While the financial markets are worried about the drop in oil prices and the economic effects of the coronavirus epidemic, the Paris Stock Exchange collapsed on Monday morning (-7.20%), after a first dive on Friday (4.14%).
At 10:02 am, the CAC 40 index fell from 369 points to 4,769.31 points. "The equity markets start the week on a colossal sales movement," said Ipek Ozkardeskaya, analyst at Swissquote Bank.
Russia's refusal at issue
"Russia has punched the face of investors by refusing to follow OPEC to cut production to meet the collapse in oil demand caused by the coronavirus at the Vienna summit last week," said he. Discussions between OPEC and its allies, mainly Russia, failed on Friday. Saudi Arabia's decision to enter a price war with Russia after it refused to participate in a further cut in production quotas at the meeting last week, leads oil prices to unscrew more than 30%, a drop observed in 1991 at the time of the Gulf War.
"The fall of oil threatens the finances of producing countries", writes Tangi le Liboux, strategist at Aurel BGC, while "the economy is gradually suffocating with hundreds of thousands of jobs (affected) in air transport, tourism, hotels and restaurants, events, among many other activities ”, due to the coronavirus epidemic. The health balance continued to worsen over the weekend, as the disease receded for several weeks in China, where the coronavirus appeared in December.
Economic measures taken in several countries
Several countries have implemented quarantine measures since the appearance of the new coronavirus. Italy took drastic measures on Sunday with the quarantine of a quarter of the territory, including its economic lung, which goes from Milan to Venice. "Investors still fear that the spread of the coronavirus will be underestimated by economists and businesses," said John Plassard, investment specialist at Mirabaud. The German government announced on Monday morning a package of measures to support its economy in the face of the impact of the coronavirus, which raises fears of a recession in the leading European power.
These measures include making recourse easier for companies in difficulty with partial unemployment of their employees, granting loans in the event of cash flow difficulties and blocking an additional envelope of 12.8 billion euros over four years for infrastructure investments. In France, around 900 companies impacted by the spread of the new coronavirus have asked to benefit from partial unemployment measures for around 15,000 workers, Labor Minister Muriel Pénicaud said on Sunday.
Raw materials hit hard
The epidemic continues to spread in the United States, where US President Donald Trump defended his government's action on Sunday after criticism of the slow and unsuccessful fight against the coronavirus. "In the United States, which derives around 70% of its gross domestic product from household consumption, quarantines across the country could lead to significant drops in economic statistics for the month of March (or even beyond) and would increase the risk of a recession in the world's leading economy, "warns Vincent Boy, market analyst at IG France.
On the CAC 40, the raw materials sector was hit head-on by the drop in oil prices, starting with ArcelorMittal (-15.19% to 9.81 points). In the oil sector Total plunged from 12.26% to 32.60 euros, TechnipFMC from 23.14% to 8.67 euros and CGG (-35.1% to 1.28 euros). In the aeronautics sector, Air France-KLM collapsed from 6.80% to 5.32 euros, Airbus from 9.25% to 90.43 euros. The bankers continued their descent into hell: BNP Paribas (-9.81% to 34.74 euros), Crefit Agricole (-9.66% to 8.40 euros) and Société Générale (-13.3% to 18.55 euros). In tourism, Accor fell 7.57% to 28.46 euros.
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