Caution recaptured world markets on Monday as a near 30% drubbing for U.S. WTI crude oil kicked off a busy week of data and earnings that will drive home the damage being inflicted by global coronavirus lockdowns.
Europe’s stock markets made a groggy start, with the pan-regional EUROSTOXX 600 flopping back into the red as London’s FTSE, Germany’s DAX and Paris, Milan and Madrid all fell more than 1%.
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E-Mini futures for the S&P 500 tumbled nearly 2% too, after Wall Street had enjoyed a strong end to last week, though even that barely reflected the carnage in oil markets.
With some global storage facilities nearly full to capacity, the ‘front-month’ May benchmark U.S. crude contract was down $5.40, or 29.5%, to just under $13 a barrel — the lowest since March 1999.
European benchmark Brent was down a more manageable 5% at $26.60 a barrel, but it all pointed to the same problem — too much supply, not enough demand.
“For oil there is a bit of a technical story (with storage), but still, if energy consumption is down 30% and OPEC reduces supply by 10%, there is still a large gap,” said Rabobank’s head of macro strategy, Elwin de Groot.
Equity and other major markets, however, were still trading relatively robustly and largely on the newsflow of the European virus numbers gradually coming down, he added.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2% in slow trade, pausing after five straight weeks of gains.
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Japan’s Nikkei fell 1.15%, but Chinese shares edged up 0.4% as a benchmark lending rate was lowered to shore up the coronavirus-hit economy after it contracted for the first time in decades.