|Posted by Conspiracy Cafe on March 9, 2020 at 11:45 PM|
Black Monday is the name for the global stock market crash of 9 March 2020. Markets opened several percent lower, having fallen greatly during the preceding two weeks. Notable causes included a combination of the COVID-19 outbreak and the plummeting price of oil. The FTSE 100 Index opened 560 points (8.6%) lower to 5920. Indices in Asia, continental Europe and the United States also fell by several percent on the same day, with the worst affected, Italy's FTSE MIB, opening 11% lower.
Main article: Socio-economic impact of the 2019–20 coronavirus outbreak
The stock market had been extremely volatile ever since Monday, 24 February 2020, when the Dow Jones Industrial Average and FTSE 100 dropped more than 3% as the COVID-19 outbreak spread worsened substantially outside China over the weekend. On 28 February 2020, stock markets worldwide reported their largest single-week declines since the 2008 financial crisis. The Federal Open Market Committee lowered the federal funds rate target by 50 basis points with Federal Reserve Chair Powell stating that the central bank "saw a risk to the outlook for the economy and chose to act" and that "the magnitude and persistence of the overall effect [of the outbreak] on the U.S. economy remain highly uncertain". At the close of trading on 3 March, European and Asia-Pacific stock markets had mostly risen, but the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average all fell (with the Dow reversing more than two-thirds of the previous day's gain), and the yield on 10-year and 30-year U.S. Treasury securities fell to record lows (with the yield on the 10-year securities falling below 1% for the first time in history). Over the next several weeks, despite rate cuts, the market continued to struggle.
Russian–Saudi Arabian oil price war
The reduction in the demand for travel and the lack of factory activity due to the outbreak significantly impacted demand for oil, causing its price to fall. In mid-February, the International Energy Agency forecasted that oil demand growth in 2020 would be the smallest since 2011. Chinese demand slump resulted in a meeting of the Organization of Petroleum Exporting Countries (OPEC) to discuss a potential cut in production to balance the loss in demand. The cartel initially made a tentative agreement to cut oil production by 1.5 million barrels per day following a meeting in Vienna on 5 March 2020, which would bring the production levels to the lowest it has been since the Iraq War.
On 8 March 2020, Saudi Arabia unexpectedly announced that it would increase production of crude oil and sell it at a discount (of $6–8 a barrel) to customers in Asia, the US and Europe, following the breakdown of negotiations as Russia resisted calls to cut production. The biggest discounts targeted Russian oil customers in northwestern Europe. Prior to the announcement, the price of oil had gone down by more than 30% since the start of the year, and upon Saudi Arabia's announcement it dropped a further 30 percent, though later recovered somewhat. Brent Crude, used to price two-thirds of the world's crude oil supplies, experienced the largest drop since the 1991 Gulf War on the night of 8 March. Also, the price of West Texas Intermediate fell to its lowest level since February 2016. Energy expert Bob McNally noted, "This is the first time since 1930 and ’31 that a massive negative demand shock has coincided with a supply shock;" in that case it was the Smoot–Hawley Tariff Act precipitating a collapse in international trade during the Great Depression, coinciding with discovery of the East Texas Oil Field during the Texas oil boom. Fears of the Russian–Saudi Arabian oil price war caused a plunge in U.S. stocks, and have a particular impact on American producers of shale oil.
Prior to opening, the Dow Jones Industrial Average futures market experienced a 1,300 point drop based on the coronavirus and fall in the oil price described above, triggering the circuit breaker and causing futures market to suspend trading. This predicted 1300 point drop would establish March 9 as being among the most points DOW has dropped in a single day. When the market opened on March 9, the Dow Jones Industrial Average plummeted 1800 points on opening, 500 points lower than the prediction. The markets continued to fall until they invoked a 15-minute trading curb.
According to BBC, analysts described the market reaction as "utter carnage".
The United States' Dow Jones Industrial Average lost more than 2000 points ("the biggest ever fall in intraday trading")[clarification needed] and hit a number of trading "circuit breakers" to curb panicked selling.
Oil firms Chevron and ExxonMobil fell more than 7%.
The NASDAQ Composite, also in the United States lost over 620 points.[clarification needed]
The S&P 500 fell over 225 points.
Oil firms Occidental Petroleum, Apache Corporation, and Marathon Oil each led S&P 500 index losses by dropping 40%
Cruise lines were also affected by the selloff because of the coronavirus outbreak on cruise ships. Carnival Corporation fell by 20% and Norwegian Cruise Line fell to an all-time low as its stock fell by nearly 27%.
Other oil firms such as BP, Royal Dutch Shell, and Petrobras also fell, each by at least 15% in NYSE trading.
Canada's S&P/TSX Composite Index finished the day off by more than 10%.
Brazil's IBOVESPA gave up 12%, erasing over 15 months of gains for the index.
Australia's ASX 200 lost 7.3% - its biggest daily drop since 2008.
London's FTSE 100 lost 7.7% suffering its worst drop since the 2008 financial crisis
BP and Shell Oil experienced intraday price drops of nearly 20%
The FTSE MIB, CAC 40, and DAX tanked as well, with Italy affected the most as the coronavirus outbreak in the country continues. They fell 11.17%, 8.39%, and 7.94% respectively.
In China, the CSI 300 Index fell 3.4%
In Hong Kong, the Hang Seng index sank 4.2%.
In Japan, the Nikkei 225 plummeted 5.1%.
In India, the SENSEX and NIFTY 50 closed down around 5%.
Use of the term 'Black Monday'
As the hashtag #BlackMonday trended on Twitter, news organizations such as the Associated Press, Fast Company, and Yahoo Finance UK referred to the selloff as "Black Monday" as early as the morning it was occurring. While The Guardian referred to it as "Crash Monday" they also later referred to it as "The Black Monday of 2020" to distinguish it from the 1987 crash of the same name. The Associated Press also quoted an analyst of the Australian finance company OFX as saying, "A blend of shocks have sent the markets into a frenzy on what may only be described as 'Black Monday' ... A combination of a Russia vs. Saudi Arabia oil price war, a crash in equities, and escalations in coronavirus woes have created a killer cocktail to worsen last week’s hangover."