Europe follows as ASX All Ordinaries plunges 7.4pc to take $150bn off the market’s value

FTSE 100 loses 8pc at the open as Germany’s DAX falls 7.4pc with US markets set to add to the global panic.

Melissa Yeo and David Rogers

30 min read

9:29PMMarch 09, 2020.

Updated 9:44PMMarch 09, 2020

1 2 3 4 5

Recession ahead in first half: Evans
$A drops sharply in ‘flash crash’
Drop in US futures triggers ‘circuit break’
ASX falls to 13-month low
Crude oil hammered as price war heats up

That’s all from Trading Day for Monday, March 9. Thanks for joining our special extended coverage to track the oil price driven plunge on global markets.

We sign off here with European markets feeling the impact of the global rout with oil shares in London pushing the FTSE 100 down more than 8pc at the open. Germany’s Dax was down 7 per cent, the CAC 40 in Paris was 6pc lower and Italy’s FTSE MIB was 11pc down in early trade.

The ASX All Ordinaries lost 7.4 per cent to take the broader market down $150bn in value, while the ASX 200 shed 7.33 per cent in its worst daily drop since the middle of the GFC after crude oil prices tumbled by 30 per cent, with local producers Beach Energy, Oil Search and Woodside in the firing line.

Discussions to cut production broke down at the OPEC+ meeting at the weekend, with Saudi Arabia and Russia now both looking to increase production, what some are calling the start of a price war.

Global efforts to contain the coronavirus continue to dominate headlines and worry markets, prompting a ‘flash crash’ in the Aussie dollar to lows of US63.13c, before recovering to US65.37c at the local close.

US futures trading was limited after a 5pc drop triggered a limit-down response.

Eric Johnston, Business Review editor 9.27pm: Shades of GFC as panic takes hold

With limited ammunition in the form of interest rate cuts, how policymakers and regulators respond in coming weeks will determine the pace of a recovery.

The crash in oil prices is signalling a recession; likewise crumbling long-term bonds (including Monday’s near inversion of the Aussie 10-year bond). Just three weeks ago equity markets were celebrating the boomtime with many staid industrials trading on earnings multiples way over their long-term average.

The old truism remains that the higher the yield (or in this case the PE), the harder they fall.

Nearly 12 years ago the financial crisis spread from toxic debt instruments into a freezing of debt markets. This crunched equities, which had been pushing record highs, and triggered a northern hemisphere recession that mutated into a European debt market crisis. Underlying all this was a lack of money flowing through the system.

8.40pm: IEA warns of virus hit to oil consumption

The world is set for its first annual decline in oil consumption in more than a decade due to the impact of the coronavirus outbreak, the IEA said on Monday.

In its latest report - which did not take into account an oil price war after Saudi Arabia and Russia failed to agree to continue production cuts - the International Energy Agency chopped its current demand forecast by 1.1 million barrels per day (mbd) in its base case scenario as the coronavirus continues to spread around the world.

That would make for a small annual drop of 90,000 barrels per day, the first since 2009.

That forecast however is based on the assumption that China brings the outbreak there under control by the end of the month and that containment measures elsewhere have less of an impact on demand.

Oil consumption tanked in February, with the IEA estimating it fell by 4.2 mbd from the same month last year, of which 3.6 mbd was in China.

AFP

8.22pm: Coronavirus causing ‘economic carnage’

The number of people infected with the coronavirus topped 110,000 across the world as the outbreak reached more countries and caused more economic carnage.

Most of Italy’s stocks failed to open after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

There were also worries that US oil producers that had issued a lot of debt would be made uneconomic by the price drop.

The yield on 10-year US Treasuries last sat at 0.4624 per cent having halved in just three sessions.

Yields on the 30-year bond dived 35 basis points on Friday alone, the largest daily drop since the 1987 crash, and slid under 1 per cent on Monday to reach 0.7020 per cent.

The fall in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it at some point crashing to the largest weekly loss in four years.

The US dollar extended its slide in Asia to as far as 101.58 yen, depths not seen since late 2016. It was last down nearly 3 per cent at 102.28 in wild trade.

The euro likewise shot to the highest in over 13 months at $US1.1492, to be last at $US1.1422.

Gold initially cleared $US1700 an ounce to a fresh seven-year peak, only to fall back to $US1676.55 amid talk some investors were having to sell to raise cash to cover margin calls in stocks.

Reuters via AAP

8.10pm: France cuts GDP growth estimates

The hit from the coronavirus epidemic on French businesses will slash two tenths of a percentage point from France’s economic growth in the first quarter, the Bank of France said on Monday.

Gross domestic product will rise 0.1pc in the first quarter of 2020 compared to the prior quarter, according to the central bank’s monthly survey of business activity. In the prior survey, the bank had projected 0.3pc growth in the first quarter.

“Business leaders predict a decline in most sectors in March given the new context of the coronavirus epidemic,” the bank said.

The declining growth projections are another signal of the economic slowdown from the virus, infections of which have started to spike in France to more than 1100 as of Sunday - second-highest in Europe behind Italy. Health officials have closed schools in two regions of France and many workers are being urged to stay home.

