Europe: Stocks end at eight-month low after oil price crash

[BENGALURU] European shares ended at an eight-month low on Monday, sinking into bear market territory after a crash in oil prices deepened concerns that a global recession could follow the coronavirus outbreak.

The oil and gas subindex bore the brunt of losses, plunging nearly 17 per cent after oil prices lost a third of their value on worries over a price war between Saudi Arabia and Russia.

The pan-European Stoxx 600 index closed down 7.4 per cent, marking its worst day since the 2008-09 financial crisis. The drop called for a flip into a more negative "bear" environment, implying a more than 20 per cent drop for the index from recent peaks.

European firms have now lost nearly US$3 trillion in value since the rapid spread of the coronavirus sparked a worldwide selloff in February, as the outbreak seemed likely to disrupt economic activity across the globe.

"The shock to oil compounds what the coronavirus is doing to the global economy," said Andrea Cicione, head of strategy at TS Lombard in London.

"In the short term, whoever feels the pain from the shock to prices - they act immediately, they cut their spending, cut their investment, and the winners, they react a lot more gradually."

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Trading on Wall Street was halted after steep losses in early trade.

Norwegian stocks exposed to crude oil plummeted 9.4 per cent, their worst day in more than 30 years, while London's commodity-heavy FTSE 100 shed 7.7 per cent.

Oil majors BP and Royal Dutch Shell both lost almost 20 per cent, while Norway's Panoro Energy plummeted 39 per cent.

Tullow Oil wallowed at the bottom of the Stoxx 600 after a nearly 32 per cent loss.

All European sub-sectors were deep in the red, with growth-sensitive miners, automakers and banks falling around 10 per cent.

Bank stocks were pressured by yields on 10-year US Treasuries, the benchmark for global borrowing costs, dropping to a record low, and German 10-year bond yields fell further into negative territory.

Only four stocks were trading positive on the Stoxx 600. Dutch midstream oil and chemical firm Vopak rose 3.2 per cent.

Italy's blue-chip index shed 11.2 per cent, underperforming its regional peers for the day after the government ordered a virtual lockdown across much of its wealthy north in a drastic attempt to try to contain Europe's worst outbreak of the virus.

Budget airline Ryanair ended 1.9 per cent lower after it said it would cut further flights to and from Italy because of to the outbreak.

Markets now expect the European Central Bank to trim interest rates at its policy meeting on Thursday, following rate cuts by central banks in the United States, Canada and Australia last week to soften the blow of the outbreak.

REUTERS