Europe close: Stocks endure heavy selling as crude oil prices crash
Stocks on the Continent were slammed at the start of the week as crude oil prices crashed after Saudi Arabia kicked-off a price war in response to Russia's decision not to support further oil output with a wave of selling ensuing across markets and sectors.
By the end of trading, Brent crude oil was down by 29.1% at $35.06 a barrel, having fallen by as much as 31.5% in overnight trading for its largest one-day decline since January 1991, at the start of the first Gulf War.
"Global stock markets have crashed as we kick off a new week, with European indices seeing their biggest one-day decline since 2016. US markets continue to hit the limit-down threshold, with efforts to curtail the selloff likely to ultimately be a case of delaying the inevitable," said IG market analyst Josh Mahony.
"While all eyes were on the trajectory and impact of the coronavirus, Saudi Arabia’s actions over the weekend added yet another element of panic as crude saw its biggest decline in history (over 30%)."
Against a backdrop of talk in markets of margin calls and enormous volatility, the benchmark Stoxx 600 was 7.4% lower at 339.64, alongside a 7.65% drop for the German Dax to 10,659.49, while Milan's FTSE Mibtel was plummeting 11.08% to 18,494.02.
In parallel, the Stoxx 600's sector gauge for Oil and Gas stocks was down by a record 14.95%, alongside a 43.86% jump in the VStoxx index of volatility for the Euro Stoxx 50 benchmark to 61.89.
That was the second-highest reading for the VStoxx since the Great Financial Crisis in 2008.
Stateside meanwhile, so-called 'level 1 market-wide circuit breakers' were triggered after the S&P 500 benchmark equity gauge started the day 7% lower, resulting in a 15-minute trading halt.
According to analysts at BofA Securities, Brent could now be expected to dip into the $20s over the coming weeks and might even fall into the teens.
Euro/dollar meanwhile jumped 1.16% to 1.1436 as traders priced-in the hit to America's shale oil sector and alongside a 9% drop in the value of the Russian rouble against the Greenback.
At the individual company level on the Stoxx 600, the worst performing issue was Tullow Oil, followed by a who's who of the Oil & Gas sector's biggest names, including BP and Eni.
Petroleum storage outfit Koninklijke Vopak N.V. was one of the just three stocks trading higher out of that 600-strong contingent, together with salmon farming specialist Mowi ASA, gold miner Polymetal and nutrition group Glanbia.
Longer-term Italian government bonds were also unwanted, with the yield on the 10-year BTP leaping 35 basis points to 1.42% after Italian authorities imposed a partial lockdown on the Lombardy region at the weekend, as well as on provinces in Piedmont. Emilia Romagna, Veneto and Marche.
However, come Monday, residents were reportedly being allowed to move freely in and out of those areas simply by saying that their trip was justified.
The news came as the death count from the coronavirus outbreak in Italy increased by 133 on Sunday to hit 355 - making it the deadliest outside China - and the number of infections soared by 26% to reach 6,387 (net of deaths and recoveries).
In the People's Republic of China on the other hand, there was apparently some goods news to be had, with the WHO reporting a further large drop in the number of new coronavirus cases on Sunday to just 46.
Elsewhere on the economic front, Germany's Federal Office of Statistics reported a 3.0% month-on-month jump in the country's industrial production for January (consensus: 1.7%), which came alongside upwards revisions to readings for the previous months.
"Overall, these data are good news. They further evidence that the industrial sector was recovering ahead of the Covid-19 outbreak." said Claus Vistesen at Pantheon Macroeconomics.
"It is futile, however, to use the January headline to say anything about Q1 as a whole. It could be a grim one, at least judging by the slump in China and increasingly likelihood of major quarantining across the European continent."