Stock markets in Europe plunged Monday as part of a global rout, in part on concerns about the effect of the new coronavirus on businesses. France’s CAC-40 was down more than 6pc in early trading.

French Finance Minister Bruno Le Maire, speaking on French radio, said on Monday that the impact on growth in 2020 would be “severe”.

Dow Jones Newswires

7.51pm: Russian ruble crashes on oil slide

The Russian ruble tumbled on Monday to a four-year low amid a crash in oil prices as authorities rushed to assure the public the country has accumulated enough funds to withstand the blow.

The ruble fell by 9 per cent to trade at 75 to the US dollar, a rate last seen in early 2016.

The Russian Central Bank and the finance ministry on Monday, a public holiday, announced measures that aim to stabilise the ruble and ensure financial stability.

AFP

7.39pm: Oil stocks smashed in London

Dow Jones Newswires reported Royal Dutch Shell B shares slumped 22pc at the market open in London. BP shares were 24pc lower in early moves, while mid-cap UK producers were hit even harder. Mining stocks also fell sharply as base-metal prices dropped. Anglo American lost 14.3pc and Glencore was 13.1pc lower.

7.20pm: London’s FTSE, Germany’s DAX sink in opening trade

The British and German stock markets slumped more than 8pc and French equities shed 4pc in opening trade on Monday in a fierce sell-off rooted in crashing oil prices.

In initial moves, with London’s benchmark FTSE 100 index of major blue-chip companies tanked 8.2pc at 5935.21 points, compared with Friday’s closing level.

In the Eurozone, Frankfurt’s DAX 30 shed 8.1pc to 10,607.80 points and the Paris CAC 40 dropped 4.2pc to 4921.91. In Milan, the FTSE MIB was down just 0.3pc at 20,731.29 points.

AFP

James Kirby, Wealth editor 6.43pm: Superannuation to suffer as market falls

Suddenly, we are in a new phase of a sharemarket downturn that is moving from a conventional “correction” to something altogether more ominous. Your superannuation fund will not have reported for February yet, but it will almost certainly be negative for the year.

Like the virus itself rapidly spreading into new territories, this sharemarket reversal is fast, furious and worse than many expected.

A 7.3 per cent drop on the S&P/ASX 200 on Monday stands as the biggest one-day fall since the global financial crisis (GFC). In total, we are down 19.9 per cent from the top in early February and a “bear market” is now a clear and present danger.

With Westpac chief economist Bill Evans forecasting a recession, it can take weeks for any visible slowdown in GDP or unemployment to become clear.

But declining holiday bookings, lower auction clearance rates and lower oil prices might be the first tangible signals we get that this market reversal has morphed into a full-scale economic interruption.

Super funds, too, will soon show the impact of falling markets. Most funds reported double digit returns last year and 2020 had kicked off with a 1.9 per cent lift in the month of January.

But leading industry figures - including Future Fund chair Peter Costello - had continually warned investors not to expect bumper returns to continue.

Industry analysts suggest year-to-date returns up to the end of February for the most popular “balanced” funds will show a drop of about 3.8 per cent. For a worker on a starting balance of $100,000 this would mean a loss of $3800.

6.10pm: Trading floors ‘a sea of red’

Trading floors were a sea of red, with Tokyo and Manila plunging more than 5 per cent, while Hong Kong dived 3.7 per cent. Sydney shed 7.3 per cent.

Mumbai, Singapore, Seoul and Jakarta were more than 4 per cent down, Shanghai shed 3 per cent and Bangkok gave up 6.8 per cent. Saudi equities tanked more than 9 per cent with oil titan Aramco losing 10 per cent.

Dubai and Kuwait sank a similar amount, while Abu Dhabi equities were almost 8 per cent down.

AFP

5.14pm: Tokyo stocks sink more than 5pc

Tokyo stocks sank more than five per cent Monday on fears over the new coronavirus and a plunge in oil prices that sent the dollar down against the yen.

The benchmark Nikkei 225 index dropped 5.07 per cent, or 1,050.99 points, to close at 19,698.76, while the broader Topix index fell 5.61 per cent, or 82.49 points, to 1,388.97

AFP

5.01pm: US, UK futures suggest carnage ahead

The heavy sell-off that dominated Asia-Pacific trading is set to continue in the overnight session, with the UK market primed to set a 4-year low.

FTSE 100 futures are suggesting an early drop of 6.3 per cent when markets open at 7pm AEDT.

That’s after US futures fell 5pc earlier today, to trigger a halt in trade. The exchange rules limit declines at 5pc from the previous close.

It's the first time trading in futures was limited since shortly after President Donald Trump won the US election in 2016.

4.42pm: Energy sector pummeled by 20pc

Energy names led the local sell-off as oil panic gripped global markets.

The sector dropped 20 per cent for the day – Woodside led with a 18.3 per cent drop to $21.54, Santos shed 27 per cent to $4.89 and Oil Search tumbled by 35 per cent to $3.30.

Heavyweight miners with exposure to the sector also felt the heat – BHP dropped 14 per cent to $27.55 and Rio Tinto slipped by 6.4 per cent to $80.77 while Fortescue took a 10.6 per cent hit to $8.58.

Gold miners were the only fleck of green as Aussie dollar gold prices set new record highs of $2555.88 per ounce.

