Oil prices crashed by more than a fifth after Saudi Arabia started an aggressive price war, sending rattled stock markets plunging and spurring a rush into government bonds as investors sought havens.
Crude was on track for its biggest one-day drop since the 1991 Gulf war after the Saudi move, which threatens to swamp the oil market with supplies just as the coronavirus outbreak hits demand. Saudi Arabia will raise production and offer its crude at deep discounts to win new customers next month, according to two people familiar with the country’s oil policy.
Oil prices fell as much as 30 per cent but later Brent trimmed losses slightly to be down 20 per cent at $36 a barrel, while West Texas Intermediate traded at about $33.00 a barrel.
European stocks slumped, with London’s FTSE 100 down more than 6 per cent and on track for its worst day since the 2008-09 financial crisis. Germany’s Dax and France’s Cac 40 fell by similar amounts and the Stoxx Europe 600 index, which tracks the region’s largest companies, slid into bear market territory — meaning a fall of a fifth since a recent high.
S&P 500 stock futures pointed to a slide on Wall Street when trading begins on Monday, falling as much as 5 per cent — the maximum allowed in a single session.
In a rush by investors to find haven assets, the 10-year US Treasury yield tumbled down through 0.5 per cent to a record low in the sharpest rally for American sovereign debt in more than a decade. The 30-year US Treasury yield dropped below 1 per cent, taking the entire US yield curve below that level for the first time.
Investors now face the prospect of the 10-year yield, which stood at 1.5 per cent just 18 days ago, soon joining government bonds in Europe and Japan in negative territory.
“The market is in the process of pricing a global recession,” said George Saravelos, a strategist at Deutsche Bank.
SOURCE: Financial Times