(Reuters / RB) Four minutes after the start of stock trading, a fifteen-minute break was ordered in New York. The trigger was the biggest price fall since the financial crisis. In the turbulence of 2008/2009, new rules were issued, which have now been applied again for the first time since December 2008.
The leading indices Dow Jones (Dow Jones 29’872.47 -0.58%) and S&P 500 (S&P 500 3’632.00 +0.13%) dropped 7%, trading had to pause for fifteen minutes. Should the prices fall 13% later in the day, trading activities would be interrupted again for a quarter of an hour. With a diver around 20% the trading day would end prematurely.
Fear of the economic consequences of the coronavirus epidemic and a wave of bankruptcies in the US oil industry are responsible for the downward trend. After the failed OPEC negotiations with Russia to tighten the production brake, Saudi Arabia wants to open the oil tap. This has the US variety WTI (WTI 45.80 +1.96%) a price drop of up to 33.8%. That is the biggest minus in its almost forty-year history. This depresses the profits of the oil companies and stifles their investment activity, warned economist Simon MacAdam of the research house Capital Economics. “At the same time, there is no increase in consumer spending in sight because of the coronavirus crisis.”
Oil values downgraded significantly
Against this background, the shares of the US oil company Chevron broke (CVX 92.14 -3.64%) by a good 15%. Shale oil producers like Marathon and Devon were hit even harder, with their papers falling by up to 38%. These companies are mostly highly indebted and have quite high production costs because of the complex fracking process with which the crude oil is removed from rock, said Neil Wilson, chief analyst of the online broker Markets.com.
Financial stocks also came under selling pressure because investors are firmly expecting a further US interest rate cut by a full percentage point in the coming week. The central bank, the Fed, surprisingly reduced the key rate by half a percentage point just last week and apart from the regular series of meetings. This would put the profit margins in the traditional lending business under additional pressure. Citigroup shares (C 57.06 0%), JPMorgan & Co. fell more than 10% each at the opening.
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