Newcrest led the gainers with a 2.5 per cent lift to $29.82 but not all were immune, with Evolution edged lower by 0.23 per cent to $4.34, Northern Star giving up 1.7 per cent to $14.22 and Saracen dialling back by 5.8 per cent to $4.04.

Here’s the biggest movers at the close:

4.13pm: ASX drops 7.3pc

A 30 per cent drop in oil prices has sent shockwaves through global markets, wiping $140bn from the S&P/ASX 200, as investors weigh up the prospect of an all-out oil price war. The ASX All Ordinaries lost $150bn in value with a 7.4 per cent, or 465 points, drop to 5822.4.

Tensions at the weekend’s OPEC meeting jolted already-weak investor sentiment, adding to fears of a global recession as the coronavirus case tally grows and countries take drastic steps to stem the outbreak.

The panic fuelled a 7.33 per cent or 456 point tumble in the benchmark ASX200 to close at daily lows of 5760.6, its worst daily drop since the Global Financial Crisis.

The decline marks a 19.9 per cent drop in just the past three weeks – putting the index on the verge of a bear market from record highs of 7197.2 at the end of February.

Meanwhile, the All Ordinaries fell by 7.4 per cent or 465 points to 5822.4.

3.58pm: Caltex slumps as deals likely off

Caltex shares slumped 16pc to a 5-month low of $26.98 amid expectations that suitors will walk away after the oil price collapse today.

While there have been no details on oil price caveats, the expectation is that any deals are off and Caltex now faces downgrades.

3.43pm: Recession ahead in first half: Evans

Westpac chief economist Bill Evans is tipping a recession in the first half of the year, based on estimates of no fiscal stimulus.

In a revision from earlier forecasts of flat growth, Mr Evans says he expects the economy to contract by 0.3pc in both the first and second quarters – to send the economy to a technical recession.

“ … But given the expected recovery in the second half of the year it is much more realistic to characterise the situation as a “major disruption” to growth rather than the style of recession that Australia has experienced in the past,” he notes, adding that he predicts the unemployment rate to hold below 6pc through the period.

That will be followed by a rebound of 1.4pc and 0.8pc respectively in the third and fourth quarters.

However, he notes that the forecasts are based on no fiscal stimulus, and that the bank will adjust its forecasts if required when the government makes any announcements later in the week.

3.09pm: Blackmores evades heavy selldown

One tiny green spot in a roiling sea of red is vitamin and healthcare company Blackmores Ltd which has been trading flat to slightly up over the session.

As a consumer stock Blackmores should be caught in selldown, but absent of any corporate developments the very early reports that China is getting back to work potentially provides speculative opportunity.

Remember, Blackmores is still down 30 per cent from recent peak.

Blackmores last at $68.64, down 0.1 per cent.

2.33pm: Gold could test all-time high

As equity markets plunge, gold and gold equities have rallied hard and are expected to gain more as the coronavirus rapidly spreads around the globe.

The S&P/ASX All Ordinaries Gold Index is up 30pc in the past 12 months while the broader S&P/ASX 200 index has fallen 12pc in the same period.

VanEck MD APAC Arian Neiron says spot gold could test its all-time high near $US1,900 per ounce if the coronavirus outbreak isn’t contained soon, driving gold miners even higher.

Spot gold is up 0.8pc at $1,685 after hitting an 8-year high of $US1703.4.

Amid the growing risk of global recession and further falls in risk asset prices, markets are expecting further rate cuts and monetary stimulus to keep liquidity in place, favouring non-financial assets like gold.

GDX (US: GDX) – the world’s largest gold miners’ ETF has seen average daily turnover of $US2.7bn on NYSE.

The Australian listing GDX (ASX: GDX) is up 8.8pc year to date while the S&P/ASX 200 has fallen 16pc.

“Similar trading trends have emerged for GDX on the ASX as investors seek the safety of gold and gold equities,” Mr Neiron says.

2.24pm: Oil drop has silver lining for motorists

The plunge in oil prices has sparked today’s market sell-off but CommSec chief economist Craig James says there could be upside for Aussie motorists amid the carnage.

“The ready-reckoner is that every $US1 a barrel fall in the oil price leads to a 1c fall at the petrol bowser. Filling up the car with petrol is the single biggest weekly purchase for most households. The fall in the oil price works like a de-facto interest rate cut,” Mr James says.

“But arguably the lower petrol price could prove more stimulatory. Many home buyers have responded to recent rate cuts by electing to pay down debt at a faster rate rather than use savings to engage in retail therapy.”

James says a $50 fall in the monthly fuel bill equates to a quarter of a per cent fall for a $350,000 mortgage. Over the past six weeks, the monthly fuel bill has already fallen by $30.

“For energy producers, arguably the breakdown of the OPEC+ production agreement is happening at the worst possible time. Demand for oil was already plummeting in the wake of COVID-19. Now there is the prospect of increased oil output from key producers.”

