US stocks plunged more than 7.5 per cent in
the worst day on Wall Street since the financial crisis, as a full-blown oil
price war rattled financial markets already on edge over the spreading
coronavirus. Treasury yields plummeted, crude sank 20 per cent and credit
500 sank the most since December 2008, the Dow Jones Industrial Average tumbled
2,000 points and small caps lost more than nine per cent as investors fled risk
assets with virus cases surging and the Trump administration so far unwilling
to step in to soften the expected economic blow.
a dramatic day across assets globally:
All but nine S&P 500 companies were lower Monday, with energy
producers routed by 20 per cent. Exxon Mobil and Chevron were down more than 12
per cent. Banks lost 11 per cent, with an ETF that tracks regional banks had
for its worst day since 2009. Apple sank 7.9 per cent and Dow Chemical plunged
22 per cent.
The rout began at the open, with losses reaching seven per cent
four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes. The
markets will close if losses reach 20 per cent. The measure is down almost 19
per cent from its Feb. 19 all-time high, threatening to end the record-long
bull market that began 11 years ago to the day.
Crude tumbled the most since the Gulf War in 1991, after an OPEC+
alliance that had contained global production disintegrated. WTI and Brent slumped by about 25 per cent.
The 10-year Treasury yield fell below 0.5 per cent before climbing
back to 0.57 per cent, and the 30-year yield dropped under 0.9 per cent, taking
the whole US yield curve below one per cent 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 six per cent.
A US derivatives index that measures the perceived risk of
corporate credit surged by the most since Lehman Brothers collapsed.
Exchange rates including the yen saw sharp moves as traders
struggled to establish where new ranges might be. The yen was up about three
per cent versus the dollar while the euro and Swiss franc both strengthened more
than one per cent.
The oil-price crash threatened to 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. Investors are clamouring for some policy response from the Trump
administration, which has so far signalled that it believes the spread is under
Donald Trump and his economic team will weigh measures later Monday to contain
the fallout from coronavirus and a sudden crash in oil prices, with funding for
a temporary expansion of paid sick leave and aid for battered US energy
producers among possible steps. A Bloomberg gauge of financial stress for the US has deteriorated at the
fastest pace since the great financial crisis.