Global markets, which have been concerned over the coronavirus outbreak and the potential fallout for economies around the world, are now dealing with another issue in plunging oil prices. Crude oil prices plunged amid fears of a price war after OPEC failed to strike a deal with its allies on production cuts. Saudi Arabia and Russia are now expected to even ramp up production which will add to the excess supply in the market considering demand expectations have fallen on the coronavirus outbreak. In the afternoon of Asian trading hours, the international benchmark Brent crude futures contract fell 22.91% to $34.90 per barrel. U.S. West Texas Intermediate (WTI) crude futures also fell sharply by 24.71% to $31.08 per barrel.
The worries over oil prices come as investors have already been jittery over the global spread of the coronavirus that has infected more than 109,000 and taken at least 3,801 lives worldwide. The Italian government ordered Sunday a large-scale lockdown in the northern part of the country, including Milan, as infection cases in the country surged to over 7,300. The situation is also worsening in the U.S. with New York, California and Oregon all declaring a state of emergency.
Gold, another safe-haven asset, crossed $1,700 an ounce, hitting its highest level since Dec. 2012. Meanwhile, copper prices hit a more than three-year low of $2.46. Copper is seen as a barometer of broad economic demand given its applications in electrical equipment and manufacturing.
Investors grapple with the potential economic damage caused by fractured supply chains, travel bans and the disruption of daily life. The infectious disease is an exogenous factor that economists and investors are finding difficult to model. There is little clarity about how long it will take governments and health officials to contain the virus, leading to a gloomy prognosis for global economic growth.
The Federal Reserve announced an emergency rate cut last week to combat the economic impact from the virus, its first such move since the financial crisis. President Donald Trump on Friday signed a sweeping spending bill of an $8.3 billion package to aid medical research. Wall Street expects more stimulus from global central banks and governments to prevent a recession.
ECONOMIC NEWS: China Exports Tumble As Coronavirus Outbreak Weigh On Overall Business Activity - China's exports decreased 17.2% in January and February period as the outbreak of coronavirus and the extended Lunar New Year holiday weighed on global supply chains and overall business activity, data released by the General Administration of Customs revealed. This was in contrast to a 7.9% annual expansion seen in December. Similarly, imports declined 4% versus 16.5% growth in December. Imports were expected to fall 16.1%. Consequently, the trade deficit totaled $7.09 billion compared to the expected surplus of $38.8 billion.
CURRENCY NEWS: China's yuan rose against the dollar on Monday, as China central bank fixed firmer mid-point rate. Prior to its open at 6.9100 per dollar, the yuan's daily midpoint rate CNY=PBOC was set at 6.926 per dollar, 77 bps or 0.11% firmer than the previous fix of 6.9337. It was the yuan's strongest fix set by the People's Bank of China (PBOC) since Feb.3. In the spot market, onshore yuan CNY=CFXS stood at 6.9301 per yuan by midday, higher by 41 bps than the previous late session close.
Powered by Capital Market - Live News
Disclaimer: No Business Standard Journalist was involved in creation of this content
