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Morning Note: There’s a new problem in Markets, Oil Price Wars!

The Corona Virus scare hit the NSE hard two weeks ago when the index touched its lowest in 16 years. Just as the NSE is starting to recover, guess what? Global Oil Wars are coming hard on markets today. This is after Saudi Arabia slashed oil prices and throwing global economies into a new wave of uncertainties after OPEC talks collapsed.

As the NSE opens today, we could see the only oil stock, Total Kenya Plc slightly take a bow but will most likely gain later on if the situation changes. As an investor, Oil should probably be a concern in terms of market volatility, more than the COVID-19.

The oil-price crash, if sustained, would upend politics around the world, exacerbate strains in U.S. high-yield credit and complicate the work of central bankers as they try to model the impact of the virus on economies. It would otherwise prove a boon to consumers, but the coronavirus is increasingly keeping them at home. Italy over the weekend effectively put its industrial heartland in the north of the country on lock-down.

Economists are having to rewrite their forecasts before the ink dries on the previous set. Morgan Stanley is among those seeing a rising risk of a technical recession across major economies, with the second quarter set to see continuing disruption thanks to the epidemic. Central bank stimulus may help eventually, though the outbreak will need to be contained first.

These are the main moves in global markets today:
Stocks

  • Futures on the S&P 500 Index lost 4.9% as of 12:12 p.m. in Tokyo. The underlying gauge fell 1.7% on Friday.
  • Japan’s Topix index declined 6.1%.
  • Australia’s S&P/ASX 200 Index plunged 5.7%.
  • Hong Kong’s Hang Seng fell 3.6%.
  • Shanghai Composite lost 2.5%.
  • Euro Stoxx 50 futures fell 6%.

Currencies

  • The yen surged 2.8% to 102.48 per dollar.
  • The euro bought $1.1391, up 1%.
  • Mexican peso was down 7.2%.
  • China’s offshore yuan was flat at 6.9316 per dollar.

Bonds

  • The yield on 10-year Treasuries dropped 26 basis points to 0.50%; 30-year yield was down 31 basis points at 0.97%.
  • Australia’s 10-year yield retreated about eight basis points to 0.59%.

Commodities

  • West Texas Intermediate crude sank 27% at $30.30 a barrel.
  • Gold added 1.2% to $1,693.15 an ounce.