A freefall in oil prices amid reports of an oil price war between major exporters Russia and Saudi Arabia coupled with mounting cases of the novel coronavirus (2019-nCoV) around the world triggered huge losses in US stocks overnight.
“The collapse in oil prices and associated credit concerns for producers has added another negative layer to a market already on its knees over the [coronavirus] outbreak. Russia and Saudi Arabia’s pledge to flood the market with cheap oil triggered a sharp decline in oil prices during yesterday’s [Asia Pacific] session, triggering a huge sell-off in energy shares overnight with main European and US equity indices down between 6% and 8%,” Rodrigo Catril, currency strategist at the National Australia Bank, said on Tuesday.
The Dow Jones Industrial Average dropped by 2,013.76 points, or 7.8%, to close at 23,851.02 on Monday - its worst one-day percentage drop since October 2008. The Standard & Poor’s 500 index fell 225.81 points, or 7.6%, to end at 2,746.56, its biggest one-day percentage decline since December 2008.
“Oil prices collapsed around 30% at the Asian open yesterday with WTI trading to a low of $27.38 while Brent fell to a low of $31.25. Brent crude is trading this morning around $34.40 per barrel (down 24% for the session) and WTI is at $30.80 (down 25%),” Catril added.
While the SHFE base metals were also weaker at the close of morning trading on Monday
, the complex is showing signs of recovery with nickel leading the charge higher.
The most-traded June nickel contract rose to 104,180 yuan ($15,000) per tonne at the close of Tuesday’s morning session, up by 4,450 yuan per tonne or 4.6% from Monday’s close of 99,610 yuan per tonne.
Gains were recorded across the rest of the SHFE base metals, albeit to a lesser extent than that in nickel. May zinc rose by 2.2% to 15,905 yuan per tonne, June tin was up by 1.6% to 135,370 yuan per tonne, May copper increased by 1.5% to 44,540 yuan per tonne, April led rose by 0.4% to 14,540 yuan per tonne and May aluminium ticked up by 0.4% to 12,940 yuan per tonne.
- The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was slightly up by 0.01% at 95.41 as at 11.35am Shanghai time.
- The Shanghai Composite Index was up by 0.62% at 2,961.54 as at 11.30 am Shanghai time.
- In data on Monday, German industrial production increased by a seasonally adjusted 3% in January from the prior month, which was better than the forecast 1.7% increase. The German trade surplus narrowed to €18.5 billion ($21.1 billion) in January from €19 billion in the preceding month.
- Also on Monday, the European Union’s Sentix investor confidence index fell to -17.1 in March from 5.2 in February.
- Data already out on Tuesday showed China’s consumer price index rose by 5.2% year on year in February, while its producer price index dipped by 0.4% over the same comparison.
- The EU’s final employment change and revised gross domestic product (GDP) are due later.