Asian share markets dropped to two-week lows on Wednesday as the bottom fell out from under crude prices, bringing to light the deep economic devastation wrought by the global coronavirus health crisis.
Jumpy investors looked to the safety of government debt as Brent oil futures dropped for a second day to a low last seen almost two decades ago, fueled by a swelling world crude glut. The nosedive in oil has turned investors away from stocks, and has given fresh urgency to bearish investors who are bracing for an unprecedented decline in asset prices as the COVID-19 pandemic wreaks havoc on the world economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8% while Japan’s Nikkei slumped 1.3%.
On tuesday, the May U.S. West Texas Intermediate futures contract crashed into negative territory for the first time in its history. On top of huge oversupply concerns, analysts say the plunge also highlights the technical constraints the market faces in responding to shocks.
International benchmark Brent futures dropped below $20 per barrel on Tuesday and last traded at $18.62, down 3.7%. So far this week, it has lost an eye watering 33.7%.
The U.S. June crude futures traded at $12.78 per barrel. While over on Wall Street, the S&P 500 lost 3.07% and the Nasdaq Composite, which has outperformed due to increased demand for various internet services amid lockdowns, dropped 3.48%.
The Nikkei 225 had a march to forget and continues to struggle
The recent plunge in oil prices have sparked fresh caution about the stock market. Overnight, companies that were seen as sure fire winners in a post-corona world, such as tech giants Amazon fell 2.7% on Tuesday. Which many analysts have concluded is a worrying sign of the times.
Half a dozen U.S. states pushed ahead on Tuesday with plans to partially reopen for business but some health officials warned doing so could trigger a new surge in coronavirus cases — fears shared by some investors.
As the troubles of restarting the U.S. economy sank in, U.S. Treasury yields tumbled, with the five-year note hitting a new record low on rising prices for bonds: one of the safest assets.
