At least $120billion has been wiped from Australian shares as a dive in crude oil prices sparked more coronavirus panic and a major bank predicted a recession.
The benchmark S&P/ASX200 plunged 6.24 per cent by lunchtime as the Australian dollar fell to its weakest level in 11 years – or since the Global Financial Crisis.
By the close of trade, Westpac became the first major bank in Australia to predict a recession in 2020, forecasting a decline of 0.3 per cent in both the March and June quarters.
Should their prediction come true, the Australian economy would be experiencing the first technical recession since mid-1991.
On Monday, the market capitalisation of the Australian Securities Exchange had plummeted by $116.7billion as of 1.08pm AEDT.
The 388-point fall, to 5,828 points, marked the worst one-day fall since November 2008 at the height of the global financial crisis.
Since peaking on February 20, the Australian share market has lost 19 per cent or $360billion, with ASX finishing 5.66 per cent weaker.
Energy stocks took the biggest hit on Monday with Oil Search plunging 27 per cent to $3.74.
This occurred as the Brent crude oil price fell by 30 per cent since Friday to a four-year low of $US31 a barrel.
During a volatile session, the Australian dollar plunged to 63.04 US cents, the lowest since March 2009.
CommSec market analyst James Tao said investors were particularly worried about a recession occurring in Australia for the first time since 1991 as coronavirus hit global supply chains.
‘Coronavirus concerns alone, some are saying this will lead to a recession or quite a sharp economic slowdown in the economy,’ he told Daily Mail Australia on Monday.
CMC Markets chief market strategist Michael McCarthy said coronavirus fears and a slump in crude oil prices were behind the share market plunge.
‘Definitely since GFC impacts we haven’t seen falls like this in 11 years,’ he told Daily Mail Australia.
‘Remain braced. This sort of price action suggests we’ve got a way to go yet so keep your powder dry, it’s going to get worse before it gets better.
More than $120billion has been wiped from Australian shares within minutes as new coronavirus cases spark panic among investors
‘The specific trigger is a huge plunge in crude oil prices.’
Global share markets have plunged after Russia reneged on an agreement with OPEC oil producing nations in the Middle East to restrict the supply of crude oil.
‘Oil prices fell 10 per cent on Friday night. This morning when futures opened, they fell another 25 per cent,’ Mr McCarthy said.
‘That rout in energy prices is really feeding into the fears that were already existing.
‘This shift on the supply side just shows how sensitive markets are to any real developments – supply increasing in a weak demand environment, markets tank.’
Mr McCarthy said the lockdown of Italy’s Lombardy region was stirring more fears of coronavirus hitting global growth.
‘The coronavirus remains a great unknown – we’re pretty sure it’s going to have an economic impact,’ he said.
‘Nobody can say how big at this stage.’
CMC Markets chief strategist Michael McCarthy said the lockdown of Italy’s Lombardy region (San Marco Square pictured) was stirring more fears of coronavirus hitting global growth
Treasurer Josh Frydenberg blamed Monday’s share market plunge on the Russians failing to reach an agreement with the Saudis on oil production.
‘Market volatility is not uncommon at times like this,’ he told reporters in Canberra. ‘We’ve seen a steep drop in oil prices in recent weeks.
‘Our financial system remains strong, our economy remains strong.’
Travel stocks also took a hit with Flight Centre shares tumbling 9.2 per cent to $24.075 after its 10,000 employees were sent an email advising them to considering working four days a week instead of five.
Qantas shares fell 8.6 per cent to $4.26.
Across the Tasman, Air New Zealand chief executive Greg Foran, the father of Bulldogs rugby league star Kieran Foran, proposed taking a 15 per cent pay cut.
This would see his pay fall by $A239,000 to $1.58million to cope with a weakening aviation environment.