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Equities
North American markets plunged at the opening bell Monday as investors fled equities amid worries over the economic impact of the spread of the novel coronavirus and tanking crude prices after the collapse of OPEC’s production agreement.
At 9:50 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 1,595.15 points, or 9.86 per cent, at 14,579.87.
Energy stocks led the declines by a wide margin, falling 29 per cent as crude prices collapsed. Financial stocks were down more than 8 per cent. Industrial stocks lost 6.8 per cent.
On Wall Street, the Dow Jones Industrial Average was down 1,791.85 points, or 6.93 per cent, at 24,072.93 at 9:54 a.m. ET and the S&P 500 was down 195.93 points, or 6.59 per cent, at 2,776.44. The Nasdaq Composite was down 530.62 points, or 6.19 per cent, at 8,045.00.
Markets on both sides of the border were temporarily halted when steep losses triggered automatic circuit breakers. Trading resumed shortly before 10 a.m. ET.
Crude prices, already struggling with the impact of the spread of the virus on demand, dropped more than 30 per cent at one point after a production deal between OPEC and its allies fell apart, leading Saudi Arabia launch into a all-out price war with Russia.
Declines on Wall Street and Bay Street follow similar routs around the world, with Europe’s major markets mired deep in the red from the start of trading.
Sinking crude prices add to recent market volatility as investors struggle to gauge the global impact of the spread of the coronavirus. Over the weekend, Italy locked down 16 million people in the north as cases of the virus surge.
“Where do you begin on a day like today?” OANDA senior market analyst Craig Erlam said. “It’s absolute carnage out there and it’s going to take a huge response from policy makers to restore order.”
“As if policy makers and investors weren’t struggling enough to get to grips with the rapid and unpredictable spread of the coronavirus, they’ve now been handed the additional problem of collapsing oil prices.”
The rush from equities, meanwhile, sent investors scrambling for safe-haven holdings, with Japan’s yen jumping and the yield on the 10-year U.S. Treasury note falling below 0.5 per cent for the first time.
In this country, Canada Mortgage and Housing Corp. said the seasonally adjusted annual rate of housing starts fell to 210,069 in February, down nearly 2 per cent from January’s rate of 214,031 units.
On Wall Street, Twitter Inc said it has struck an agreement with Elliott Management and private equity firm Silver Lake, giving both board seats. Under the deal, Silver Lake will invest US$1-billion, which the company said will use to fund a US$2-billion repurchase program. The announcement comes a month after reports that activist investors were pushing for the removal of chief executive Jack Dorsey.
Overseas, markets were deep in the red. The pan-European STOXX 600 fell into bear market territory and was down 6.77 per cent by afternoon. Britain’s FTSE 100 dropped more than 6.91 per cent. Germany’s DAX was down 7.07 per cent. France’s CAC 40 sank 7.34 per cent.
In Asia, Japan’s Nikkei closed down 5.07 per cent. Hong Kong’s Hang Seng ended down 4.23 per cent. The Shanghai Composite Index finished down 3.01 per cent.
Commodities
Crude prices suffered their biggest one-day rout since the Gulf War as Saudi Arabia launched into a price war after a deal to curb production among OPEC and its allies collapsed.
The day range on Brent is US$31.02 to US$38.34. The range on West Texas Intermediate is US$27.34 to US$33.59.
The low end of both ranges represents the weakest for each benchmark since February 2016.
The drop comes as Saudi Arabia fires the first shot in a price war after failing to get Russia’s co-operation to deepen and extend production caps to offset the impact of the spread of the coronavirus on global demand.
“The rationale [for Saudi Arabia] must surely be that in sending oil prices to their lowest levels since 2016, and their biggest one day fall since the days of the 1991 Gulf War, the action might prompt the Russians back to the table to agree a production cut,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
"This seems a high stakes gamble given how high the Saudi break-even price is, when you price in all of their welfare spending. The one upside for Saudi Arabia is that this will be even more painful for Iran, already suffering as a result of a coronavirus outbreak."
Meanwhile, the International Energy Agency said early Monday that global oil demand is set to contract in 2020 for the first time in more than a decade.
The Paris-based group said it expects oil demand to be 99.9 million barrels per day (bpd) in 2020, lowering its annual forecast by nearly 1 million bpd and signalling a contraction of 90,000 bpd, the first time demand will have fallen since 2009.
