As we open the newspapers or turn on the TV, and take in the news, in the last few weeks, it has been majorly focused on the coronavirus and its implications on global supply chains. Today, we saw more uncertainty in the markets, as the top headlines for the day (10 March 2020) looked like this:
U.S. stocks plunge most since the financial crisis (1)
Oil Plunges most since 1991 after producers embark on price war (2)
On Monday, the 9th of March, the S&P 500 Index saw a drop of more than 7%, triggering a 15-minute trading halt.
Graph Source: Tradingview.com
The declines came as oil prices collapsed nearly 50% for the year, with nearly 30% drop this week, after OPEC +talks collapsed. Saudi Arabia announced reduced prices, in an apparent price war with Russia.
As per CNBC, it is reported that an oil price war will have massive geopolitical consequences, pummeling markets that are already shaken by the coronavirus: Covid-19. (3) The steep drop in oil prices and the increased spread of the coronavirus have increased fears of a global recession.
As per current guidelines, a 15-minute pause in trading is mandated on all U.S. stock exchanges if the S&P 500 index falls more than 7% before 3:25 p.m. New York time.
Another circuit breaker kicks in if the index falls 13% before 3:25 p.m, and trading is suspended for the session if the drop reaches 20%.
Trading also halts on both the Dow and the Nasdaq when a circuit-breaker is triggered on the S&P 500.
The U.S. Securities and Exchange Commission mandated the creation of market-wide circuit-breakers to prevent a repeat of the Oct. 19, 1987 market crash, in which the Dow plunged 22.6%. (4)
Gold has been quite reliable during these turbulent times and holding its high price levels above 1650 USD per ounce (15 600 SEK per ounce with USD/SEK exchange rate=9.46 on 09:00 UTC+1).
Gold prices hit a more than seven-year high on Monday (March 9) as a stock market rout on concerns over the widening coronavirus outbreak and its economic impact drove investors to safe-haven assets. (5)
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Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings
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