Stocks tumble as oil price crash sends shockwaves

Bloomberg

Oil prices crashed, equities plunged and Treasuries soared on Monday as the world headed for a full-blown price war in crude and panic appeared to grip financial markets.
In a dramatic start to the week across assets: Futures on the S&P 500 Index fell about 5%, triggering trading curbs designed to limit the most dramatic moves while cash markets are closed. Two major exchange-traded funds that track US benchmark gauges posted even bigger declines in pre-market trading. They are not subject to the same curbs.
Crude at one point tumbled more than 30%, the most since the Gulf War in 1991, after an OPEC+ alliance that had contained global production disintegrated. WTI and Brent pared some of their losses but remained down more than 20%.
The 10-year Treasury yield fell below 0.5% and the 30-year yield dropped under 0.9%, taking the whole US yield curve below 1% for the first time in history.
The Stoxx Europe 600 Index fell the most since 2016 on trading volumes exceeding three times the 100-day average. Several of the region’s gauges look set to enter bear markets. Japanese stocks entered one earlier when they tumbled almost 6%.
Exchange rates including the yen saw sharp moves as traders struggled to establish where new ranges might be. The yen was up about 3% versus the dollar while the euro and Swiss franc both strengthened more than 1%.
The spread between Italy’s 10-year sovereign yield and Germany’s jumped 36 basis points to 215 basis points, the highest since August.
The oil-price crash, if sustained, would upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home. Italy effectively put its industrial heartland in the north of the country on lockdown.
Equities and haven assets showed little immediate reaction to news that President Donald Trump’s administration is drafting measures to blunt the economic fallout from the virus. A Bloomberg gauge of financial stress for the US has deteriorated at the fastest pace since the great financial crisis.
“You just don’t know which way things are going to go, it makes it very hard to price anything right now,” said Sarah Hunter, chief economist for
BIS Oxford Economics, on Bloomberg TV.
The European Central Bank’s policy decision comes on Thursday amid expectations it may ease policy. The UK Chancellor of the Exchequer unveils the government’s 2020 budget on Wednesday. The US core consumer price index, due on Wednesday, is expected to remain subdued in February.
Futures on the S&P 500 Index sank 4.9% in New York. The Stoxx Europe 600 Index sank 6.1%. The MSCI Asia Pacific Index sank 4.1%. The MSCI All-Country World Index dipped 2%.
The Bloomberg Dollar Spot Index jumped 0.2%. The euro surged 1.2% to $1.142. The British pound gained 0.3% to $1.3081. The Japanese yen strengthened 3% to 102.29 per dollar. The Mexican peso weakened 7.8% to 21.8032 per dollar.
The yield on 10-year Treasuries declined 34 basis points to 0.43%. The yield on two-year Treasuries declined 24 basis points to 0.27%. Germany’s 10-year yield sank 15 basis points to – 0.86%. Japan’s 10-year yield decreased four basis points to -0.163%.
West Texas Intermediate crude fell 22.2% to $32.10 a barrel. Brent crude fell 21.6% to $35.48 a barrel.
Gold strengthened 0.3% to $1,678.48 an ounce. LME zinc sank 2.5% to $1,935 per metric ton. Iron ore sank 2.4% to $84.95 per metric ton.