Global stock markets post biggest falls since 2008 financial crisis - MW

Global stock markets fell the most since the 2008 financial crisis on Monday after oil prices fell on fears of escalating economic costs of the coronavirus outbreak.

Nearly £ 125 billion was wiped out of the value of FTSE 100 on the fifth worst day in history for the index of leading UK company stocks, as it plummeted 7.7% to end the day below. 6,000 points, the lowest level since the 2016 Brexit Vote.

In Italy, Prime Minister Giuseppe Conte, has extended the red zone restrictions in the north to the country, banning all public gatherings and preventing movement outside of work and emergencies.

Trading on Wall Street was frozen for a few minutes after the market opened because the stock buying and selling system did not keep up with the events. The Dow Jones index closed down more than 2,000 points for the first time, down 7.8%.

On an escalating day of economic damage as countries scramble to deal with the outbreak, developments include:

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• The death toll in Britain has increased from three to five after the victims were confirmed in Wolverhampton and Sutton, south of London. Both are in their 70s and have underlying health conditions.
• A scramble to bring hundreds of British tourists from Italy is underway, as the Foreign Ministry advises against all but essential travel to the country.
• Seven Britons took a positive test after flying from London to Vietnam with an infected 26-year-old woman who recently traveled to Milan and Paris.
• The British health director, said people with minor symptoms such as coughs and colds may be required to isolate themselves within the next two weeks.
• Germany and the Republic of Ireland have announced emergency funding packages worth billions of euros, in which Berlin declares that it will do everything it needs to stabilize the economy and secure jobs.

Some of Britain's biggest companies have dropped by billions of pounds, with oil and gas stocks reporting the most serious losses. HA has dropped by nearly 20% and Shell has dropped by 18%. In the US, Chevron lost 14% and France America Total fell 17% in the lingering global sales pressure. Smaller oil companies on the UK's FTSE 250 index were more severely affected.

Stock markets fell across Europe with losses in France, Germany and Spain about 8%, far exceeding the depth of the eurozone sovereign debt crisis. The biggest sell-off came from Italy, with shares in Milan collapsing more than 11%.

Global stock market correction - to a scale last seen in weeks after the collapse of Lehman Brothers in 2008, caused the worst global economic recession since the Great Depression 1930s - takes place amid increasing bitterness between Saudi Arabia and Russia about reduced oil production as the coronavirus epidemic reduces international crude oil demand.

On Sunday, Russia refused to sanction production cuts that would support oil prices. Saudi Arabia retaliated by pledging to increase production, causing oil prices to collapse on Monday morning with the sharpest percentage drop since the start of the First Gulf War.

The price of a barrel of oil has dropped more than 30% at a time, dropping to around $ 35 (£ 26.70) to release a wave of sustained and heavy selling pressure across financial markets. other in the world.

Traders drew similarities to Black Monday in 1987, when stocks crashed around the world, saying stock exchanges had sped up from Islam's panic to a pure hysteria. Face the twin threats of coronavirus and the oil price war.

The Vix volatility index, called a measure of Wall Street's fear, measures the future extremes expected in financial markets, soaring to their highest level since the 2008 crash. A trader said that it will get worse before it gets better.

Ayush Ansal, of Crimson Black Capital, said: Markets were broken before Saudi Arabia decided to launch an oil price war, but this latest development has taken them far beyond what is possible. there.

Investors rushed to buy assets that were considered safe havens in times of market turmoil - including UK, US and German government bonds - reducing borrowing costs to a record low.

The price of 10-year US Treasury bonds saw the sharpest increase in more than a decade, while yields - capital in the opposite direction of prices - for the first time US Treasury bonds fell below 1%.

The cost of lending to the UK government over the first two years has turned negative - meaning investors are forced to pay to own these bonds. Gold prices have risen to the highest level since 2013.

In the face of the financial market crisis, pressure is increasing on the Bank of England and the European Central Bank to cut interest rates earlier this week alongside other measures to support economies. increasingly fragile economy of the UK and EU.

The US Federal Reserve issued the first emergency rate cut order since the 2008 collapse, last week, although economists said the additional cut could be close to zero. Current levels of 1-1.25% may be required to reinforce confidence because of concerns about global growth.

In the UK, Prime Minister Rishi Sunak, is expected to use the Wednesday budget as a de facto emergency declaration to reveal an important tax sweep package and spending measures to protect companies and family.

However, analysts warn that the lack of coordinated international response when countries withdraw into protectionist policies could threaten to further disrupt the global market, while also significantly increasing the risk. global economic recession this year.

Neil Shear, chief economist at consulting firm Capital econom, said: `` The worst-case scenario is likely to be a strong recession but perhaps short-lived instead of complete depression [but] when the virus spread, it is very likely that the 'worst case scenario' quickly becomes the most likely scenario.

In a silver lining, observers say the world's largest banks are better prepared to continue lending to families and businesses despite strong moves in the financial markets. Risks still exist, however, including heavily indebted US shale energy companies that may be forced to leave business due to the collapse in oil prices.

BlackRock, the world's largest investment management company, said: The market dynamics were reminiscent of the financial crisis. But we don't think it was 2008 2008, because the economy and financial system are growing stronger.

MW