A day full of ups and downs! As the crude oil price war begins, the whole world is “not good”!
On March 9, the global market felt the sudden “black swan” event in 2020—— The power of price wars in the oil market. First, crude oil prices experienced an epic plunge during the Asian trading hours, with the drop even exceeding 30%. Later, market panic spread, causing the Asia-Pacific stock market to plummet across the board, further affecting European stocks to collectively enter a bear market, US stocks triggering circuit breaker, and the United States 10 The 1-year Treasury bond yield fell below 0.5% for the first time…
What impact will the oil price war have on the financial market?
1. International oil prices plummeted
International oil prices plummeted on the 9th. As of the close of the day, the price of light crude oil futures for April delivery on the New York Mercantile Exchange fell by US$10.15 to close at US$31.13 per barrel, a decrease of 24.59%. The price of London Brent crude oil futures for May delivery fell by US$10.91 to close at US$34.36 per barrel, a decrease of 24.10%.
2. Domestic energy and chemical futures collectively plummeted
On March 9, the domestic commodity futures market closed sharply for energy and chemical products. Fuel, asphalt, crude oil, PTA, methanol, EG, palm, Zhengzhou oil, PP, EB, plastics, soybean oil, soybean oil, etc. fell to the limit, NR, rubber fell sharply by more than 6%, Shanghai silver fell by more than 4%, Shanghai nickel, urea After falling by more than 3%, only Shanghai Lead and Apple closed slightly higher.
3. The Shanghai and Shenzhen stock markets plummeted, with 3234 stocks falling
On March 9, the Shanghai and Shenzhen indexes closed down across the board, with the Shanghai index falling more than 3% and 3,234 stocks in the two cities falling. Computer, defense and military industry, and electronics sectors led the decline.
4. Asia-Pacific stock markets plummeted across the board
In the morning of March 9, Asia-Pacific stock markets opened sharply lower. The Nikkei 225 Index fell below the 20,000-point mark, and Australia’s S&P/ASX200 Index suffered its largest single-day decline in 2008.
As of the close, the South Korea Composite Index fell 4.19% to 1954.78 points, refreshing the low since the end of August 2019; the Nikkei 225 Index closed down 5.07% to 19698.76 points, refreshing the 2019 low. The lowest level since early January this year; Australia’s ASX200 index fell 7.9% to 5760.6 points; New Zealand’s NZX50 index fell 2.94% to 11091.81 points.
5. The S&P 500 triggered the second circuit breaker in the history of the US stock market
On the evening of March 9th, Beijing time, U.S. stocks opened sharply overnight. The S&P 500 opened down 7% and triggered a circuit breaker mechanism, suspending trading for 15 minutes. The Dow Jones Industrial Average fell 7.29%, setting a new low since the beginning of 2019.
Data show that in the past thirty years, the US stock market has only triggered a circuit breaker once before: on October 27, 1997, the Dow Jones Industrial Index plummeted 7.18%, closing at 7161.15 points, the biggest drop since 1915.
As of the close of the day, the Dow Jones Industrial Average fell 2013.76 points to close at 23851.02 points, a decrease of 7.79%. The S&P 500 stock index fell 225.81 points to close at 2746.56 points, a decrease of 7.60%. The Nasdaq Composite Index fell 624.94 points to close at 7950.68 points, a decrease of 7.29%.
6. European stock markets collectively entered a bear market
European stocks fell significantly on the 9th. The German DAX index and the French CAC40 index once fell by more than 8%, and the British FTSE 100 index once fell to 7.8%, collectively entering the bear market stage. As of the close of the day, the British FTSE 100 index fell 7.6% to 5965.7 points; the French CAC 40 index fell 8.3% to 4707.9 points. Germany’s DAX index fell 7.9% to 10625.0 points.
7. The U.S. ten-year Treasury bond yield fell below 0.5% for the first time
In the foreign exchange market, the U.S. dollar index continued its decline, falling nearly 0.6% at one point; the euro rose nearly 1% against the U.S. dollar at the beginning of the session, approaching the 1.14 integer mark; the U.S. dollar fell the most against the Japanese yen at the beginning of the session It exceeded 1.7% and set a new low since November 2016 to 103.53.
In the bond market, the U.S. ten-year Treasury bond yield fell below 0.5% for the first time, and the U.S. ten-year Treasury bond yield fell below 1% for the first time.
8. The Russian ruble exchange rate fell sharply
On the 9th, affected by the plummeting price of Brent crude oil futures, the ruble exchange rate suffered a heavy blow. As of 15:00 Moscow time, the exchange rate of the US dollar against the ruble reached 1:75.04, which was a 9.5% depreciation of the ruble against the US dollar compared with the previous trading day. The exchange rate of the euro against the ruble also reached 1:86.65, which was a 10% depreciation of the ruble against the euro from the previous trading day.
