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Oil collapsed, the dollar fell to a 17-year low and Wall Street briefly crumbled almost 10 per cent overnight as recession fears battered financial markets.
Index futures point to further pain today for Australian investors, sliding 70 points or 1.4 per cent to 4826. The ASX 200 pre-empted some of the carnage yesterday with a 340-point plunge to a new four-year low.
The Dow fell more than 10 per cent for the second time in three sessions, temporarily erasing the last of its gains since Donald Trump came to power. The US oil market had its third-worst session on record, tumbling 24 per cent. Copper dived almost 8 per cent to a three-year low. The dollar shed more than three per cent.
US stocks hit new crisis lows, triggering ‘limit-down’ circuit-breakers for the fourth time in a week. When trade resumed, the indices continued south before a late bump trimmed their losses as the Senate approved a coronavirus relief package. The S&P 500 lost 131 points or 5.18 per cent, bringing its fall from last month’s peak close to 30 per cent. The Dow gave up 1,338 points or 6.3 per cent to close below 20,000 at 19,899. The Nasdaq shed 345 points or 4.7 per cent.
The death toll from the Covid-19 outbreak passed 100 in the US overnight as the number of infected reached 6,400. Italy recorded 475 deaths in 24 hours as the death toll reached 2,978.
Dire predictions of economic collapse fed the stock market rout. “Hell is coming,” billionaire investor Bill Ackman told CNBC as he called for the president to send workers home to contain the spread of the coronavirus. “We need to shut it down now. Capitalism does not work in an 18-month shutdown. Capitalism can work in a 30-day shutdown.”
The US energy sector slumped 14.3 per cent as a collapse in oil accelerated. The US benchmark, West Texas Intermediate, dropped $6.58 or more than 24 per cent to settle at US$20.37 a barrel, its lowest finish since 2002. Global benchmark Brent crude settled $3.85 or more than 13 per cent lower at US$24.88 a barrel, a 16-year low. The falls came as a plunge in demand due to the Covid-19 pandemic met a surge in supply due to the failure of an OPEC deal capping production.
“The last time that there was a global surplus of this magnitude was never,” Jim Burkhard, head of oil markets at IHS Markit, wrote in a report.
Besides oil companies, airlines, hotels and banks bore the brunt of the selling. The S&P 600 Airlines Industry index fell 34 per cent. Hyatt Hotels shed 19 per cent, Marriott International 15.2 per cent, Hilton Grand Vacations 23.6 per cent. Dow component Boeing fell 17.9 per cent. Goldman Sachs lost 11.8 per cent, JPMorgan Chase 9.9 per cent and Wells Fargo 5 per cent.
Winners were few. Pharmacy chain Walgreens Boots Alliance rose 6.5 per cent on an expected uptick in business. Walmart gained 2.8 per cent on anticipated demand for its online retail offering. Amazon gained 1.2 per cent.
BHP and Rio Tinto face early pressure here from heavy losses in their US listings. BHP’s US-listed stock crumbled 11.24 per cent after its UK-listed stock lost 3.79 per cent. Rio Tinto shed 8.97 per cent in the US and 3.82 per cent in the UK. The falls came as iron ore once again ignored the carnage elsewhere in commodity markets. The spot price for ore landed in China held steady at US$90.75 a dry ton.
Copper collapsed below US$5,000 a tonne in a dire signal for the global economy. The metal most closely tied to economic growth sagged 7.8 per cent to US$4,840 on the London Metal Exchange. Aluminium eased 0.1 per cent, nickel 3.3 per cent, zinc 1.3 per cent and tin 4.9 per cent. Lead gained 3.8 per cent.
The sell-off did not spare gold, which declined to its lowest level since December as traders sold liquid assets to cover losses elsewhere. Gold for April delivery settled $47.90 or 3.1 per cent lower at US$1,477.90 an ounce.
The dollar took a beating, falling 3.3 per cent to 58 US cents.
The day ahead brings February jobs figures at 11.30 am EST. The Reserve Bank is reported to be holding an emergency meeting and is expected to announce a cut to he cash rate this afternoon. President Trump is due to address the media about the virus tonight.
