FTSE collapse: 'Markets have passed from panic mode into pure hysteria'
An all-out oil war between Saudi Arabia and Russia has led to stock markets and oil prices tanking around the world.
As investors already deal with the fallout from coronavirus, the Middle Eastern oil giant announced plans to flood markets with extra supply – wiping billions off companies.
Motorists will be hoping the decision could see petrol forecourts reduce prices by up to 10p a litre.
However, supermarkets are already stretched with coronavirus preparations and it remains unclear how quickly the cuts will be passed on at forecourts.
The falls started in Asia overnight, spreading to Europe and beyond and then to the US, where the New York Stock Exchange was suspended for 15 minutes following a 7% crash immediately after opening.
In London, companies on the FTSE 100 lost around £140 billion – adding to heavy losses over coronavirus fears – and means the index has fallen by almost 20% in just over two weeks.
The Saudis are trying to punish Russia after the two sides failed to agree to supply targets. Leaders will also be hoping it pushes US shale gas companies under, as their operations become economically unviable.
The move sent the price of a barrel of Brent Crude down 30% initially, before settling at around 20% down on a day earlier, to just 36.08 dollars a barrel.
The impact was felt across the world, with the FTSE 100 losing 8%. It spent most of Monday swinging between falls of 8% and 6%.
Smaller indexes – the FTSE 250 and FTSE 350 – were also both down by 6.5% and 7.3% respectively, as US markets opened, with oil majors taking the brunt.
BP, Shell and British Gas owner Centrica were all some of the biggest fallers, with shares dropping between 15% and 20% through the day.
Neil Wilson, chief market analyst at Markets.com, said: “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.
Ayush Ansal, chief investment officer at Crimson Black Capital, said: “The FTSE’s collapse on Monday morning shows the markets have passed from panic mode into pure hysteria.
“Markets were at breaking point before Saudia Arabia’s decision to launch an oil price war, but this latest development has taken them beyond that.
“Any positive news around the coronavirus is being ignored outright, while negative developments are being catastrophised.
“Markets will always be irrational but Monday morning saw the end of reason.”
Big falls in FTSE-100 being driven by Royal Dutch Shell (-21%) and BP (-18%). RDS is largest company in FTSE 100 and BP 3rd. Slump in oil price > slump in oil companies profits / share price > significant falls in wider equity indices (which incl. oil companies). https://t.co/ZNkBz4Qi1M— Richard Ramsey (@Ramseconomics) March 9, 2020
But it was smaller companies who were hit even harder – Premier Oil and Tullow Oil lost 55% and 37% of their value respectively.
Around 15 of the top 100 companies lost more than 10% of their value within the opening 30 minutes of trading, and stayed there through most of the day.