Asian stocks slipped to two-week lows on Wednesday as the floor fell out from under crude prices, exposing the deep economic disaster due to the global coronavirus pandemic.
Skittish investors sought the safety of government debt as Brent oil futures plunged for a second day to a low last seen almost two decades ago, fueled by a swelling world crude glut.
The dizzying dive in oil has turned investors away from stocks, and has given fresh urgency to bearish voices who are bracing for a catastrophic decline in asset prices as the COVID-19 pandemic wrecks the world economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8% while Japan’s Nikkei slumped 1.3%.
Earlier this week, the May U.S. WTI futures contract crashed into negative territory for the first time in history.
In addition to massive 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 33.7%.
U.S. June crude futures traded at $12.78 per barrel.
Amazon fell 2.7% on Tuesday.
The risk-averse mood offset news that the U.S. Senate on Tuesday unanimously approved $484 billion in fresh relief for the U.S. economy and hospitals hammered by the pandemic.
Governors of about 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 difficulties 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.
The dollar rose to a two-week high against a basket of currencies, as investors fled riskier assets for the world’s most liquid currency while putting pressure on oil-linked currencies such as the Norwegian crown and the Canadian dollar.