[REPORT] Petrol may hit $1 a litre: A production agreement between OPEC+ nations (largely OPEC and Russia) has ended. Global oil prices fell 10 per cent on Friday and fell another 26 per cent today https://t.co/37LBrg358a #ausbiz #ausecon pic.twitter.com/Kluhi8ucDi
— CommSec (@CommSec) March 9, 2020

Gerard Cockburn 2.11pm: Klarna to slow Afterpay growth: Citi

Afterpay’s US and UK customer growth is could be slowed by Swedish rival Klarna, as it exploits its larger overseas presence, according to analysts at Citi.

The brokerage noted Klarna’s first mover advantage was helping to extend its lead in the UK, citing strong web traffic, app downloads and 5000 active merchants compared to Afterpay’s reported 400 merchants.

But in the US, Afterpay has less to worry about – Citi estimates Afterpay is growing its customer base at 1.8 times the rate of its rival.

In December, Afterpay added approximately 550,000 US customers according to Citi’s estimates, while Klarna added 300,000 new US users in the same period.

The Swedish payment provider’s Australian subsidiary launched in January and is financially backed by Commonwealth Bank. Afterpay app downloads (Android only) were above Klarna downloads in Australia, according to Citi.

The broker has a Buy rating on the stock with a target price of $42.20, shares last down 13.5pc to $28.49.

Klarna CEO Sebastian Siemiatkowski. Picture: Adam Yip.

2.03pm: Gold rally lifting local miners

Gold prices are rallying to new highs amid the market sell-off, with Australian dollar prices setting new record highs.

Safe haven buying, along with weakness in the Aussie dollar, has pushed the price of the precious metal to $2626.32 an ounce, while it edges past $US1700 an ounce, the highest since 2012.

Strength in prices is lifting Evolution shares by 4.9pc, Newcrest by 3.9pc, Northern Star by 1.7pc and Saracen Minerals by 0.7pc.

1.35pm: $A drops sharply in ‘flash crash’

The Aussie dollar took a dramatic 1.15c turn at lunch, to near 11-year lows, in what traders are calling another “flash crash” for the local currency.

Earlier in the session, AUDUSD had been trading at US65.98c, but dropped sharply to lows of US64.83c.

That dip was short-lived thought, with trade recovering to US65.21c.

1.21pm: US futures drop triggers ‘circuit break’

A 5pc drop in S&P500 futures has triggered the market’s so-called circuit breaker or limit-down response, signalling a turbulent session ahead for Wall Street.

The exchange rules limit declines at 5 per cent from the previous close.

It's the first time trading in futures was limited since shortly after President Donald Trump won the US election in 2016.

US government bonds, which have already rallied to unprecedented highs, extended gains. The yield on the benchmark 10-year U.S. Treasury note fell 0.239 percentage points to 0.529pc and the equivalent 30-year yield declined to 1.028pc. Yields move inversely to prices.

With Dow Jones Newswires

1.02pm: Stocks extend tumble to 6pc

The local market carnage is extending at lunch, with stocks down 6 per cent to wipe $112bn off the benchmark ASX200.

At 1pm, shares are down 373 points to 5843.1 – the lowest since February 2019.

Meanwhile, the $A is dropping by 2.7pc to near its 11-year lows – at US64.79c.

Energy names are leading the downfall – Woodside is dropping 17pc and Santos by 26pc.

Only gold miners are trading in the green amid safe haven trading, here’s the biggest movers at 1pm:

12.48pm: Virus spurs horror response: Lucerne

Lucerne Investment Partners portfolio manager Jerome Lander says investors are “reacting in horror” to the growing coronavirus threat, describing the current market environment as “truly dangerous times for all investors but particularly for those holding large amounts of overvalued equity and property assets”.

It comes as the Australian sharemarket experiences its biggest one-day fall since the global financial crisis. The S&P/ASX 200 has plunged 6pc to a 14-month low of 5840.90 amid a collapse in oil prices.

“This is a truly frightening pandemic with significant ramifications which much of the developed world is unlikely to cope with well,” he says.

“The reality is ICUs are likely to be overrun around the world and people will increasingly seek to avoid social contact and hide at home in order to avoid contracting the deadly virus.”

He says a 10 per cent ICU admission rate for Italy’s 1,492 cases of coronavirus is a “truly horrifying statistic”.

With underlying economic weaknesses being exposed he says “one bubble after another is at risk of popping, as the fake wealth and artificial economy of the last few years explodes in the face of a devastating global recession”.

With equity markets now “crashing with delusional housing prices likely to follow,” he predicts central banks will shortly attempt to restore order to financial markets.

12.43pm: Hong Kong, China stocks plunge

Hong Kong and Shanghai stocks plunged at the start of trade Monday, with energy firms battered by a crash in oil prices, while coronavirus fears continue to hammer sentiment.

The Hang Seng index fell 4.4 per cent while the benchmark Shanghai Composite Index dived 2.3 per cent.

12.25pm: NAB tips unconventional policy by June

NAB now predicts the RBA will start unconventional monetary policy by June.

Chief economist Alan Oster says the RBA will cut the cash rate to 0.25pc next month given the rapid coronavirus-driven deterioration in both the local and global economies, prompting the board to consider its other options.

“This means conventional monetary policy will soon reach its limit given the RBA has said it is unwilling to take the cash rate below 0.25 per cent,” Mr Oster says.

“This places unconventional policy on the table and we now forecast ‘yield curve control’ to commence by May or June.”

