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* Oil falls more than 30% as Saudi Arabia cuts prices
* Energy firms suffer double-digit drops
* Pan-Europe stocks enter bear market
* SPDR S&P 500 ETF down 7.4% in premarket trade
* Fed funds fully price for 75 bps cut in March
* 30-year Treasury yields drop below 1%, drag dollar down
* U.S. crude vs energy sector ETFs: https://tmsnrt.rs/2TPLlcD
By Karin Strohecker
LONDON, March 9 (Reuters) - Global stocks plunged on Monday
and prices for crude oil tumbled as much as 33% after Saudi
Arabia launched a price war with Russia, sending investors
already worried by the coronavirus fleeing for the safety of
bonds and the yen.
Saudi Arabia had stunned markets with plans to raise its
production significantly after the collapse of OPEC's supply cut
agreement with Russia - a grab for market share reminiscent of a
drive in 2014 that sent prices down by about two-thirds.
Brent crude and U.S. crude futures slid as
much as $14 to trade at $31.02 and $27.34 a barrel in chaotic
trade. They recovered some of their losses but were still down
23% - on track for their biggest daily fall since 1991, the
start of the first Gulf War.
European equity markets suffered hefty losses with London
, Frankfurt and Paris tumbling between
7-8%. Italy's main index slumped 11% after the
government ordered a lockdown of large parts of the north of the
country, including the financial capital Milan.
The pan-regional STOXX 600 fell into bear market
territory -- a drop of more than 20% from its February peak. Oil
stocks sank, with Premier Oil down 51% and energy giant
BP trading 21% lower.
Heavy selling was set to continue on Wall Street with U.S.
futures hitting their down limit after tumbling 5% on
Sunday. The SPDR S&P 500 exchange traded fund
is down 7.4% in premarket trading.
"We are seeing this week, finally, a full-scale liquidation
and signs of capitulation, full-scale panic - we see this in
every asset," said Paul O'Connor, head of multi-asset at Janus
Henderson.
"The oil price plunge adds a huge disruptive dynamic to
markets that are already very fragile - investors are looking
for losers in this move."
The losses in Europe followed sharp declines in Asia. MSCI's
broadest index of Asia-Pacific shares ex-Japan
lost 4.4% in its worst day since August 2015 and Japan's Nikkei
dropped 5.1%. Australia's commodity-heavy market
closed down 7.3%, its biggest daily fall since the 2008 global
financial crisis.
Investors piled into safe-haven bonds, driving the 30-year
U.S. bond yields beneath 1% on bets that the Federal
Reserve will be forced to cut interest rates by at least 75
basis points at its March 18 meeting, after having already
delivered an emergency easing last week.
The U.S. 10-year Treasury yield fell to as low as 0.318%
in its biggest daily fall since 2011 - during a
sovereign debt crisis across the euro zone.
The number of people infected with the coronavirus rose
above 110,000, and 3,800 have died from the virus.
"Markets appear to be capitulating as the virus arrives in
the US, the heart of global finance," said BofA's David Hauner.
There were mounting worries that U.S. oil producers that had
issued a lot of debt would be made uneconomic by the price drop.
The mood was also hit by North Korea firing three
projectiles off its eastern coast.
Noting that many central banks had little scope to ease
further, Martin Whetton, head of bond & rates strategy at CBA,
said "let's hope we start to see some more clarity on the
reaction."
BOND BONANZA
Markets fully priced in an easing of 75 basis points
from the Fed on March 18, while a cut to near zero was now seen
as likely by April.
The European Central Bank meets on Thursday and will be
under intense pressure to act, but rates are already deeply
negative.
"This week’s ECB meeting will be the first test case for ECB
President Christine Lagarde," ING's eurozone chief economist
Carsten Brzeski wrote in a note. "With hardly any ammunition
left and confronted with an external shock which cannot be tamed
by economic policies, the ECB will have to balance carefully
between words and deeds."
The 10-year Bund yield - the euro zone's leading
safe asset - fell to a new record low of -0.863% while inflation
expectations for the euro zone sank below 1% for the first time.
Data suggested the global economy toppled into recession
this quarter. Figures out from China over the weekend showed
exports fell 17.2% in January-February from a year earlier.
The fall in U.S. yields and Fed rate expectations pushed
the dollar to its largest weekly loss in four years before it
recovered some ground..
The dollar extended its slide to 101.58 yen, depths
not seen since late 2016. It was last down nearly 3% at 102.42.
The euro shot to the highest in over 13 months at $1.1492
, to be last at $1.1410.
Gold initially cleared $1,700 per ounce to a fresh
seven-year peak, only to fall back to $1,677.4 amid talk some
investors were having to sell to raise cash to cover margin
calls in stocks.
(Additional reporting by Sujata Rao and Thyagaraju Adinarayan
in London, Wayne Cole in Sydney and Sumeet Chatterjee in Hong
Kong, Editing by Catherine Evans, Timothy Heritage and Toby
Chopra)
