Oil price crash causes worst day for markets since depths of financial crisis

10 March 2020

Oil price crash causes worst day for markets since depths of financial crisis

The Weekly Note is brought to you by the ALPHA: r² discretionary service team.

Market news

Equity markets are rebounding sharply today, but are not close to covering the losses suffered yesterday, when multiple headline indices suffered the worst single session since the depths of the 2008 financial crisis. The FTSE 100 has been up over 4% this morning and Wall Street futures indicate a similar uplift for US stocks. This can be attributed to optimistic talk of overselling and policy response, but with economic and financial forecasts being continuously re-written, the direction of travel for markets is extremely uncertain. 

Yesterday's sell-off saw the FTSE 100 and S&P 500 fall 7.25% and 7.60% respectively, pushing London's index into bear market territory. The trigger for the rout was the oil price, which plummeted around 24% after OPEC and Russia failed to reach an agreement on price-supporting production cuts. Instead, both Saudi Arabia and Russia pledged to raise output, essentially starting a price war. It was the biggest one-day decline for oil prices since the Gulf War in the early 1990s. 

Investors were already working hard to digest the fast-evolving coronavirus situation. Italy has hastily placed its entire population of 60m people in quarantine following the rapid acceleration of its number of cases. It is unlikely that Italy will be alone in implementing such extreme measures, perhaps merely a few weeks ahead of some other countries. 

As such, expectations of policy responses have risen. The Federal Reserve cut its rates last week and is expected to follow up with significant additional support this week. The entire Treasury yield curve traded below 1% for the first time on Monday. President Trump said that he would announce a relief package today, potentially easing the financial burden on workers, with paid sick leave thought to be on the agenda. 

In the UK, chancellor Rishi Sunak has said he will deliver “whatever action is required” to deal with the coronavirus crisis, ahead of his first budget speech on Wednesday. MPs have been urging the government to give small businesses tax concessions to help them battle falling consumer demand and higher sick pay costs. 


Stock focus

Oil companies suffered their worst day in over 20 years yesterday after Brent crude fell to just $35 a barrel. Royal Dutch Shell and BP, two of FTSE 100's most valuable companies and biggest dividend payers, fell 18% and 20% respectively. From the FTSE 250, Premier Oil plunged 57% lower while Tullow Oil closed down 32%. 

A report from the China Academy of Information and Communications Technology has shown that iPhone sales in China fell 61% last month, compared to the previous year. The drastic fall is a direct consequence of the coronavirus crisis and shows how strict restrictions on large populations will affect companies' earnings. Sales in China make up about 15% of Apple's total revenue. 

M&G has warned that the virus-related market turmoil is weakening its capital position, but that its Solvency II coverage ratio was “within our risk appetite”. Reporting its results this morning, M&G, which demerged from  Prudential last year, announced adjusted operating profit before tax of £1.15bn. Net outflows for the year totalled £1.3bn. 

Tesco has agreed to sell its Asian business to one of Thailand's richest conglomerates for £8.2bn. The deal follows a strategic review in December following “inbound interest” and the price paid by Charoen Pokphand Group has been well-received. Tesco says it plans to return most of the windfall to shareholders and its pension scheme. 

Flybe became a major victim of the coronavirus last week, sinking into administration after the virus hit flight bookings. The impact on new bookings proved the final straw for the airline, which operates almost 40% of the UK's domestic flights, after the government refused to provide a £100m emergency loan. More than 2,000 jobs will be lost and regional airports are also at risk.


Subscribe to the Weekly Note!

Subscribe today and email [email protected] to register your interest, and receive the full Weekly Note in your inbox every Tuesday.


Walker Crips
Old Change House
128 Queen Victoria Street
London EC4V 4BJ

020 3100 8000
[email protected]


Important information

This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.

Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England number 4774117.

Oil price crash causes worst day for markets since depths of financial crisis

Important note

No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.

Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.

Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.