Yield curve control is a form of quantitative easing where the RBA announces target levels for government bond yields and buys bonds if yields fail to settle at those targets.

Mr Oster says the timing is “very fluid”, depending on the state of the outbreak, the economy and financial markets, and the RBA could announce its plans as early as April.

“The functioning of short-term wholesale money markets is also critical to the effectiveness of the low cash rate, although in this respect the RBA has already said it will ensure the financial system has sufficient liquidity.”

Mr Oster adds that “importantly, monetary and fiscal policy are now working in tandem” to support the economy.

He expects the Commonwealth government to announce spending and tax measures later this week, aiming to minimise job losses by shoring up the cash flow of affected businesses, noting press reports it could be $10bn, or around 0.5pc of GDP.

12.07pm: Tokyo joins sell-off with 4.4pc drop

Tokyo stocks are down 4.4pc on Monday on fears over the new coronavirus and a plunge in oil prices that sent the dollar down against the yen.

The Nikkei shed 3pc at the open and continued to sink, down around 4.41 per cent by midday local time.

“The yen surged … at the market open this week as investors dived into safe havens on accelerating COVID-19 cases in Europe, and as Saudi Arabia triggers a price war for oil, adding another level of unwanted panic to a market already thick with fear,” Stephen Innes, chief market strategist at AxiCo, said in a note.

Concurring with Innes, Marito Ueda, senior trader at FX Prime, told AFP: “Fears over the virus’s impact on the global economy and plummeting in the US yields had investors seek the safe haven yen.” “It is essentially flight from the dollar,” he added.

AFP

11.51am: Macquarie oil, energy exposure weighs

Homegrown investment bank Macquarie Group is down 7 per cent and coming under additional pressure on the “Monday Meltdown” given its large exposure to oil and energy trading.

Commodities trading represents around 40 per cent of the investment bank’s income, according to recent disclosures.

Not all of this $2.42bn is tied up in oil and energy (with forex, metals and soft commodities also contributing), but the first half results included a strong contribution from client hedging and trading from global oil, North American gas and power as well as EMEA gas and power.

Macquarie also has key positions in oil storage and transport across North America. Macquarie Group last down 7 per cent at $122.75.

11.47am: Zenith lifts as PEP lobs takeover bid

Perth-based utility Zenith Energy is surging by 39 per cent this morning, a rare splash of green on the local market, after recommending a takeover offer from Pacific Equity Partners that values its equity at around $150m.

Zenith said PEP is offering $1.01 per share in cash, representing a 45 per cent premium to Friday’s closing price.

“PEP has a strong history in backing management teams in the remote power sector and with the additional capital firepower PEP can bring to Zenith, we are highly optimistic about the company’s future growth,” PEP Managing Director Andrew Charlier said.

ZEN shares last up 39pc to 96.5c.

Dow Jones Newswires

11.39am: Banks drop to multi-year lows

The major banks are all down around 5 per cent in morning trade, with fears of a credit crunch dialled up with today’s plunge in oil prices.

Westpac is the worst performer, down 5.8 per cent to $20.12, after hitting a 7.5 year low of $20.08.

Commonwealth Bank is down by 4.7 per cent to $70.46, NAB lower by 5.9pc to $20.70 – an eight year low – and ANZ is shedding 5.5pc to a 7 year low of $20.69.

Ben Wilmot 11.29am: ASX tourism stocks take a hiding

Property stocks exposed to the tourism industry, led by Dreamworld owner Ardent Leisure Group, have plunged but other stocks are holding up relatively well in the face of market turmoil.

Ardent shares had tumbled to 58.5c, a 13pc slip, as the stock goes into free fall on the back of fears about the impact on both Dreamworld and its US-based business Main Event.

Cinema and hotels group Event Hospitality and Entertainment was off by 3.81 per cent to $9.84.

Lendlease has been belted with a 5.51 per cent fall, partly due to the developer’s exposure to global capitals where COVID-19 has emerged. But in midmorning trade large retail landlords, that have already sustained heavy falls, were off by less than the broader market.

Scentre had dipped by 3.37 per cent and Vicinity Centres was down just 3c to $2.13.

Supermarket focused groups, Charter Hall Retail REIT and SCA Property Group, had barely moved either with drops of 2.24 per cent and 2 per cent respectively.

Property funds group have also been under pressure and Charter Hall was off by 4.12 per cent and Goodman Group was down 3.82 per cent, as both trade more like financial stocks.

Hedge fund target Rural Funds suffered a 4.26 per cent drop, despite its recent strong results.

11.25am: Risk sell-off reminiscent of GFC

The sell-off in risk assets reminiscent of the global financial crisis of 2008, with talk of a market maker or bond fund “blowing up”.

“(There’s a) lot of talk of one of the largest banks in the world had their trading desk blow up this past week do to their massive bond short,” says Chris Weston, head of research at Pepperstone.

Some aspects of the current sell-off are “worse than the GFC”, according to a broker contracted by The Australian.

“It’s definitely panic … this is (at the) GFC level (of panic),” he said. “There’s a lot of option margin calls and margin lending selling.”

“Everyone is panicking at the wrong time. I’m actually looking at buying in the next few days.”

