NEW YORK, USA – Global stocks sank on Wednesday, April 15, as COVID-19 infects the global economic outlook, while oil prices slumped as output cuts led by the Organization of the Petroleum Exporting Countries (OPEC) were deemed insufficient to soak up a supply glut.
Sentiment turned sour on Wednesday on grim warnings over the economic impact of the coronavirus, which emerged in China and has so far killed more than 131,000 people and infected more than two million globally.
The International Energy Agency said 2020 was likely to be “the worst year in the history” of the sector.
The IEA put the drop in demand at 29 million barrels per day in April, far more than a daily cut of 10 million agreed over the weekend by the OPEC oil cartel and its allies.
The benchmark West Texas Intermediate oil contract finished at $19.87 per barrel, its lowest closing price since February 2002.
Investors are “keeping a nervous eye on oil markets, as the price of that commodity renews its drive lower,” said market analyst Chris Beauchamp at online trading firm IG.
“There is a growing realization, as many suspected last week, that short of dramatic cuts in the multiple tens of millions of barrels per day, nothing would be enough” to stabilize the market, he said.
A bigger than expected rise in US oil stocks didn’t help matters.
The drop in oil prices reverberated into stock markets as shares in energy firms took a hit.
Top stock markets across Europe finished more than 3% lower.
Wall Street also had a bad day, with the Dow shedding 1.9% following a trove of terrible economic data.
Economic reports released on Wednesday showed US retail sales plunged in March while industrial production in the same month suffered its steepest drop since 1946.
Other reports pointed to weak homebuilder sentiment and manufacturing conditions, while a Federal Reserve report said US economic activity “contracted sharply.”
The losses were a rupture in the market’s rise over the last 3 weeks as improving coronavirus data from New York and other hotspots and unprecedented government stimulus have boosted sentiment.
“The economic numbers are coming in even worse than most economists expected,” said economist Joel Naroff in a note that questioned the stock market’s recent strength.
“Investors have been exuberant the last 3 weeks,” he said, and yet, “First quarter earnings are just starting to come in and for most firms they are gruesome.” – Rappler.com