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Billions of dollars were wiped off global stock markets on Monday, as investors panicked about an oil price war and the continued spread of coronavirus.
The FTSE 100 (FTSE) closed down 7.2% at 5,994.04 in London — a level not seen since 2016. The crash represents the biggest one-day fall for the FTSE since the financial crash in 2008 and the fourth biggest percentage drop on record.
The sell-off was immediate. More than £122bn ($159bn) had been wiped off the value of London’s 100 most valuable listed companies by around 9am. All but one company — Polymetal International (POLY.L) — ended the day with losses.
The rout was global — the Stoxx 600 (^STOXX), which tracks the 600 biggest listed companies across Europe, closed down 7.2%. Japan’s Nikkei (^N225) had closed down 5% overnight. And the S&P 500 (^GSPC) dropped 7% as markets opened in the US. The scale of the Wall Street sell-off triggered a 15-minute trading halt, a measure introduced to calm market panic in the wake of the global financial crisis.
“This will be remembered as Black Monday,” said Neil Wilson, chief market analyst at Markets.com. “If you thought it couldn’t get any worse than the last fortnight, think again... it’s utter carnage out there.”
The sell-off came as investors reacted to ongoing fears about the spread of coronavirus and falling oil prices. Oil dropped 30% as Saudi Arabia launched a price war with Russia overnight.
Societe Generale analyst Kit Juckes said the oil shock “dwarfed” coronavirus fears, with the decision to slash prices an “unwelcome brake” on economic growth for oil exporters like the US, Russia and Brazil.
However, investors continued to worry about the impact of coronavirus and containment measures such as travel bans. Much of northern Italy, including financial capital Milan, was put into full-scale lockdown over the weekend. Italy’s FTSE MIB (FTSEMIB.MIB) dropped 11.1%.
“Markets have gone into panic mode, pure and simple,” said Kyle Rodda of trading firm IG.
“The plunge in the oil price has raised major credit risks in financial markets, which are already reeling from the expected slowdown in global growth because of the coronavirus,” he told the Guardian.