Coronavirus scare, oil crisis roil share markets to bring back recession fears

Global stock markets went hell for leather as crude prices came crashing down on Monday. The combined effect of crude shock and the carnage caused by coronavirus is tipping the scales pointedly towards a global recession.

The twin-evils put Wall Street to the sword and just minutes after market opened the S&P 500 index fell 7%. Trading halted for 15 minutes for the first time since the circuit breaker rule was adopted in 2013 for US equities.

Indian benchmark indices, too, saw an ugly slide into a bear market with the Sensex and Nifty plunging 5% each and registering their first biggest one-day fall ever in absolute terms. In all, Indian investors lost as much as Rs 6.84 lakh crore wealth, while the rupee touched a six-month low of 74.05 against the dollar.

The market mayhem spread evenly across geographies.

While European markets suffered hefty losses, a mirror affect was seen in Asian markets with Hong Kong’s Hang Seng Index seeing its worst daily drop in two years, followed by Australia’s ASX 200 index that recorded its biggest fall since the 2008 global financial crisis.

Monday also saw the yields on the benchmark US 10-year treasury bonds becoming a punching bag for bulls. Considered a benchmark for retail interest rates, it fell to an all-time low of 0.32% in overnight trading.

With top exporter Saudi Arabia waging a price battle with Russia, oil prices plunged 33% to $30 per barrel, sending currencies and commodities on a free fall. While gold crossed $1,700 an ounce, the highest level since December 2012, copper (barometer for economic demand) touched a three-year-low.

Meanwhile, both S&P BSE Sensex and NSE’s Nifty50 index slipped 5% each, subjecting even blue chips such as Reliance Industries, ICICI Bank, HDFC and TCS to a massive selloff.

“Indian markets have fallen almost 16% from its peak, following its global peers, which have fallen anywhere between 13% and 20%. The relentless FII selling in the past two weeks has added to the overall downtrend,” said Siddartha Khemka, head of retail research at Motilal Oswal Financial Services.