Oil crash sparks 'Black Monday' meltdown on virus-hit markets

NEW YORK, USA (UPDATED) – World oil prices crashed Monday, March 9, fueling a vicious sell-off on stock markets which were already buckling under from the spreading coronavirus outbreak.

Stocks tanked as the global oil market nosedived 30% at one stage after top exporter Saudi Arabia slashed the prices it charges customers following a bust-up with Russia over crude production cuts.

Major United States indices plunged more than 7% – with the Dow finishing more than 2,000 points lower in its worst session since 2008 – following a 15-minute halt to trading early in the session triggered by a 7% drop.

In Paris, the CAC-40 index lost over 8%, also its worst daily drop since the 2008 financial crisis, while the Dax blue-chip index in Frankfurt saw its sharpest single fall since 2001.

Later in Brazil, the Ibovespa index finished down more than 12%.

"The markets have passed from panic mode into pure hysteria," said Ayush Ansal, chief investment officer at trading firm Crimson Black Capital.

"Markets were at breaking point before Saudi Arabia's decision to launch an oil price war but this latest development has taken them beyond that."

Saudi Arabia opened the spigots Monday, slashing oil prices after Russia refused on Friday, March 6, to join producers in cutting output to defend prices.

The dizzying oil drop – the steepest since the 1991 Gulf War – sent investors fleeing for safety alongside mounting fears over the worsening coronavirus, which has seen Italy lock down a swathe of its north.

Late Monday, Italian Prime Minister Giuseppe Conte announced that he was extending a lockdown decree to the entire country.

'Black Monday'

"This will be remembered as Black Monday," said analyst Neil Wilson at trading site Markets.com.

Italy's stock market took the heaviest battering after a chunk of the county's northern region was sealed off – including Milan and Venice – as authorities struggled to contain the spread and impact of coronavirus.

At the end of an exceptionally volatile trading day, Milan's FTSE MIB index stood more than 11% lower.

As the disease claims more lives around the world, dealers are shedding riskier assets for safe haven investment, sending gold and the yen surging and pushing US Treasury yields to record lows while the dollar was broadly lower against the yen, euro, and other currencies.

While governments and central banks have unleashed, or are preparing to unleash, stimulus measures, the spread of COVID-19 is putting a huge strain on economies and stoking concerns of a worldwide recession.

Trading floors in Asia were also a sea of red, with Tokyo plunging more than 5%, Hong Kong more than 4%, and Sydney more than 7%. (READ: Philippine stocks suffer worst nosedive since global financial crisis)

Saudi equities also tanked, with oil titan Aramco's shares leading the plunge. The Dubai, Kuwait, and Abu Dhabi exchanges also suffered sharp drops.

Oil majors bore the brunt of a fierce wave of selling while other commodities firms also nursed heavy losses.

Hong Kong-listed CNOOC tumbled 17% and PetroChina more than 9%, while in Tokyo, Inpex dived 13%. In Sydney, Santos plummeted 27% and Woodside Petroleum tanked 18.4%.

Back in the US, Exxon Mobil slumped 12.2%, while midsized producer Occidental Petroleum plummeted 52% and oil services titan Halliburton 37.6%. – Rappler.com