Coronavirus: World shares skid after price of crude oil plunges below zero
World share prices skidded Tuesday after the price of U.S. crude oil plunged below zero, with demand collapsing as the coronavirus pandemic leaves factories, automobiles and airplanes idled.
The extreme volatility in energy markets highlighted investors’ broad concerns about the duration of the pandemic and its impact on the economy, weighing on financial markets more broadly.
In Europe, Germany’s DAX stock index lost 2.4 per cent to 10,420 and the CAC 40 in France shed 2.2 per cent to 4,428. Britain’s FTSE 100 declined 1.7 per cent to 5,714.
Wall Street looked set for losses, with the future contract for the S&P 500 down 1.3 per cent, while the contract for the Dow industrials lost 1.7 per cent.
A growing glut of oil is pushing storage capacity to its limits, leading to unprecedented drops in crude markets.
The U.S. benchmark’s settled at negative $37.63 per barrel on Monday and on Tuesday, the cost to have a barrel of U.S. crude delivered in May was at negative $7.40 per barrel.
When trading of contracts for U.S. oil to be delivered in May expire on Tuesday, the earliest delivery available will be for June. Analysts consider the June contract to now be closer to the “true” price of crude.
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But even the June contract was falling sharply. It was down $3.85 at $16.58 per barrel, trading as low as $11.79 a barrel at one point.
The tumult in the oil market mirrors volatility in many others and reflects uncertainty over where the world economy will head as governments begin to loosen controls imposed to contain the coronavirus.
In stock markets, while share prices have gradually stabilized after wild swings earlier this year, uncertainty over growing numbers of coronavirus cases in Japan and in some Southeast Asian countries has left investors wary about new waves of infections.
Unconfirmed reports Tuesday that North Korean leader Kim Jong Un was in fragile condition after surgery added to the jitters. But South Korea’s government said Kim appeared to be handling state affairs as usual.
Tokyo’s Nikkei 225 stock index fell 2 per cent Tuesday to 19,280.78 while the Hang Seng index in Hong Kong lost 2.2 per cent to 23,793.55. South Korea’s Kospi slipped 1 per cent, to 1,879.38.
Australia’s S&P/ASX 200 fell 2.5 per cent to 5,221.30 and the Shanghai Composite index gave up 0.9 per cent to 2,827.01.
In a sign of continued caution in the market, Treasury yields remained extremely low. The yield on the 10-year Treasury slipped to 0.57 per cent from 0.62 per cent late Monday.
In currency trading, the dollar edged down to 107.40 Japanese yen from 107.63 on Monday. The euro fell to $1.0831 from $1.0862.
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