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.
Mainland China - excluding Hubei province, the epicentre of the coronavirus outbreak - reported no new locally transmitted cases on Sunday for the second straight day, as authorities remained on alert for infections arriving from abroad.
China's exports contracted sharply in the first two months of the year, and imports declined, as the health crisis triggered by the coronavirus outbreak caused massive disruptions to business operations, global supply chains and economic activity.
Alibaba Group Holding, the e-commerce giant, fell 5% to HK$193.50. Tencent Holdings, China's social media and online game giant, fell 4.6% to HK$377.40. Casino stocks dropped, with Galaxy Entertainment plunging 4.4% to HK$48.75.
Shares of oil producer & refiners were hit by a sharp fall in crude futures on reports that Saudi Arabia plans to boost oil output after the collapse of Organization of the Petroleum Exporting Countries production limit talks with Russia. PetroChina, the nation's top oil and gas producer, sank 9.6% to HK$2.72, while China Petroleum & Chemical (Sinopec) lost 2.8% to HK$3.82. China Oilfield Services tumbled 20% at HK$8.38. Offshore oil and gas producer CNOOC fell 17.2% to HK$8.79.
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