The VIX index hit an 11-year high of 54.39 per cent on Friday before closing at 41.94.

11.20am: ASX approaching bear market

As shares trade down by 5.4 per cent, the benchmark ASX200 is teetering on a bear market, in what will surely be the quickest dive on record.

It was just three weeks ago that the index set a record high of 7197.2, but the today’s current trading levels are 18pc from that.

A bear market is defined as a 20 per cent fall from a peak.

ASX200 last at 5881.6.

10.54am: Oil facing huge oversupply: Bernstein

Investment manager Bernstein has issued a wide-ranging downgrade on energy producers, saying OPEC+’s decision not to cut output had taken the market by surprise.

Brent oil prices were now “likely to fall below the marginal cash cost of supply at $US36 a barrel,” according to analyst Neil Beveridge.

He adds that the decision leaves markets facing huge oversupply and creates uncertainty about new strategy, tipping oil at $US34 to $US40 a barrel to be an attractive re-entry point.

Bernstein said the move was worse than the OPEC surprise decision against cutting in 2014, eliciting a war with US oil producers and ultimately sending oil prices from $US110 to $US70 a barrel at the time.

Of Mr Beveridge’s downgrades, local names Woodside was cut to market perform, with price target lowered 45pc to $24.40, while Santos was cut to underperform with its price target dropped 38pc to $5.90.

Price chart for #WTI as trading resumes & slumping 30%. Talks for production cuts broke down at an OPEC meeting last week with Saudi Arabia & Russia now both looking to increase production & pushing prices down #ausbiz #oil #bloomberg #energy pic.twitter.com/Q3NihXJwZr
— CommSec (@CommSec) March 8, 2020

Eli Greenblat 10.45am: Retailers hit in market meltdown

Retailers have been hit hard in the market meltdown this morning with Solomon Lew’s Premier Investments among the biggest casualties as well as JB Hi-Fi and Wesfarmers.

Premier Investments is down 4.5 per cent to $15.57, JB Hi-Fi down 3 per cent to $33.22 and Wesfarmers is 3.3 per cent weaker at $37.90.

Coles is down 1.8 per cent to $15.40 and Woolworths is 1.9 per cent weaker at $37.25.

Myer is actually up 1.8 per cent at 28 cents.

10.37am: ASX falls to 13-month low

The drop in local shares has sent the benchmark ASX200 to its lowest levels in 13 months, as the oil price drop fuels concerns of a credit crunch.

With a 4.7 per cent decline now, the index is at its lowest levels since February 4, 2019.

10.23am: Data discrepancies fuel market confusion

Market information between Bloomberg and IRESS are showing discrepancies this morning, adding confusion to an already dramatic open.

Bloomberg flashed an early decline of as much a 6.6 per cent on the ASX200, compared to IRESS opening 4.1 per cent drop.

10.19am: Woodside, Santos lose more than 20pc

Energy names are feeling the heat this morning, after crude oil prices dropped 30 per cent this morning on escalating tensions and fears of an oil price war.

The sector is lower by 17pc, with Woodside down 19.5pc, Santos by 23.6 per cent and Oil Search by 22pc.

10.12am: Market drops 4pc on oil hit

The local market has dropped by 4 per cent early, falling sub 6000 after oil prices tanked this morning.

The benchmark ASX200 is down by 252 points or 4.05 per cent to 5964.2.

Energy stocks are the worst hit – down 19 per cent.

10.00am: Bond yields slammed

Heightened risk aversion is pulling local bond yields even further down, with 10-year Australian bond yields shedding as much as 11 basis points to new record low of 0.56 per cent this morning.

Three-year yields are lower by 10.6pc to 0.334pc.

9.45am: US futures tumble on oil hit

US futures are dropping by 4.2 per cent at the open, as the price of oil drops and markets continue to assess the threat of coronavirus to the global economy.

Ahead of the local open, S&P futures are lower by 4.4pc, putting pressure further on the local market.

ASX futures are last down 2.4pc.

Prince Abdulaziz bin Salman Al-Saud, Minister of Energy of Saudi Arabia, arrives for a meeting of the OPEC, at their headquarters in Vienna, Austria. Picture: AP/ Ronald Zak.

9.27am: Redbubble founder gets $75k monthly pay

Redbubble founder Martin Hosking is set to rake in $75,000 per month after he was forced to retake the position of chief executive last month.

Mr Hosking stepped into the position on February 18, following the sudden departure of Barry Newstead, and will serve as an interim chief until a permanent replacement is found.

In an update to the market, the company said he would be eligible for a cash bonus dependent on his achievement in key results areas, but would not receive any director fees while in the CEO position.

As for the outgoing Mr Newstead, he will continue to receive his usual salary, superannuation and accrued entitlements during his six month notice period.

9.23am: Crude oil hammered

Crude oil prices have dropped by 25 per cent at the open, what is the biggest drop in 29 years according to Bloomberg.

ANZ analysts note the “OPEC+ alliance is dead”, saying that”not only did the parties fail to reach agreement on further cuts to production, they failed to extend the current production cut agreement which expires at the end of March”.

