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Morning Note: Market Crash! The Chaos of Oil & the Virus.

Financial markets globally yesterday had their worst day as markets opened lower and ‘messier’. This is after Oil prices cratered more than 20% on Monday following Saudi Arabia’s surprising decision over the weekend to slash prices. At one point Sunday evening, crude oil futures were down about 40%.

Yesterday, the NSE share indices had one of the worst hit since the 2008 financial crisis which was coupled by a post-election violence. The benchmark NSE All Share Index (NASI) yesterday plummeted 8.19 (-5.24%) points to close at 147.98, representing a 1-week loss of 1.47%, a 4-week loss of 12.26%, and an overall year-to-date loss of 11.08%. If this continues then the NSE20 share index which indicates a mix of most active stocks might hit the 2200 mark before the end of the week. With banks expected to release their results, we expect moderate decline in prices, mostly in the counters that have a high foreign dominance.

The global stock market correction – of a scale last seen in the weeks after Lehman Brothers’ collapse in 2008, which triggered the worst global recession since the Great Depression of the 1930s – comes amid an increasingly bitter standoff between Saudi Arabia and Russia over oil production cuts as the coronavirus outbreak drags down international demand for crude.

European markets suffered hefty losses in early trade with London dropping more than 8%, Frankfurt falling more than 7% and Paris almost matching those losses. The pan-regional STOXX 600 tumbled into bear market territory — a drop of more than 20% from recent peaks. Oil stocks suffered massive losses with Tullow down 57% and BP down 27% in early trade.

Analysts have warned that the lack of a coordinated international response as countries retreat into protectionist policy-making could threaten to unsettle global markets further, while dramatically raising the chances of a global recession this year.

These are the main movers in markets today:

Stocks

  • Futures on the S&P 500 gained 2.7% as of 10:33 a.m. in Tokyo.
  • The S&P 500 Index sank 7.6% to the lowest since June.
  • Topix index fell 0.6%.
  • S&P/ASX 200 Index rose 1.3%.
  • Kospi index rose 0.4%.
  • Hong Kong’s Hang Seng Index gained 0.9%.
  • Shanghai Composite Index rose 0.6%.
  • MSCI Asia Pacific Index fell 0.2%.

Currencies

  • The Japanese yen fell 1.2% to 103.55 per dollar.
  • The euro was at $1.1388, down 0.5%. It rose 1.5% Monday.
  • Offshore yuan rose 0.2% to 6.9385 per dollar.
  • Bloomberg Dollar Spot Index rose 0.2%.

Bonds

  • The yield on 10-year Treasuries rose 12 basis points to 0.66%.
  • Australia’s 10-year bond yield rose eight basis points to 0.69%.

Commodities

  • Gold fell 0.8% to $1,667.94 an ounce.
  • West Texas Intermediate rose 5.8% to $32.92 a barrel.