France’s energy minister also said Saudi Arabia, which holds the presidency of the G20 economic powers this year, must coordinate on oil prices to avoid economic disruption for other countries, according to Reuters.
“I want Saudi Arabia, as president of the G20 richest countries, to enter into coordination on the oil price question so that it doesn’t shake up the markets,” French Finance Minister Bruno Le Maire told France Inter radio.
“In the long term, if oil prices fall too much that worries markets and has repercussions on financing for our companies and economies,” he added.
In other commodities, gold prices gained after briefly spiking above the US$1,700 mark.
Spot gold rose 0.4 per cent to US$1,680.07 an ounce, having touched its highest since December 2012 at US$1,702.56. U.S. gold futures rose 0.5 per cent to US$1,680.20.
Currencies
The Canadian dollar sank as currencies linked to crude prices took a beating.
The day range on the loonie so far is 72.69 US cents to 74.27 US cents.
“The collapse in crude prices pushed the Canadian dollar to its weakest point since May 2017, before posting a slight recovery,” Shaun Osborne, chief currency strategist for Scotiabank said.
“Plummeting US yields to new all-time lows are dragging their Canadian counterparts lower — thus providing little support for the CAD on the rates fron t— with markets also placing aggressive bets that the BoC will follow an anticipated 75-basis-point Fed cut next week (possibly sooner, inter-meeting) with a 75 basis-point [cut] of its own at its April 15 meeting.”
In other commodity-sensitive currencies, the Australian and New Zealand dollars both fell about 2 per cent. The Norwegian krone sank 3 per cent to hit a record low.
“This fall in the oil price just comes at the worst time, or at least that’s how financial markets are reading it,” Paul Mackel, head of emerging markets FX research at HSBC in Hong Kong, told Reuters.
“Volatility across assets is overshadowing any type of silver lining from a fall in the oil price,” he said.
Elsewhere, the U.S. dollar fell about 3 per cent against Japan’s yen as U.S. Treasury yields sank.
The U.S. dollar index fell to its lowest level since September 2018 before recovering somewhat to trade at 95.181, down 0.3 per cent. The Swiss franc, also viewed as a safe-haven currency, added nearly 1 per cent against the U.S. dollar.
More company news
Ensign Energy Services Inc. says it lost $71.6-million in its latest quarter compared with a profit of $154.8-million in the same quarter a year earlier. The Calgary-based oilfield services company says the loss amounted to 44 cents per diluted share for the quarter ended Dec. 31 compared with a profit of 98 cents per share in the last three months of 2018. Revenue grew to $375.8-million, up from $346.1-million in the fourth quarter of 2018.
Wells Fargo & Co said on Monday Elizabeth Duke has resigned as the chair of its board, effective Mar 8. James Quigley has also resigned as a member of the board, the bank said in a statement.
The Globe’s Andrew Willis reports that a battle for dominance in Canada’s East Coast fisheries is playing out, as rival food companies weigh $450-million-plus bids for Clearwater Seafoods Inc., the country’s largest owner of licences to harvest lobster and shellfish. Clearwater’s board of directors put the Halifax-based company up for sale last week by launching a strategic review after Clearwater “recently received several expressions of interest” from potential buyers, according to a press release. Clearwater’s board said options under consideration include sale of all or part of the company, or a merger.
Stelco Holdings Inc. said Paul Scherzer has been appointed chief financial officer, effective March 16. He takes over from Roy Collins, Stelco’s vice-president, internal audit, who had been filling the role on an interim basis.
Cineworld’s biggest shareholder sold part of its stake to refinance existing loans, the company said on Monday, after the cinema operator’s stock tumbled on concerns about the potential impact of the coronavirus on box office attendance. Cineworld said Global City Theatres - a proxy for CEO Moshe Greidinger and his brother deputy CEO Israel - sold the 7.9-per-cent stake sale for US$152-million for GCT’s own reasons, unrelated to the company’s business.
Economic news
Canada Mortgage and Housing Corp said the standalone monthly SAAR of housing starts for all areas in Canada was 210,069 units in February, a decrease of 1.9 per cent January.
Statistics Canada said the total value of building permits issued in January rose 4 per cent to $9.2-billion. Increases were reported in six provinces, led by B.C.
With Reuters and The Canadian Press
Terry Weber