Analysts warn of 'utter carnage' as oil crashes and global stocks tumble
- The sell-off across stocks, bonds and oil prices on Monday morning has been referred to as "carnage" by a number of analysts.
- Oil prices slumped more than 25% after OPEC and its allies failed to agree to cut output.
- "There have been plenty of bad days since the coronavirus infected investors. Yet Monday's session felt like a different kettle of fish entirely," said one analyst.
- For more stories go to www.BusinessInsider.co.za.
Analysts warned of a global recession on Monday as a coronavirus-fuelled sell-off dragged stocks, bond yields and oil prices lower.
Oil futures plummeted 26% on Monday, following their sharpest decline since the Gulf War in 1991 after OPEC+ failed to agree to cut output last week. Global stocks followed the sentiment tumbling across the board, with European stocks down more than 6% and Dow futures pointing to an opening drop of 5%.
Here's what analysts are saying about the sell-off:
Nigel Green, chief executive and founder of deVere Group:
"A global recession is now almost inevitable this year," Green said.
"Oil's sharpest one-day drop since the 1991 Gulf war has further fuelled the sell-off in global stock markets that started a couple of weeks ago on fears that coronavirus is going to severely damage economic growth. With the combination of the implications of the oil stand-off and the outbreak, I now believe that it's almost inevitable that there will be a global recession this year."
Neil Wilson, chief market analyst, Markets.com:
"This will be remembered as Black Monday. If you thought it couldn't get any worse than the last fortnight, think again. The blood really is running in the streets, it's utter carnage out there."
"Equities have been caught in the blast from the oil bomb. There's a risk of losses in oil positions needing to be covered by selling down elsewhere - we're in a vicious circle. Equity markets are hideous today and these kind of moves are to be afraid of as they can lead to aggressive tightening in credit that can spiral into real financial distress. We don't know even know what kind of impact the coronavirus will have on the economy yet bond and equity markets are screaming recession. This is going to take a massive fiscal effort - slicing rates by 50bps ain't going to cut it," Wilson said.
Connor Campbell, financial analyst, Spreadex:
"There have been plenty of bad days since the coronavirus infected investors. Yet Monday's session felt like a different kettle of fish entirely. Once again raising the specter of the financial crisis, the European markets suffered single-day losses not seen since the aftermath of the Lehman Brothers collapse. Essentially, it's the equivalent of hoarding toilet roll and tinned beans - people are scared."
"Rather than giving investors a chance to cool down, a weekend full of alarming headlines only stoked the fires of panic. Italy is potentially planning to place 16 million people under quarantine; France has banned gatherings that exceed 1000 people; the UK saw its third death from the illness; and the number of cases in the US has hit 500," Campbell said.
Craig Erlam, senior market analyst, OANDA Europe:
"Where do you begin on a day like today? 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. On the face of it, falling oil prices during times of economic distress doesn't sound like a bad thing for consumers but central bankers, oil producers and commodity countries may not exactly agree," Erlam said.
Adam Vettese, analyst at multi-asset investment platform, eToro:
"This is an oil-price collapse on a scale not seen since the Gulf War. Unless there is a fresh agreement between the Saudis, who can manage with oil at this level, and Russia, which can't, we can expect the price to remain under pressure."
"The knock-on effect on the UK's oil majors has been brutal this morning, with investors in full panic mode and it is hard to see sentiment turning in the near term."
Russ Mould, investment director at AJ Bell:
"Many investors have been waiting for capitulation in the markets before thinking about buying on the dips. History suggests capitulation is quickly followed by despair and that is potentially the best time to buy ahead of a market recovery. Monday's market destruction might suggest we are moving from the panic to the capitulation stage of the investing-linked emotions cycle."
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