Markets drop as fears over coronavirus and oil price war grow
The FTSE 100 fell more than 8% in early trading as fears of a global recession grew, caused by the impact of coronavirus and an oil price war.
The drop follows a 30% slump in the oil price overnight after Saudi Arabia launches a price war, as it boosted production amid a major disagreement with Russia. It is the biggest single drop in the price of oil since the first Gulf War, in 1991.
The fall in the FTSE 100 resulted in it becoming a bear market – it is more than 20% below its recent peak seen in January when it traded above 7,600 points – and it dropped briefly below 5,900 in the first hour of trading.
I don't think I've ever seen a day like this
— Neil Wilson (@marketsneil) March 9, 2020
Neil Wilson, chief market analyst at Markets.com, said “There’s a risk of losses in oil positions needing to be covered by selling down elsewhere – we’re in a vicious circle.
“Equity markets are hideous today and these kind of moves are to be afraid of as they can lead to aggressive tightening in credit that can spiral into real financial distress.
“We don’t know even know what kind of impact the coronavirus will have on the economy yet bond and equity markets are screaming recession.”
Unsurprisingly, the biggest fallers included energy and mining giants Royal Dutch Shell, BHP and Anglo American. Holiday company TUI also continued its slide, and has now lost half of its value in the last month.
The FTSE 100 is the index of the largest listed companies and has global exposure. It was trading down 6.8% at 9.10am.
The FTSE 250, which is made up of companies that generate a much greater proportion of its revenues from the UK than its big brother, was down 5.7%.
Oil and gas stocks also took a hammering – Premier Oil was down more than 50% and Tullow Oil nearly 40% this morning – while James Bond’s luxury car maker Aston Martin Lagonda continued its stock market nightmare with an 18% drop to a new nadir.
