Panic over fears that the Covid-19 fallout will sink the world economy stripped billions from the value of stockmarkets around the world yesterday in the worst selloff since the financial crisis a decade ago. The latest slump which extended the waves of market selling into the third week was triggered by the remarkable crash in the price of crude oil. Energy markets are flashing red for a potential world recession and stockmarkets are likely to fall even further, experts warned.
The price of the global crude benchmark, Brent shed a further $10 to $35.73 a barrel, its sharpest drop since the Gulf War almost 30 years ago. The plunge has revived crisis-era fears for the health of European and US banks and investment funds which could be exposed to the economies of oil producers or energy markets. Such so-called secondary effects have in the past turned stock- market selling into routs.
A circuit breaker to trading was triggered as the S&P index in the US plunged and European markets, including the Ftse-100 in London and the Dax in Frankfurt, slumped by around 7.5%.
“It has been another day for the history books. The losses in equities have been easily overshadowed by the high drama in oil markets, but a day that has seen a near 9% fall for the Dow before an almost 5% rebound is not one that will be forgotten quickly,” said Chris Beauchamp, chief market analyst at online broker IG.
“The dash to sell equities shows no sign of relenting, as today proves to be just as dire as investors feared it might be early this morning,” he said.
In Ireland, the Iseq index fell over 400 points or almost 6.5%, almost matching the losses of other European markets.
Irish banks tumbled for their worst one-day losses since the financial crisis amid fears that the fallout from the Covid-19 virus will hit economic growth hard this year. Bank of Ireland fell 16% and AIB ended 14% lower. Irish property shares and housebuilders also slid in the global sell-off. Shares in oil explorer Providence Resources were hit hard again. “We think global equities could yet fall further in the coming weeks and months, despite the plunge in most markets today,” said Oliver Allen at Capital Economics in London. “We still expect a recovery later this year, but the timing looks likely to hinge on two conditions being met,” he said, namely the virus being brought under control and the oil price steadying.
“That suggests to us that global equities will stage a comeback. But that might still be weeks or even months away, and the interim could be painful,” Mr Allen said. In Ireland, the fall in the crude oil should trigger lower prices in electricity and pump prices in the coming weeks.
Darragh Cassidy at price comparison website, Bonkers.ie cautioned about a large cut in prices here.