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(Alliance News) - The FTSE 100 on Monday posted its biggest one-day slide since 2008 after oil prices dived on a Saudi price war and Italy placed a quarter of its population under lockdown as coronavirus cases continued to climb.
"It has been another day for the history books. The losses in equities have been easily overshadowed by the high drama in oil markets, but a day that has seen a near 9% fall for the Dow before an almost 5% rebound is not one that will be forgotten quickly," said Chris Beauchamp, chief market analyst at IG.
The FTSE 100 index closed down 496.78 points, or 7.7%, at 5,965.77.
The FTSE 250 ended down 1,199.36 points, or 6.4%, at 17,547.15, and the AIM All-Share closed down 50.04 points, or 5.9%, at 800.90.
The Cboe UK 100 ended down 7.4% at 10,153.08, the Cboe UK 250 closed down 6.6% at 15,630.29, and the Cboe Small Companies ended down 4.1% at 10,841.76.
In European equities on Monday, the CAC 40 in Paris ended down 8.4%, while the DAX 30 in Frankfurt slid 7.9%.
Brent oil was quoted at USD36.22 a barrel at the London equities close Monday from USD46.00 late Friday.
Saudi Arabia launched an all-out oil war Sunday with the biggest cut in its prices in the last 20 years, Bloomberg News reported, after a failure by cartel OPEC and its allies to clinch a deal to cut production.
A meeting of main producers was expected to agree to deeper cuts to counter the impact of the new coronavirus, but Russia refused to tighten supply.
In response, the Gulf powerhouse cut its price for April delivery by USD4 to USD6 a barrel to Asia and USD7 to the US, with Aramco selling its Arabian Light at an unprecedented USD10.25 a barrel less than Brent to Europe, Bloomberg reported.
Just after markets opened, crude prices briefly dropped as much as 30% before gaining back some ground – the biggest fall since the Gulf War in 1991. Oil traded at USD31.26 overnight, its worst price in four years.
"Whether Saudi Arabia disagreed with the Russian position or whether the Russian arguments around the ineffectiveness of cuts to deal with virus swayed the Saudis, the bottom line is that oil markets are about to suffer a positive supply shock just as a major negative demand shock is playing out," said Bank of America.
Oil's plummet hit London heavyweights BP and Royal Dutch Shell. BP shares closed down 19% while Shell 'A' shares shed 18% and 'B' shares also 18%.
Shell is the largest company listed in London by market capitalisation.
There were also losses for oil firms in the FTSE 250, with Premier Oil slumping 57% and Tullow Oil tumbling 31%.
Oil majors were amongst the firms dragging down the Dow Jones in New York, with Chevron shares down 13% and ExxonMobil 8.3% lower.
Stocks in New York were sharply in the red at the London equities close, with the Dow Jones down 5.0%, the S&P 500 index down 4.9%, and the Nasdaq Composite down 4.3%.
Just after Wall Street opened, a trading halt was triggered for 15 minutes as stocks plunged. The suspension was triggered after the S&P 500's losses hit 7%.
Meanwhile, yields on US Treasuries plummeted to fresh all-time lows as demand surged for refuge assets such as bonds.
US President Donald Trump is said to be considering options later Monday for emergency economic assistance to Americans hit by the coronavirus fallout.
Measures due to be presented to Trump after he returns from a weekend in Florida will include expanding paid sick leave, aid for small businesses and tax deferrals for the travel and hotel industries, which have been especially impacted, the Washington Post reported.
CNBC reported that a meeting was scheduled where the economic team would give Trump "a full menu of options."
The US has at least 22 deaths from the coronavirus and 566 confirmed cases, according to a Johns Hopkins tally.
Italy now has the highest number of confirmed cases outside China at 7,375, and its death toll stands at 366.
At the weekend, Italy imposed restrictions on around 16 million people for nearly a month in a bid to stop the spread of the disease there. Across the whole of Italy, museums and cultural institutions are closed and all sporting fixtures must be played behind closed doors.
"Dealers are terrified that more swathes of Europe will go into quarantine, and that has been a factor in the brutal sell-off in stocks. In this part of the world there are serious concerns that some economies could slow down or even get pushed into a recession," said David Madden at CMC Markets.
While equities were down, the safe haven Japanese yen sparkled. Against the yen, the dollar was trading at JPY102.10 compared to JPY105.23 late Friday.
Gold, meanwhile, had pared gains to be quoted at USD1,668.05 an ounce at the London equities close Monday against USD1,665.00 at the close on Friday.
The pound was quoted at USD1.3119 at the London equities close Monday, compared to USD1.3020 at the close on Friday. The euro stood at USD1.1462, against USD1.1325.
The best performers in a red-drenched FTSE 100 on Monday were gold and silver miner Polymetal International, up 0.6%, and supermarket Tesco, which ended flat.
Tesco said it has agreed to sell its Thai and Malaysian operations to a combination of CP Group entities for USD10.6 billion on a cash and debt free basis.
Tesco also said it will return GBP5.0 billion to its shareholders via a special dividend.
The grocer said the sale of these south-east Asian businesses will further de-risk its business by reducing indebtedness through a GBP2.5 billion pension contribution that is expected to eliminate the current funding deficit and "significantly" reduce the prospect of having to make further pension deficit contributions in the future.
The disposal will also further simplify Tesco's operations, it said.
In the FTSE 250, Network International closed down 12% as the payments solutions provider said it has seen a reduction in client transaction volumes in recent weeks amid the coronavirus outbreak.
Network International reported pretax profit for 2019 of USD65.6 million, up 14%, as revenue rose by 12% to USD334.9 million.
However, the firm noted coronavirus is hitting global travel and spending patterns.
"Although we are diversified through our presence in multiple geographies and across the payments value chain, we have seen some reduction in client transaction volumes in the recent weeks. The full impact remains uncertain and will depend on the length and severity of the effect of the coronavirus on economic activity in our markets, and we will continue to monitor the situation closely," said Network International.
In the corporate calendar for Tuesday are annual results from investment manager Standard Life Aberdeen, events and publishing company Informa, and Prudential spin-off M&G.
In Tuesday's economic calendar, there is the British Retail Consortium's like-for-like sales at 0001 GMT with Chinese inflation at 0130 GMT. Eurozone employment and GDP are at 1000 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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