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Isthe11-yearbullmarketinU.S.stockscomingtoanend?
AstheU.S.stockmarketsufferedabloodbathonMonday,thethreemajorstockindexesallfellbymorethan7%,andtheDowJonesIndustrialAverageplummetedbymorethan2,000points.Themarketcannothelpbutthinkofanoldquestion.AstheU.S.stockmarketcelebratesits11thbirthday,thelongestbullmarketinhistory,isthebullmarketnearingitsend?
ItisunderstoodthatthebullmarketintheU.S.stockmarket,whichhashitrecordhighs,beganinearlyMarch2009andwasbasedontheFederalReserve’sloosemonetarypolicy,strongcorporateearnings,andthemoney-makingeffectofinvestors.above.Amongthem,technologystockshavebecometheleadersofthebullmarket.ThecurrenthistoricalhighoftheU.S.stockmarketwasreachedinthemiddleoflastmonth.TheNasdaqCompositeIndexhasrisenby677%fromthelowin2009,significantlyoutperformingthe357%increaseoftheDowJonesIndustrialAverage.
TherehasbeencontroversyinrecentyearsastowhetherthebullmarketintheU.S.stockmarketwillend,andnowitisfacinggreaterriskimpacts.TheCOVID-19epidemichasrapidlyescalatedoverseasandhashadanegativeimpactontheglobaleconomy.EuropeanandAmericanstockmarketshavefluctuatedsharplyinthepasttwoweeks,andinternationaloilpriceshavecontinuedtofall.IntheweekfromFebruary24to28,theDowJonesIndustrialAveragefell12.36%,itslargestweeklydeclinesinceOctober2008.InordertoslowdowntheeconomicimpactoftheCOVID-19epidemic,theFederalReservemadeanemergencyinterestratecutby50basispointslastTuesday.Centralbanksinmanycountriesfollowedsuitbyloweringinterestrates,butthisdidnotplayaroleincalmingmarketsentiment.Globalstockmarketsarestillstuckina”miserable” mode, with the Nasdaq Composite Index falling more than 4% during intraday trading last Friday.
Recently, international oil prices, which have already plummeted due to the epidemic weakening demand, have been hit hard because OPEC and Russia failed to reach an agreement to reduce production. Market pessimism is extremely strong, and most institutions believe that demand for crude oil will drop significantly, and the decline may even exceed that of the 2008 financial crisis. Goldman Sachs predicts that oil prices may plummet to US$30/barrel in the second and third quarters of this year, and may touch the critical mark of US$20/barrel.
Crude oil, as the king of commodities, has undoubtedly had a huge impact on the market due to its huge price shock. But whether it is the epidemic or oil prices, their impact is externalized. Whether U.S. stocks have the foundation to continue rising depends on fundamentals. In 2019, U.S. Treasury bond yields inverted several times, which already warned of an economic recession. There is currently considerable downward pressure on the U.S. economy, and U.S. stock earnings growth showed signs of slowing down in the first quarter. What cannot be ignored is that the current valuation of U.S. stocks is on the high side. Statistics show that as of last Friday, the average price-to-earnings ratios of the Dow Jones Industrial Average and the S&P 500 were 22.16 times and 23.95 times respectively, which were approximately 45% and 50% higher than the average price-to-earnings ratios in 2008.
In this regard, Zhang Yidong, global chief strategist of Industrial Securities, recently said that even without the impact of the epidemic, the “buffalo” of the U.S. stock market this year will be difficult to sustain. The U.S.’s constant “release of water” has created a false boom in consumption, and the consumer confidence index has reached a historically high level, which is a bit of a boom-and-bust situation. Based on the new round of global “water release” led by the Federal Reserve, the probability of a major bear market of more than 30% in the US stock market in 2020 is relatively small, while the probability of a small bear market of about 20% or an oscillatory market of about 10% is greater.
However, some overseas analysts believe that investors do not need to panic excessively, and long-term investors should take a long-term view. Historical data shows that “there are opportunities in crises.” A sharp drop in a sudden crisis is often a good opportunity to buy at low prices. For example, during market adjustments such as the 1987 stock market crash and the 2008 financial crisis, buying stocks brought huge profits to investors. Stock god Buffett recently said that he has no special expertise on the new coronavirus, but investors who look at the next 10 to 20 years and focus on the company’s profitability will find that investing in stocks is “a good investment.” . The epidemic has had a big short-term impact on airline stocks, but Buffett’s Berkshire Hathaway has recently been buying shares of Delta Air Lines. </p
