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US stocks rout deepens as oil prices tumble

07 March 2020, MVT 15:36
A car drives in front of the OPEC office building during the 178th meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna, Austria, on March 6, 2020. - All eyes are on Russia at the gathering of OPEC countries and their allies, with the cartel hoping to convince Moscow to back drastic production cuts to counter the effects of the coronavirus outbreak. (Photo by ALEX HALADA / AFP)
07 March 2020, MVT 15:36

Wall Street stocks fell sharply Friday afternoon and oil prices tumbled around 10 percent as markets headed to another ugly finale on worries the coronavirus will lead to a global recession.

Near 2025 hrs GMT, the Dow Jones Industrial Average was down 2.7 percent at 25,415.78.

The broad-based S&P 500 sank 3.4 percent to 2,921.19, while the tech-rich Nasdaq Composite Index tumbled 3.5 percent to 8,378.03.

Traders essentially ignored strong US jobs data for February, viewing the report as outdated and not representative of an economy now pressured by worries that include supply chain disruption in China, a contraction of global travel and anxiety that fear of illness will stifle the consumer-driven US economy.

Demand remained elevated for secure assets such as bonds, with the yield on the 10-year US Treasury note falling to a fresh all-time low.

The rout in the equity market has wiped out roughly USD 4 trillion of household worth in the last two weeks, according to IHS.

"Unless reversed fully and quickly, this will weigh on consumer spending over the next few years," IHS said in a report. "More immediately, weakening consumer attitudes will likely slow consumer spending in the second quarter, and businesses are likely to put some investment plans on hold until the outlook clears up."

In the oil market, the US benchmark futures contract, West Texas Intermediate for delivery in April, ended at USD 41.28 a barrel, down 10.1 percent.

In London, Brent oil futures for delivery in May finished down 9.4 percent at USD 45.27 per barrel. Both WTI and Brent ended at their lowest levels since April 2016.

The big drop came after major producers failed to agree to production cuts after Russia balked at a proposal by the Organization of the Petroleum Exporting Countries (OPEC) to trim crude output by 1.5 million barrels per day in face of the lower demand due to the epidemic.

Andrew Lebow of Commodity Research Group said oil prices were getting low enough to threaten some US producers, raising the prospect of loan defaults, or even bankruptcy.

"At the very least, there will be some negotiating on the loans, capital is already tight," Lebow told AFP. "If we're here for a while, that's problematic."

New York, United States | AFP

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