World stocks sink on coronavirus shock, oil price crash

Global share markets plunged on Monday as panicked investors fled to the safety of bonds and the yen to hedge the economic trauma of the coronavirus, while oil plunged more than 30% after Saudi Arabia opened the taps in a price war with Russia.

Saudi Arabia had stunned markets with plans to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that sent prices down by about two thirds.[O/R]

The shock in oil was seismic as Brent crude LCOc1 futures slid $12 to $33.20 a barrel in chaotic trade, while U.S. crude CLc1 shed $11.80 to $29.48. [O/R]

In Asia, stocks tumbled, the safe-haven yen surged and emerging market currencies with exposure to oil tumbled in volatile trade. [FRX/]

Heavy selling was set to continue, with European futures sharply lower and U.S. futures hitting their down limit.

Investors drove 30-year U.S. bond yields beneath 1% on bets the Federal Reserve would be forced to cut interest rates by at least 75 basis points at its March 18 meeting, despite only just having delivered an emergency easing.

“Wild is an understatement,” said Chris Brankin, Chief Executive at stockbroker TD Ameritrade Singapore.

“Not just us, but across the globe you would have every broker/dealer raising their margin requirements...trying to basically protect our clients from trying to leverage too much risk or guess where the bottom is.”

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 4.4% in its worst day since August 2015, while Shanghai blue chips .CSI300 fell 2.9%.

EuroSTOXX 50 futures STXEc1 last traded down 6%, German DAX futures FDXc1 dropped 5.6% and FTSE futures FFIc1 fell 6.5%.

Japan's Nikkei .N225 dropped 5.1% and Australia's commodity-heavy market closed down 7.3%, it's biggest daily fall since the 2008 global financial crisis.

E-mini futures EScv1 for the S&P 500 .SPX hit their lower limit of 2,819 in Asia morning trade, pointing to Wall Street's rout deepening as investors priced in growing risks of a U.S. recession.

The number of people infected with the coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic carnage.

Italy’s markets are sure to come under fire after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

Not helping the mood was news North Korea had fired three projectiles off its eastern coast on Monday.

“After a week when the stockpiling of bonds, credit protection and toilet paper became a thing, let’s hope we start to see some more clarity on the reaction,” said Martin Whetton, head of bond & rates strategy at CBA.

“Dollar bloc central banks cut policy rates by 125 basis points, not as a way to stop a viral pandemic, but to stem a fear pandemic,” he added, while noting many had little scope to ease further.