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Oil rises but Asia struggles to recover from Black Monday rout
HONG KONG, March 10, 2020 (BSS/AFP) – A bounce in the price of oil provided
some support to under-pressure stocks in early Asian trade on Tuesday, a day
after global equities suffered their biggest losses in more than a decade.
Global stock markets had capitulated on what has become known as “Black
Monday”, with the Dow on Wall Street plunging more than 2,000 points,
triggering an emergency break in early trade.
But there was some relief on Tuesday as oil prices jumped around six
percent after plunging by a third the previous day, in their worst session
since the 1991 Gulf War.
Equity markets were a lot calmer across Asia, though they continued to
fluctuate through the morning.
Hong Kong rose 0.3 percent, Sydney added 1.2 percent and Singapore gained
1.4 percent and Jakarta added 2.4 percent.
But Tokyo ended the morning 1.5 percent lower, Taipei lost one percent,
Seoul eased 0.3 percent, Wellington dropped 1.3 percent and Manila gave up
0.7 percent.
Traders remain on edge and AxiCorp’s Stephen Innes warned the panic had not
yet stopped, with “growing evidence that an oil shock of historic proportions
is now underway”.
“Severe weakness in energy markets is quickly cascading into broader
declines in commodity markets, high-yield credit, and equities,” he said.
He added that “a fiscal response is wholly justified, and regardless of
whether or not governments can respond fast enough, all they need to do is
drop a number”.
If the “US, China, Europe, and Japan get on the phone and agree on a figure
like something in the quadrillions, the fiscal pump will likely provide oil
markets with a much-needed Alka-Seltzer moment”.
Speculation is mounting that the Federal Reserve will cut interest rates
again, having slashed them last week, while the European Central Bank is due
to meet this week.
And Donald Trump said his administration would be meeting lawmakers to
discuss economic relief measures to mitigate the impact of the disease as it
spreads through the United States.
– Italy imposes new measures –
Still, while governments and central banks have unleashed, or are preparing
to unleash, stimulus, the spread of COVID-19 is putting a huge strain on
economies and stoking concerns of a worldwide recession.
But that has now been compounded by an oil price war between Saudi Arabia
and Russia.
Top exporter Saudi Arabia slashed the prices it charges customers following
a bust-up with Moscow over crude output cuts, starting a price war that sent
traders into a tailspin.
Chris Lafakis, energy economist at Moody’s Analytics, said: “With COVID-19
already savaging demand for travel and transportation, the last thing oil
producers needed was a supply shock that would hit their pocketbooks even
more.
“The world is now drowning in a glut of crude oil that appears likely to
persist for months.”
The panic was felt around the world, with Frankfurt seeing its sharpest
single fall since 2001, London’s FTSE losing more than seven percent and
Paris collapsing more than eight percent in its worst daily drop since the
2008 financial crisis.
Brazil’s Ibovespa index finished down more than 12 percent.
The rush for safe investments also sent yields on US Treasuries to record
lows.
While the outbreak appears to be slowing in China, investors are
desperately looking for signs of an easing in Europe and the United States.
Italy is now the worst-hit country outside China, with more than 9,000
cases and hundreds of deaths. On Monday, Prime Minister Giuseppe Conte said
he was extending restrictions on travel and public gatherings initially
imposed on the north to the entire country. Milan’s FTSE MIB crashed 11
percent Monday.
– Key figures around 0230 GMT –
Brent Crude: UP 6.8 percent at $36.70 per barrel
West Texas Intermediate: UP 5.9 percent at $32.95
Tokyo – Nikkei 225: DOWN 1.5 percent at 25,090.35 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 25,122.60
Shanghai – Composite: DOWN 0.4 percent at 2,930.81
Dollar/yen: UP at 103.52 yen from 102.42 yen at 2050 GMT Euro/dollar: DOWN
at $1.1398 from $1.1448
Pound/dollar: UP at $1.3066 from $1.3112
Euro/pound: DOWN at 87.24 pence from 87.28 pence
New York – Dow: DOWN 7.8 percent at 23,851.02 (close)
London – FTSE 100: DOWN 7.7 percent at 5,965.77 (close)
BSS/AFP/FI/ 0937 hrs