positive on the STOXX 600. Dutch midstream oil and chemical firm Vopak rose 3.2 per cent.
Italy's blue-chip index shed 11.2 per cent, underperforming its regional peers for the day after the government ordered a virtual lockdown across much of its wealthy north in a drastic attempt to try to contain Europe's worst outbreak of the virus.
Budget airline Ryanair ended 1.9 per cent lower after it said it would cut further flights to and from Italy because of the outbreak.
Markets now expect the European Central Bank to trim interest rates at its policy meeting on Thursday, following rate cuts by central banks in the US, Canada and Australia last week to soften the blow of the outbreak.
North America
Wall Street suffered its biggest one-day loss since the 2008 financial crisis on Monday and recession worries loomed large as tumbling oil prices and ongoing coronavirus fears prompted investor panic on the anniversary of the US stock market’s longest-ever bull run.
All three major US stock averages plunged sharply at the opening bell, triggering trading halts put in place in the wake of 1987’s “Black Monday” crash. The Dow plummeted a record 2000 points out of the starting gate on the day marking the current bull market’s 11th year.
During the session, the Dow came about a 10th of a percent from confirming a bear market, or 20 per cent below its record peak.
“It’s certainly one for the history books,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “The markets are now pricing in a high probability of recession.”
Peter Cardillo, chief market economist at Spartan Capital Securities in New York, agreed.
“There’s a lot of fear in the market and if the price of oil continues to move lower it’s an indication that a global recession is not far away,” Cardillo said.
The CBOE Volatility index , a gauge of investor anxiety, touched its highest level since December 2008.
Benchmark 10-year US Treasury yields briefly sank to 0.318 per cent, a record low.
The sell-off began over the weekend when an oil supply pact between Saudi Arabia and Russia collapsed and both countries vowed to hike production amid weakening global demand due to the coronavirus and signs of an economic slowdown.
Oil prices registered their biggest one-day fall since the 1991 Gulf war, with Brent crude futures LCOc1 closing down 23.88 per cent and front-month WTI falling 25.1 per cent. That sent the S&P Energy index sliding 20.1 per cent, its largest one-day drop on record.
Global markets were already on edge as worldwide confirmed cases of COVID-19 surged past 110,000, causing widespread supply disruption and large-scale quarantine measures as governments scramble to contain the outbreak.
The Dow Jones Industrial Average fell 2,013.76 points, or 7.79 per cent, to 23,851.02, the S&P 500 lost 225.81 points, or 7.60 per cent, to 2,746.56 and the Nasdaq Composite dropped 624.94 points, or 7.29 per cent, to 7,950.68.
All 11 major sectors of S&P 500 ended the session deep in red territory, with energy and interest rate-sensitive financial stocks suffering the largest percentage losses.
Boeing Co was the biggest drag on the Dow, tumbling 13.4 per cent following the Federal Aviation Administration’s rejection of the planemaker’s proposal regarding wiring systems in place on its grounded 737 MAX aircraft.
Apple Inc shares fell 7.9 per cent after data showed the company sold fewer than 500,000 smartphones in China in February amid the coronavirus crisis.
Chipmakers registered their largest drop since October 2008, with the Philadelphia SE Semiconductor index falling 8.3 per cent.
Declining issues outnumbered advancing ones on the NYSE by a 17.86-to-1 ratio; on Nasdaq, a 19.11-to-1 ratio favoured decliners.
The S&P 500 posted one new 52-week high and 229 new lows; the Nasdaq Composite recorded nine new highs and 1,049 new lows.
Volume on US exchanges was 17.22 billion shares, compared with the 11.05 billion average over the last 20 trading days.