Global shares plunge in worst day since financial crisis

Shares around the world had their worst day since the financial crisis with the dramatic falls leading to the day being dubbed "Black Monday".

The main financial indexes in the US closed down by more than 7%, while London's index of top shares ended the day nearly 8% lower.

Similar drops took place across Europe and Asia as a row between Russia and Saudi Arabia saw oil prices plunge.

Shares were already reeling from fears of the impact of coronavirus.

Analysts described the market reaction as "utter carnage".

In the US, the major stock indexes fell so sharply at the start of trading, that the buying and selling of shares was halted for 15 minutes, as a so-called "circuit breaker" aimed at curbing panicky selling came into effect.

The Dow Jones Industrial Average sank by 7.8% or more than 2,000 points - the biggest points-drop in history and the largest decline in percentage terms since the financial crisis. The S&P 500 fell 7.6%, while the Nasdaq dropped about 7.3%.

The declines in London wiped some £125bn off the value of major UK firms.

The UK and US falls were mirrored by similar declines in Europe, with the main stock market indexes in France, Germany and Spain all closing over 7% lower.

"There is panic setting into the market right now," said Andrew Lo, professor of finance at MIT's Sloan School of Management. "Things are going to get worse before they get better."

Oil output disputes

The dramatic drops were triggered by a row between Saudi Arabia and Russia over oil output.

Saudi Arabia said it would slash prices and pump more oil, sparking fears of a price war. This came after Russia rejected a proposal by oil exporters to cut supply to cope with lower demand due to the coronavirus outbreak.

Analysts said Saudi Arabia was "flexing its muscles" to protect its position in the oil market.

On Monday, the price of international oil benchmark Brent fell almost a third in its biggest drop since the Gulf War in 1991 before recovering slightly to trade 20% lower.

The price of oil had already fallen sharply this year as the coronavirus began to spread internationally, with demand for fuel expected to decline.

'Surprising' decision

Those conditions make Saudi Arabia's decision to increase output "extremely surprising", said Stewart Glickman, an energy equity analyst at CFRA Research.

"This is not the first time that we've had a shock to the oil market, but it is the first time that I can recall that you've had a supply shock and a demand shock at the same time," he said.

"The craziness that you're seeing in the oil prices today, and companies related to oil and gas, is a reflection of this being pretty unprecedented."

In the US and UK, oil firms led the market declines, with shares in Shell, BP and Chevron down about 15% or more. Premier Oil saw its shares more than halve in value.

In Frankfurt and Paris, banks were hit hardest, while the Russian rouble tumbled about 8% to its weakest level since 2016.

In Brazil, steep falls in morning trade also triggered a temporary pause with shares ending the day down 12%.

Earlier, Asian markets had also fallen sharply, with Japan's Nikkei 225 index down 5% while Australia's ASX 200 slumped 7.3% - its biggest daily drop since 2008.

In China, the benchmark Shanghai Composite fell 3%, while in Hong Kong, the Hang Seng index sank 4.2%.

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Source: BBC