Global stocks plunge with crude oil in free fall: Markets wrap | Auto Finance News | Auto Finance News

Global stocks plunge with crude oil in free fall: Markets wrap

Gas flares burn from pipes aboard an offshore oil platform in the Persian Gulf's Salman Oil Field, operated by the National Iranian Offshore Oil Co., near Lavan island, Iran, on Thursday, Jan. 5. 2017. Nov. 5 is the day when sweeping U.S. sanctions on Iran’s energy and banking sectors go back into effect after Trump’s decision in May to walk away from the six-nation deal with Iran that suspended them. Photographer: Ali Mohammadi/Bloomberg

U.S. stocks plunged more than 5%, whipsawing back from losses that topped 7% and triggered a trading halt, as a full-blown crude price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, oil sank more than 30% and credit markets buckled.

The S&P 500 is now down about 18% from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day. NYSE circuit breakers halted trading for 15 minutes at 9:34 a.m. in New York, in a move designed to limit panic. The next circuit breaker will trip if losses reach 13%.

Read more: Breakneck speed of sell-off puts longest bull market in jeopardy

In a dramatic day across assets globally:

  • Crude tumbled the most since the Gulf War in 1991, after an OPEC+ alliance that had contained global production disintegrated. WTI and Brent pared some of their losses but remained down more than 20%.
  • The 10-year Treasury yield fell below 0.5% and the 30-year yield dropped under 0.9%, taking the whole U.S. yield curve below 1% 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 6%.
  • A U.S. 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 3% versus the dollar while the euro and Swiss franc both strengthened more than 1%.

The oil-price crash, if sustained, would 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. Italy over the weekend effectively put its industrial heartland in the north of the country on lockdown in an attempt to halt the spread of the illness.

“The market was poised and vulnerable to this volatility and crude oil has just exacerbated it,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. “The coronavirus itself has been the main cause of the correction, but now it’s being exaggerated even further.”

Equities and haven assets showed little immediate reaction to news that President Donald Trump’s administration is drafting measures to blunt the economic fallout from the virus, including a temporary expansion of paid sick leave and possible help for companies facing disruption from the outbreak. A Bloomberg gauge of financial stress for the U.S. has deteriorated at the fastest pace since the great financial crisis.

“It is pretty nuts right now,” said Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, in an email Monday. “It feels like ‘07-’08 when every weekend it felt like the bottom was falling out.”

Elsewhere, the spread between Italy’s 10-year sovereign yield and Germany’s jumped 39 basis points to 218 basis points, the highest since August.

Here are some key events coming up:

  • The European Central Bank’s policy decision comes Thursday amid expectations it may ease policy.
  • The U.K. Chancellor of the Exchequer unveils the government’s 2020 budget on Wednesday.
  • The U.S. core consumer price index, due Wednesday, is expected to remain subdued in February.

These are the main moves in markets:

Stocks

  • The S&P 500 Index sank 5.3% to 2,815.33 as of 10:34 a.m. New York time, the lowest in about nine months on the largest tumble in more than eight years.
  • The Dow Jones Industrial Average sank 5.3% to 24,485.76, the lowest in more than 13 months on the biggest tumble in more than eight years.
  • The Nasdaq Composite Index sank 5.1% to 8,142.41, the lowest in almost 20 weeks on the largest tumble in more than eight years.
  • The MSCI All-Country World Index sank 5.1% to 488.47, the lowest in more than 13 months on the biggest tumble in more than 11 years.

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.2% to 1,191.01, the lowest in two months.
  • The euro jumped 1.2% to $1.1415, the strongest in 13 months on the biggest surge in more than two years.
  • The Japanese yen appreciated 3% to 102.29 per dollar, the strongest in more than three years on the largest jump in more than three years.
  • The British pound gained 0.4% to $1.3106, reaching the strongest in more than five weeks on its fifth consecutive advance.

Bonds

  • The yield on 10-year Treasuries decreased 24 basis points to 0.53%, the lowest on record with the largest tumble in more than eight years.
  • The yield on 30-year Treasuries declined 31 basis points to 0.97%, the lowest on record with the biggest fall on record.
  • Germany’s 10-year yield sank 18 basis points to -0.89%, hitting the lowest on record with its eighth straight decline and the largest tumble in more than eight years.
  • Britain’s 10-year yield decreased 13 basis points to 0.106%, reaching the lowest on record with its 15th straight decline and the biggest dip in about 16 months.

Commodities

  • Gold weakened 0.2% to $1,671.22 an ounce.
  • West Texas Intermediate crude fell 16.8% to $34.35 a barrel, the biggest drop since 1991.

–With assistance from Todd White.

— By Claire Ballentine (Bloomberg)

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