(Reuters) – European stocks ended Monday at an eight-month low, sinking into the bear market after a collapse in oil prices, adding to fears that a global recession may follow the coronavirus outbreak.
The oil and gas sub-index .SXEP suffered the largest losses, plunging nearly 17% after oil prices lost a third of their value due to concerns over a price war between the ‘Saudi Arabia and Russia. [O/R]
The pan-European STOXX 600 index closed down 7.4%, marking its worst day since the 2008-2009 financial crisis. The decline called for a switch to a more negative “bearish” environment, implying a drop of more than 20% in the index compared to recent peaks.
European companies have now lost nearly $ 3 trillion in value since the rapid spread of the coronavirus triggered a worldwide sale in February, as the epidemic seemed likely to disrupt economic activity around the world.
“The oil shock is worsening what the coronavirus is doing to the global economy,” said Andrea Cicione, chief strategy officer at TS Lombard in London.
“In the short term, whoever feels the pain of the price shock – they act immediately, they reduce their expenses, reduce their investments, and the winners, they react much more gradually.”
Trading on Wall Street was halted after heavy losses at the start of trading. [.N]
Norwegian .OSEAX oil-exposed stocks fell 9.4%, their worst day in over 30 years, while the London-based FTSE 100 .FTSE fell 7.7%.
BP oil majors (BP.L) and Royal Dutch Shell (RDSa.L) both lost almost 20%, while the Norwegian company Panoro Energy (PENO.OL) fell by 39%.
Tullow oil (TLW.L) sprawled at the bottom of the STOXX 600 after a loss of almost 32%.
All European subsectors were plunged into red, miners sensitive to .SXPP growth, .SXAP car manufacturers and .SX7P banks falling by around 10%.
Bank stocks were boosted by 10-year US Treasury bond yields US10YT = RR, the benchmark for global borrowing costs, falling to an all-time low, and German 10-year bond yields DE10YT = RR have yet dropped into negative territory. [US/] [GVD/EUR]
Only four stocks traded positively on the STOXX 600. The Dutch oil and chemical company Vopak (VOPA.AS) increased by 3.2%.
The Italian benchmark index .FTMIB lost 11.2%, underperforming its regional counterparts the day after the government’s decision to virtually lock much of its rich north in a drastic attempt to try to contain the worst epidemic virus in Europe.
Low-cost airline Ryanair (RYA.I) ended down 1.9% after announcing it would cut flights to and from Italy due to the epidemic.
Markets now expect European Central Bank to cut interest rates at policy meeting on Thursday, following central bank rate cuts in the United States, Canada and Australia last week to soften the blow of the epidemic.
Report by Ambar Warrick and Sruthi Shankar in Bengaluru, edited by Timothy Heritage