Stock charts in Asian trading were glaring in red on Monday as worried investors scrambled to bonds to cushion the coronavirus' economic effects, and oil plummeted over 20 percent after Saudi Arabia cut its official sale price.
The world's leading oil producer is aiming to significantly increase its output after the breakdown of OPEC's supply reduction deal with Russia, a grab for market share that is reminiscent of a move in 2014 that cut prices by about 70 percent.
Japanese shares dropped 3 percent during Sunday night's opening bell. Australia's market fell 5 percent at the open as well. Meanwhile, the output on the US 10-year treasury momentarily retreated under .5 percent for the first time in history Sunday night as traders fled for safe haven assets.
The safe-haven Japanese currency rose versus emerging key market currencies with exposure to gas and oil, including the Russian rouble and Mexican peso, as market strategists saw peril ahead.
Monday's price swing puts at risk the fiscal well-being of the large majority of sovereign producers and spending cuts and rising equity loads are now looming in the event of a protracted period of falling prices, warned Helima Croft, director of global commodity planning at RBC Capital Markets.
Saudi Arabia had withdrawn last week for a huge slash in oil output by OPEC member states and by those oil refiners in alliance with the global oil cartel, particularly Russia. The plan was to boost prices following a global drop in demand as a result of the coronavirus outbreak. But Russia opposed, not wanting to submit to the demands, and over the weekend, Saudi Arabia made a 180-degree turn.
Energy stocks were battered and E-Mini futures for the S&P 500 dropped 4.5 percent having been restricted down at one level. The EuroStoxx 50 futures also dropped 4.5 percent and FTSE futures 4.9 percent.
Japan's Nikkei weakened 4.6 percent and Australia's commodity-heavy market, 6 percent. MSCI's broadest index of Asia-Pacific stocks outside Japan shed 3.1 percent to a five-month ceiling, while Shanghai blue chips retreated 2.2 percent.
West Texas Intermediate crude, one of the market's price barometers, plummeted 11 percent on Friday before the Saudi announcement, ending at $41.28 per barrel. Around Sunday evening, it had fallen an extra 25 percent. The last time WTI dropped under $40 was in August 2016.
In currencies, the US dollar stretched its slide during early Asian session to hit 103.55 yen, levels not seen since late 2016, while the euro rallied to its highest in more than eight months at $1.1387.