Oil prices in a freefall. Brent crude is seeing its biggest drop in 29 years right now. pic.twitter.com/u5xuvDnmE4
— David Ingles (@DavidInglesTV) March 8, 2020

9.11am: Margin selling to hit shares

Selling to close accounts may add to a sell-off in Australian shares today.

A retail trader tells The Australian that the third biggest margin lender will need to sell around $500m.

If so, the total amount of selling at 11am related to margin loans could be several times that amount.

It comes after the S&P/ASX 200 dived 2.8pc to a fresh 10-month low of 6216.2 on Friday.

The index fell 13pc in the past two weeks and is expected to open down about 1.6pc at a 12-month low near 6120.

9.08am: Goldmans warns of oil price war

Goldman Sachs has warned the price of oil could dip into the $US20s, after Russia knocked back OPEC’s planned coronavirus action plan.

Brent crude may dip as low as $2 a barrel, testing the levels at which some producers can operate, according to the brokerage, according to Bloomberg reports.

Keiran Gair 9.04am: Flight Centre staff asked to cut pay

Flight Centre employees are being asked to drastically cut back their working hours or take unpaid leave as executives scramble to offset the devastating financial impact of COVID-19.

In an internal email sent to the company’s 10,000 employees, staff members were asked to reduce their workload by one day a week to alleviate the “significant” downturn caused by the outbreak.

“Staff can work a four-day week rather than five days with their salary reflective of this change,” the email said.

“All staff have been offered the opportunity to reduce their FTE (full-time equivalent) by one day per week or fortnight.”

Flight Centre staff have been asked to trim working hours to combat the virus downturn. Picture: Peter Wallis.

9.01am: What’s on the broker radar?

AMP raised to Buy – Morningstar
ARQ Group raised to Hold – Bell Potter
Alumina raised to Hold – Morningstar
Aurizon raised to Hold – Morningstar
Beach Energy raised to Outperform – Macquarie
Breville cut to Neutral – JP Morgan
Downer EDI raised to Buy – Morningstar
Harvey Norman raised to Hold – Morningstar
Magellan Financial raised to Hold – Morningstar
Sonic Healthcare cut to Sell – Morningstar
Tabcorp raised to Buy – Morningstar

8.52am: OPEC disagreement sparks oil price fears

Shares in the energy-dependent Gulf plunged to multi-year lows Sunday after OPEC’s failure to agree on a coronavirus action plan prompted fears of an all-out oil price war.

OPEC and its allies failed to clinch a deal on production cuts that would have offered support to energy markets, sending prices tumbling to four-month lows on Friday.

The OPEC+ meeting was expected to agree to deeper cuts of 1.5 million barrels per day to counter the effects of the novel coronavirus, but Moscow refused to tighten supply.

Fears of a price war were stoked as Saudi Arabia — the world’s top exporter — quickly responded by making significant cuts to its oil price.

All the seven bourses in the Gulf were in the red amid a panic sell-off over fears that energy prices, the mainstay of public revenues in the region, could collapse.

The Saudi stock market, the largest in the region, dived by 7.7 per cent minutes from the opening bell on Sunday, the first day of the trading week.

AFP

8.39am: Gold prices wobble

Gold prices fluctuated more than one per cent on Friday, sliding from a seven- year high as investors sold the precious metal to cover margin calls as the rapid spread of the coronavirus hammered equity markets.

Spot gold fell 0.5 per cent to $US1,662.75 per ounce on Friday. US gold futures slipped 0.3 per cent to $US1,663.60.

Gold jumped 1.2 per cent to its highest since January 2013 at $IS1,689.65 earlier in the session, but then shed all those gains to drop as much as 1.4 per cent.

“We are seeing a lot of volatility in the equity markets, fairly large losses and uncertainty bringing the S&P below 3,000. We are most likely seeing liquidation of gold in order to cover margin calls,” said Bart Melek, head of commodity strategies at TD Securities.

“This is very reminiscent of what happened in the corrections during the financial crisis.” US stocks tanked and the Dow Jones Industrials shed nearly two per cent, while government bonds rallied as traders worried about a prolonged economic slowdown. Oil prices also collapsed more than eight per cent to their lowest levels since mid-2017.

Reuters

8.30am: Air NZ dumps guidance

Airline Air New Zealand has withdrawn the full year earnings guidance issued only two weeks ago, saying the impact of the coronavirus is likely to be worse than first expected.

Full-year profit guidance for 2020 was fist issued by the company on 24 February and subsequently reconfirmed at its half-year profit announcement on 27 February.

But the company says the situation has changed.

“The airline now believes that the financial impact is likely to be more significant than previously estimated and with the situation evolving at such a rapid pace, the airline is not in a position to provide an earnings outlook to the market at this time,” a statement issued to New Zealand’s stock exchange says.

7.04am: Sayonara surplus

Scott Morrison has jettisoned the budget surplus to fund a coronavirus stimulus package of almost $10bn in a bid to stave off a recession.

Treasurer Josh Frydenberg conceded in meetings last week the forecast $5bn surplus this financial year would need to be sacrificed for a “substantial” fiscal package to inject short-term cash into the economy, The Australian has learned.

The state and territory governments are also under pressure to adopt their own plans, with estimates that a short-term payroll tax amnesty could inject an immediate $9bn of job-saving cashflow into affected businesses.

