Monday, March 9, 2020

Asia Times: Oil prices tumble as much as 30% after Saudi Arabia signals possible oil production ramp up

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • US payrolls

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Market Recap: Oil prices tumble as much as 30% after Saudi Arabia signals possible oil production ramp up

Wall Street ended lower on Friday as fear continues to dominate financial markets. The coronavirus outbreak continued to spread at an accelerated rate outside of China, putting pressure on various asset classes as the likelihood of a global economic slowdown increases.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -0.98% -256.50 25,864.78
S&P500 -1.71% -51.57 2,972.37
Nasdaq -1.87% -162.98 8,575.62
*Source: Bloomberg

Major indices around the world were mixed over the week however, with the CSI300 leading gains as the pace of new cases of the coronavirus across China continues to slow down. Major US indices were able to etch out slight gains over the week likely thanks in part to the Fed's 50bp rate cut last Tuesday. UK and EU indices fell last week as well as new cases of the virus spikes across major economies in the EU.

Indexes Weekly Change (%) Net Change Closing Price
Dow Jones +1.79% +455.42 25,864.78
S&P500 +0.61% +18.15 2,972.37
Nasdaq +0.10% +8.25 8,575.62
FTSE100 -1.79% -118.06 6,462.55
Euro Stoxx -2.93% -97.42 3,232.07
German Dax -2.93% -348.48 11,541.87
Nikkei -1.86% -393.21 20,749.75
KOSPI +2.68% +53.21 2,040.22
ASX200 -3.49% -225.00 6,216.21
CSI300 +5.04% +198.46 4,138.51
Hang Seng +0.06% +16.74 26,146.67
Straits Times -1.66% -50.10 2,960.98
*Source: Bloomberg

The dollar fell on Friday against almost all major indices with the exception of the Canadian dollar as more new cases of the coronavirus starts to appear across the US. The Dollar Index fell 0.90% despite a strong employment report from the US Bureau of Labour Statistics for February, with NonFarm Payrolls jumping 273,000 instead of an expected 173,000 growth. Unemployment fell to 3.5% from 3.6% as well. Expect oil-related currencies to suffer today as oil prices crash early on Monday morning.

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Safe haven assets continued to surged on Friday, as investors hedge against a possible recession as a result of the virus. Gold, yen, Swiss francs and US Treasuries all surged across the board. Benchmark 10-year yields fell 15.0bps to 0.76%, extending into a fresh record low on Friday. On Monday morning, 10-year yields fell below 0.50% after oil prices crashed, but recovered slightly to 0.54% as of 8.39am (GMT +8).

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.10% +1.60 1,673.83
Silver -0.50% -0.09 17.05
JPY +0.73% +0.77 105.39
*Source: Bloomberg
US Treasury yields Daily Change (%) Yield (%)
2-Year -9.1 0.51%
10-Year -15.0 0.76%
30-Year -25.3 1.29%
*Source: Bloomberg

Crude oil futures sank on Friday after OPEC+ talks fell apart when Russia refused to cut its oil production at the bloc’s meeting last week. Brent and WTI crude futures fell 9.44% and 10.07% to US$45.27 and US$41.28 per barrel respectively on Friday. But crude oil prices crashed on Monday morning, sinking more than 20% by 7.59am (GMT +8) after Saudi Arabia cut its official prices and signalled that it would increase its oil production numbers, which investors see as a likely start to an oil price war between Saudi Arabia and Russia.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -9.44% -4.72 45.27
WTI Crude -10.07% -4.62 41.28
*Source: Bloomberg

Meanwhile in Asia, major indices sharply fell on Monday morning, plagued by both a crash in oil prices and fear of a global economic slowdown. But we may see some recovery in non-energy sectors in financial markets after an initial spillover from the crash in oil markets as the cost of energy sharply falls. Equity futures tracking the major indices in the US were down 4% on Monday morning as of 8.57am (GMT +8) as well.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -4.35% -903.30 19,848.43 8:38:15 AM
KOSPI Index -2.75% -56.20 1,984.12 8:58:10 AM
ASX200 Index -5.39% -334.91 5,881.30 8:58:05 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany Jan Trade Balance (3pm)
  • Germany Jan Industrial Production (3pm)
  • Canada Feb Housing Starts (8.15pm)