Global markets are falling after the failed alliance between OPEC and Russia. The alliance which lasted for 30 years has resulted in a worst one-day crash. Triggering fuel panic, especially with the global coronavirus pandemic.
Stocks record massive decline.
Equivalently, there is a decline in the global stock market index. For instance, S&P 500 reduced by 6% while Dow declined by about 2046points. Nasdaq Composite was down 5.4%. The dropping rates of over 7% led to 15 minutes of halted trade by the New York Stock Exchange. However, they recovered some of their losses after the market resumed.
The selloff affected the Asia Pacific where they incurred the biggest plunge since 2008. ie a decline of 7.3% on Australia S&P/ASX 200. Other affected stock market indexes include HSI which lost 5.1% and SHCOMP which shed 3%.
What is the main reason behind the oil panic?
On Monday, Saudi Arabia launched a price competition against Russia. As such oil prices have collapsed leading to a staggering loss in the stock market. The country announced a massive discount on its oil prices, resulting in fierce competition. There is a reckoning ahead for other producers, especially companies operating in the US. The situation even worsens because of the low demand and high supply during the corona outbreak.
The novel virus contributes to the declining economy as investment rates are low. The virus infects over 108000 people. It is still spreading to different continents. Cases in Italy are extreme for about 16 million people are under lockdown. Multiple cases, however, are recorded on a daily basis across the globe. An oversupply of oil could further pressure oil prices. Especially as states will have free rein over how much they pump and the prices they set.
Saudi Arabia made the decision hoping to reign the global market share in oil. This preceded a failed deal when Russia refuted OPECS efforts to rescue the oil market.
According to the chief market strategist, Stephen Innes, the crises in the global market are complete pandemonium. Investment rates have reduced with great losses incurred. The corona pandemic and Saudi’s oil price war are deepening plunges in the global market. There is panic among investors with most of them opting for safe-haven assets.
Within the last week of February, US stocks incurred the worst losses because of the disruption steered by the virus outbreak. Within the past days, about 9trillion has been lost from the global market. Major US companies are now encouraging their employees to work from home.
Chinas slow recovery.
Coronavirus has impacted greatly Chinas economy. Compared to the previous year, Chinas export rate between January and February fell by 17% while imports by 4%. The declines are because of the corona outbreak and the new year lunar holiday. Since the virus outbreak, most of the country’s economic activities were suspended. However, hopefully, when the people will return to work, companies will catch up.