What caused global markets to sink

World markets plunged after global oil prices nosedived on fears the global economy weakened by a virus outbreak might be awash in too much crude.

Global stock markets and oil prices plunged Monday after a squabble among crude producers jolted investors who already were on edge about the surging costs of a virus outbreak.

The main stock indexes in London and Frankfurt dropped by more 8% at the opening. Tokyo closed down 5.1% while Sydney lost 7.3% and Shanghai was off 3%.

The benchmark U.S. crude price fell as much as 30%, deepening a rout that began when Saudi Arabia, Russia and other major producers failed to agree on how much to cut output to prop up prices.

Investors usually welcome lower energy costs for businesses and consumers. But the abrupt plunge, amid anxiety over the coronavirus, rattled markets.

Central banks worldwide have cut interest rates. But economists warn that while that might help to encourage consumer and corporate spending, it cannot reopen factories that are due to quarantines or a lack of workers and raw materials.

Investors are looking ahead to a meeting Thursday of the European Central Bank, which is widely expected to announce new stimulus measures.

Already last week, global stocks were sinking as the spread of the virus prompted governments to follow China’s lead by imposing travel controls and canceling public events.

The U.S. Federal Reserve’s emergency 0.5% cut in its key lending rate failed to reverse the downturn and the yield on the 10-year Treasury, already at record lows, dropped to 0.47% from 0.7% late Friday.

“Global recession risks have risen,” Moody’s Investors Service said in a report. “A sustained pullback in consumption, coupled with extended closures of businesses, would hurt earnings, drive layoffs and weigh on sentiment.”

In Saudi Arabia, the Riyadh stock exchange suspended trading of state-owned oil giant Saudi Aramco after its share price sank by the daily 10% limit at the opening.

Investors already were on edge about the mounting costs of the coronavirus outbreak that began in China and has disrupted world travel and trade.

India’s Sensex retreated 6.2% to 35,255.73. Markets in Taiwan, New Zealand and Southeast Asia also declined.