A final federal stimulus package has yet to be settled on, with the government’s razor gang expected to present a plan to cabinet on Tuesday. However, sources have said the numbers were yet to be finalised and a decision on short-term assistance was unlikely to be settled before Wednesday.

6.45am: Boris budget to pump infrastructure

Britain unveils its first post-Brexit budget on Wednesday and analysts expect Prime Minister Boris Johnson to press ahead with major spending on infrastructure, despite the economic fallout from the coronavirus.

Finance minister Rishi Sunak, who will present the budget after his predecessor Sajid Javid resigned unexpectedly last month, is also scheduled to outline emergency funding measures in the battle against COVID-19.

Before the novel coronavirus hit the headlines, Chancellor of the Exchequer Sunak had said the budget “will deliver” on recent government promises of “unleashing the country’s potential”.

However, the government has now delayed publication of its National Infrastructure Strategy — a more long-term outlook on improving British transport connections while achieving net-zero emissions nationwide by 2050.

In the immediate term, 39-year-old Sunak’s task is to carry out Johnson’s goal of boosting improved productivity in cities outside London via massive infrastructure projects, such as the new high-speed railway HS2.

Javid resigned, and was replaced by his deputy Sunak, after Johnson offered to keep on the former chancellor only if he sacked all of his political advisers.

The prime minister wants greater say over Treasury policy following the Conservatives’ victory in the general election in December that finally unlocked Brexit and allowed Britain to quit the European Union on January 31.

AFP

6.42am: Coles makes new panic buying move

Supermarket giant Coles has introduced a further limit on purchases of toilet paper to a single pack, saying it’s the “right thing to do” to ensure all Australians have access to their fair share of essentials.

Supermarkets have begun imposing limits on the sale of loo roll after having their shelves stripped by hysterical shoppers.

Coles on Sunday introduced a further limit of one pack per customer, per shop, after restricting purchases to four packs on Thursday.

Customer notices – which have begun to be rolled out nationally – points the finger for toilet paper shortages at customers overbuying the product. “The sudden and unprecedented demand for toilet paper has created a problem. But the problem isn’t a shortage of toilet paper,” the notice says. “The problem is that some people are buying a lot more toilet paper than they normally do and more than they need to.

“At Coles, we have a responsibility to ensure every Australian can access their fair share of the things they need every day. And right now, not every Australian can; including the elderly and most vulnerable.”

AAP

6.35am: Saudis, Russians in oil clash

Following the bitter breakdown of its oil-production pact with Russia, Saudi Arabia is slashing crude prices and preparing to boost output as part of an aggressive campaign to snatch some of Moscow’s market share, according to delegates from the Organisation of the Petroleum Exporting Countries and Saudi officials.

The Saudi gambit comes after a longstanding partnership between some of the world’s largest oil producers, including Saudi Arabia and Russia, splintered on Friday. The sides failed to reach an agreement on production cuts to support the price of oil in the face of the coronavirus-related economic slowdown.

In a notice to buyers sent Saturday, Saudi Arabian state oil giant Aramco said it was cutting most of its prices. It slashed its popular medium crude by $US7 a barrel to the U.S., by $US8 a barrel to Northern Europe and by $6 to the Far East for oil deliveries next month.

The price cuts are aimed directly at Russia’s market share, Saudi officials said, but don’t encompass the entirety of the kingdom’s strategy, as it is set to boost its crude output as well to 10 million barrels a day, up from about 9.7 million barrels a day in January. The officials said Saudi Arabia would up output next month to well above 10 million barrels a day and could increase to its maximum capacity of 12 million barrels a day if needed.

Fears of an impending oil-price war sent shares of the Saudi Arabian Oil Co., as the company is formally known, sliding as much as 9% in Sunday trading in Riyadh, dropping below 30 riyals. That takes the stock below the 32 riyals per share level that the company was listed at less than three months ago.

Saudi Arabia flooded the market in 2014 and weakened prices, hoping to undermine U.S. producers. A production hike now would be different because it would come at a time when there is little foreseeable demand for extra Saudi oil.

Dow Jones

Cliona O’Dowd 6.15am: ASX set for another fall

Investors are bracing for another volatile day on the local sharemarket, with futures pointing to heavy falls on Monday amid heightened panic over the COVID-19 virus and a rush to safety.

The local sharemarket is tipped to drop 1.5 per cent, or 93 points, at the open after data showed China’s exports collapsed in the first two months of the year due to the coronavirus outbreak, with business activity grinding to a halt, triggering a supply shock.

A plunge in oil prices, meanwhile, brought about by the failure of oil-producing nations to come to an agreement on limiting supply amid a slump in demand, will add to the selling pressure and negative sentiment.

Brent crude, the global benchmark, on Friday fell more than 9 per cent to $US45.27 a barrel, in what was its biggest one-day drop since 2008. US oil prices slumped more than 10 per cent to $US41.28, the biggest one-day drop since late 2014.

Oil prices have collapsed 33 per cent since the start of the year due to the COVID-19 outbreak.

Underscoring the fear gripping markets around the globe, Australian and US government bond yields are skirting record lows, with the Australian 10-year bond yield last week falling to 0.675 per cent as investors seek out safe-haven assets.

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