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  • and in this week's market update, a plunge in the oil price unsettles broader equity, bond and currency markets.

  • Richie Soon AC prepares his first UK budget on Joe Biden looks to build on his Super Tuesday success.

  • Financial markets suffered their biggest falls on Monday since the financial crisis, as a plunge in the oil price on growing Corona virus fears combined to send investors running for safe havens.

  • As is often the case, they then staged a partial recovery on Tuesday as some bravery, investors decided the selloff had gone too far too fast.

  • The price of Brink crude fell 30% at one point on Monday morning after Saudi Arabia triggered an oil price war following the collapse of talks last week with fellow production giant Russia.

  • The two had Bean grudgingly cooperating for some time, most recently to counter a sharp drop in demand for energy in the wake of the Corona virus outbreak.

  • But talks broke up without agreement on Friday as Russia decided to pull the plug on a strategy which it worries is actually just supporting its rivals in North America's shale fields.

  • Russia's refusal to support a cutting production by OPEC pushed the group's day facto leader, Saudi Arabia, to promise higher output on bigger discounts to cut the price off the globally traded commodity.

  • The move is high risk.

  • It punishes Russia, which is dependent on oil sales.

  • The move is also calculated to hit the North American shave industry, which has swamped the world market with excess oil in recent years.

  • But Saudi Arabia is perhaps more dependent than any country on a high oil price if it is to fund the planned modernization on diversification off its economy.

  • Trading in Saudi Aramco shares were suspended after they fell by the maximum allowed 10%.

  • Riyadh's threat to flood markets with oil sent the price of Brent crude as low as $31 a barrel.

  • The U.

  • S W T I equivalent contract fell to $27.

  • 70 although both bounce back on Tuesday.

  • The dramatic fall in the oil price hit the energy sector hard, with bellwether stocks like BP and Shell losing 1/5 of their value in chaotic early trading On Monday morning, some smaller exploration stocks fell even harder, but the biggest victims could be North American shale producers, many of whom have borrowed heavily to fund their activities on May struggle to survive a sharp downward price shock.

  • The pressure on energy stocks spilled over into the wider markets, with massive falls across Asia, Europe and then America.

  • As Monday unfolded, hard hit with the banks, which stand to lose heavily if struggling energy companies default on their loans.

  • From Tokyo to London and then New York shares fell by as much as 8% with a plunge on Wall Street triggering a 50 minute trading halt.

  • Soon after the dealing they began, investors fled shares in search of safe havens as usual there lighted on government bonds, pushing the U.

  • S 10 year Treasury bond yield ever closer to zero on a new set of record lows.

  • The 30 year bond yield fell below 1% taking the yields on all maturities of bond below this level for the first time.

  • Expectations are now high that the Federal Reserve will move to cut rates again following last week's unsuccessful nor 0.5% point cut in U.

  • S rates, which tried and failed to stabilize markets as well as bonds.

  • Investors have moved into traditional safe haven currencies.

  • The Japanese yen rose by more than 2% against the dollar, while the currencies of oil exposed countries bore the brunt of seven pressure.

  • The day had started with heavy selling of shares in Japan down 5.6% and Australia 7.3% lower.

  • By the time trading had opened in Europe, markets were in turmoil.

  • Many stocks took several minutes to even begin trading up to 1/2 an hour.

  • In some cases.

  • The Italian MIB index was hardest hit, down 10% as the country remains the focus of Corona virus concerns in Europe.

  • Over the weekend, more than 16 million people in the most prosperous north of the country were put into locked down in a bid to control the outbreak.

  • Stocks 600 Index, which tracks the region's biggest companies, has now fallen into bear market territory, meaning a drop off more than 20% from the recent peak.

  • In London heavily exposed to energy stocks, shares fell by 8.5% of the open as the oil price fall triggered a widespread capitulation by investors already reeling from two weeks of Corona virus fueled nerves.

  • The 4100 index traded at 7675 as recently as January, the 17th since when it has fallen by 22% plunging it to into bear market territory.

  • It fell below 6000 yesterday for the first time since early 2016.

  • Before this, the UK benchmark had not Bean in the 5000 range since 2012.

  • Markets rarely move in one direction for long, however, and sure enough, choose they saw some rest fight.

  • Brent crude rebounded 8% to $37 on Tuesday, the Chinese stock market recovered by 2.1% and Tokyo was up 1.3%.

  • The first C 100 added 3% to rise above 6100.

  • Havens fell out of favor, with the 10 year Treasury yield up 21 basis points to north 210.7%.

  • The yen weakened by a couple of percentage points against the dollar.

  • Now the collapse in share prices sets a difficult backdrop for Richie soon at the newly promoted UK chancellor of the Exchequer, who's due to unveil his first budget tomorrow Wednesday.

  • He was already acting in the context of the biggest public health crisis in generations, with many fearing that the Corona virus outbreak is poised to inflict significant damage to the UK economy.

  • It's already coping with the uncertainty off ongoing Brexit negotiations.

  • The competing pressures on the chancellor may mean he chooses to limit his ambitions, deferring big decisions on spending and maybe pension reform until later in the year, when a second budget on the spending review are scheduled, Attention will focus on government growth forecasts which arm or out of date than usual, thanks to the lack of a budget in 2019 on their open to even larger revisions.

  • Unusual thanks to the many uncertainties clouding the economic picture in Britain today.

  • The UK government is keen, though, to finally put an end to 10 years of austerity on it had been planning to open the spending taps in a bid to invest in the left behind parts of the British economy.

  • But those ambitions may be overshadowed this week by the need to support the economy through the possible pandemic ahead.

  • Meanwhile, away from the markets and the economy, the two man race between former vice president Joe Biden on Bernie Sanders to win the Democratic Party nomination heats up this week having unexpectedly emerged as the front runner during last week's Super Tuesday round of primaries, when 1/3 of delicates were at stake.

  • Attention now shifts to a handful of other key states.

  • If Biden can build on last week's gains, then Sanders will have a mountain to climb to get approval from Democratic Party members for his socialist agenda INM, or normal conditions.

  • That would probably get a nod of approval from Wall Street, but any relief has inevitably being drowned out by everything else going on in the markets.

  • Also somewhat lost in the noise will be this Thursday's E C B meeting, when further easing is now expected as the European Central Bank looks to join in the global response to the markets twin crises.

and in this week's market update, a plunge in the oil price unsettles broader equity, bond and currency markets.

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Weekly Market Update: 10 March - Market Volatility, UK Budget and Democratic Primaries

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    林宜悉 posted on 2020/03/16
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