Dow drops 7.8% as free-fall in oil, virus fears slam markets

NEW YORK (AP) — The Dow Jones Industrial Average sank 7.8%, its steepest drop since the financial crisis of 2008, as a free-fall in oil prices and worsening fears of fallout from the spreading coronavirus outbreak seize markets.

Trader Gregory Rowe prepares for the day's activity on the floor of the New York Stock Exchange, Monday, March 9, 2020. (AP Photo/Richard Drew)

The sharp drops triggered the first automatic halts in trading in two decades.

The price of oil plunged nearly 25% after Saudi Arabia indicated it would ramp up production after Russia refused to production cutbacks in response to falling demand.

Europe fell into a bear market. U.S. stocks are now down 19% from the peak they reached last month.

Bond yields plumbed new lows as investors sought safety.

The state oil giant Saudi Aramco led the financial losses, dropping by 10% on Riyadh’s Tadawul stock exchange. That forced a halt to Aramco’s trading. Other Mideast markets fell as well.

The new coronavirus has affected global energy prices, and OPEC failed to make a production cut deal with Russia last week. Global oil prices have suffered their worst losses since the start of the 1991 Gulf War.

The Saudis made a play to grab market share by increasing output, suggesting more oil on the market just as demand is plunging.

Boursa Kuwait shut down within 30 minutes of opening Monday as stocks again dropped by 10%, the third such emergency halt to trading in recent days.

World oil demand is expected to fall this year for the first time since the global financial crisis in 2009, the International Energy Agency said Monday.

In its monthly report, the agency says it has cut its forecast for global oil demand by 1.1 million barrels a day as the new coronavirus wreaks havoc on the global economy. That will leave demand 90,000 barrels a day below the previous year.

The IEA, which advises mainly oil-importing countries on energy matters, says it still expects demand to return close to normal in the second half of this year. But it says that the outlook is highly uncertain and depends on how governments react to halt the spread of the virus.

The publication of the report comes as the price of crude was down about 20% on Monday.

Earlier Monday, coronavirus concerns led Saudi Arabia to cut off air and sea travel to and from nine countries: Bahrain, Egypt, Iraq, Italy, Kuwait, Lebanon, South Korea, Syria and the United Arab Emirates. That comes after the kingdom earlier closed off its land borders as well.

Neighboring Qatar has halted travel to 15 nations.

In the United States, eyes are fixed on cruise ships on opposite sides of the country that were kept at bay over fears of virus threats.

More than a quarter of Italy’s people are under a lockdown and sites from the Sistine Chapel to the ruins of Pompeii are closed.

China and South Korea each reported dozens of new infections Monday, but they were down precipitously from their highs.

UN sees $1-2 trillion hit to world economy

A key U.N. trade organization is warning of looming recession in the world economy as countries respond to the novel coronavirus outbreak.

Richard Kozul-Wright of the U.N. Conference on Trade and Development predicts a global "hit" to the world economy of between $1 trillion and $2 trillion this year, and cautions it could be worse.

Even before oil markets plunged Monday, Kozul-Wright said countries whose economies are largely dependent on production of commodities will face pressures as an economic slowdown reduces demand for their products.

Kozul-Wright said the European Union, which faced poor economic prospects at the end of 2019, was "almost certain" to tumble into recession this year, pointing especially to pressures in Germany and Italy.

He was speaking at a release of a new UNCTAD report examining the possible impact of the COVID-19 outbreak and forecasting that annual global growth will fall below 2.5% this year.

Copyright 2020 Associated Press. All rights reserved.