Oil Price And Stock Markets in Free Fall - News-Credit-Mortgage-Coin


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Tuesday, March 10, 2020

Oil Price And Stock Markets in Free Fall

Concerns about the consequences of the coronavirus epidemic are growing. Added to this is the crash in the oil price. The stock exchanges around the world react with huge losses. Trading on Wall Street has been suspended.

The dramatic sell-off on the stock exchanges continues. Fears of an oil price war add to concerns about the economic consequences of the coronavirus epidemic. Traders spoke of a "black Monday" in the face of the stock market crash. The Dax fell temporarily more than eight percent on Monday to a 14-month low of 10,558.17 points and was heading for the largest daily loss since the September 11, 2001 attacks on the World Trade Center in New York. You could no longer adequately process the abundance of Job's messages, said portfolio manager Thomas Böckelmann from the asset manager Euroswitch.

On Wall Street, the dominant Dow Jones index fell seven percent at the start of trading, the biggest drop in price in ten years. The trade was then suspended for 15 minutes.

The German MDax of medium-sized stock exchanges lost 6.80 percent on Monday to 23 068.82 points. The EuroStoxx 50, the leading index of the euro zone, fell 5.66 percent to 3049.06 points. The stock exchanges in Asia had previously collapsed. The Japanese leading index Nikkei lost a good five percent.

The price also fell significantly at other stock exchanges in the region. Share prices on the Seoul stock exchange slipped by more than four percent. The leading index fell 85.45 points, or 4.2 percent, to its closing level of 1954.77. In China, the Shanghai Composite Index lost a significant 3.01 percent to 2943.29 points. The Shenzhen Component Index left the market with a loss of 4.09 percent at 11,108.55 points.

Traders are already making comparisons to the stock market crash of 1929 and 1987 and speak of a "black Monday". "Although the number of infections in China seems to have reached a plateau, the corona wave continues to roll and it is not yet possible to say when this will end," writes analyst Ralf Umlauf from Landesbank Helaba. "Uncertainty is high and the prospects for the economy and markets are difficult to assess, especially since oil prices are still falling sharply."

The latest Sentix poll by mood researchers underscores this: investor sentiment in the eurozone plummeted in March like never before in a month and fell to its lowest level since April 2013. "After double-digit price losses in record time, one wonders whether a bear market can be prevented at all, "explains market strategist Clemens Schmale from Godmode Trader. By that he means whether we are currently seeing the beginning of a longer downward trend or just a short-term setback in a long-term intact upward trend.

Oil price war between Russia and Saudi Arabia

On the oil market, after the failed negotiations to cut production, the oil price collapsed by 30 percent - the strongest percentage drop since 1991. Portfolio manager Thomas Altmann from QC Partners spoke of a "real bloodbath. The oil war is now coming to the fight against Corona ", he said. "Investors flee from anything that is at risk."

The cause of the slump is the failed negotiations between the Opec oil cartel and the producing countries grouped together in the so-called Opec +, such as Russia. On Friday, the negotiating partners of Opec + surprisingly could not agree on a new agreement. Even an extension of the existing funding restriction was missing in the final declaration of the participating states. In addition, the dispute between Saudi Arabia and Russia over future production seems to be escalating. According to the Bloomberg news agency, citing insiders not mentioned by name, Saudi Arabia could increase production in the coming months. According to it, the production volume of the leading Opec country could be increased to a new record of twelve million barrels per day.

As reported by the Frankfurter Allgemeine Zeitung (FAZ) on Monday, citing unidentified participants in the Russian delegation at the Opec + negotiations in Vienna, Russia's departure from the oil cartel should also be seen as a declaration of war on the United States. In recent months, new sanctions from Washington have caused resentment in the Russian government. Among other things, reference was made to the punitive measures imposed by the USA against a subsidiary of the Russian Rosneft in February. The drop in oil prices triggered by Moscow's decision is also likely to have consequences for American funding through the fracking method. In this method, a mixture of water, sand and chemicals is pressed into rock layers under high pressure in order to extract oil. It is comparatively expensive and only pays off if the prices are rather high.

A barrel (159 liters) of the North Sea type Brent last cost $ 32.83. The price was $ 12.44 lower than on Friday. The price of American crude oil of the WTI variety dropped by $ 12.44 to $ 28.84.

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