Asian stocks fall as oil prices drop to 18-year low
Stocks across Asia fell after oil prices dropped to their lowest level in nearly two decades on fears that coronavirus would cause a collapse in global demand.
Oil prices have now plummeted by about two-thirds this year, with a price war between Saudi Arabia and Russia compounding the impact of the virus pandemic.
In early Asia trading on Monday, West Texas Intermediate, the US oil benchmark, slid as much as 7.4 per cent to an 18-year low of $19.92 per barrel. Brent crude, the international marker, fell as much as 7.6 per cent to $23.03 a barrel.
The latest slump in oil prices came after a senior government medical adviser in the US warned on Sunday that up to 200,000 people in the country could die as a result of the Covid-19 outbreak. President Donald Trump has extended social distancing guidelines in the US until the end of April, raising new concerns over the pandemic’s economic impact.
“The bearishness in the market continues to grow,” said Warren Patterson, head of commodities strategy at ING. He said the surplus of crude in the markets during the second quarter of the year was likely to be “enormous” as Saudi Arabia and Russia failed to agree on production cuts.
Efforts to contain the spread of coronavirus, which have involved economic shutdowns and restrictions on the movements of billions of people, could damp any prospect of an immediate oil price rebound. “The risk is that we continue to see weaker crude prices in the near term,” said Robert Rennie, global head of market strategy at Westpac.
That bearishness bled into global stocks on Monday. Japan’s benchmark Topix index fell 3.5 per cent after Shinzo Abe, prime minister, warned the country was “on the brink” as its faces risks from a second wave of infections.
In China the CSI 300 of big Shanghai- and Shenzhen-listed stocks dropped 1.4 per cent, while Hong Kong’s Hang Seng was 1.5 per cent lower.
China’s central bank on Monday cut its short-term lending benchmark and injected $7bn into the financial system in the latest action taken by policymakers to try and support markets hit by coronavirus.
Futures tipped Wall Street’s S&P 500 to fall almost 1 per cent when trading begins later in the day. The US stock index last week recorded its strongest three-day rally since the 1930s after Congress passed a $2tn stimulus bill to cushion the economic impact of coronavirus.
Total cases of the virus worldwide surpassed 700,000 over the weekend as more than 44,000 people were confirmed to have contracted coronavirus on Sunday.
Haven assets gained ground, with the 10-year US Treasury yield dropping 0.02 per cent to 0.656 per cent. Bond yields fall as prices rise. The Japanese yen strengthened 0.5 per cent to ¥107.30 per US dollar.
Additional reporting by Leo Lewis in Tokyo and David Sheppard in London