US stocks tumble as oil price plunges and lawmakers debate lockdowns
US stocks have tumbled at the open as plunging crude oil prices and debates over the timetable for lifting coronavirus lockdown measures weigh on investor sentiment.
The Dow Jones index dropped 1.5 per cent in early trading. The S&P 500 fell 1.2 per cent and the Nasdaq slipped 0.8 per cent.
European shares also turned lower. The UK’s FTSE 100 was down 0.1 per cent while the pan-European Stoxx 600 fell 0.4 per cent. Germany’s Dax was down one per cent.
Chief among investor concerns was the slump in oil prices, which hit US shale producers hard and signals pessimism about future demand.
WTI crude, the US benchmark, crashed 35 per cent to a 20-year low of $11.90 per barrel. Brent crude fell five per cent to $26.70 per barrel.
The astonishing collapse in oil prices – WTI traded at more than $60 per barrel at the start of January – was accelerated today by fears that storage capacity could soon run out as demand evaporates, spelling trouble for producers.
“As gasoline tanks begin to fill, the demand for crude oil drops and this development has increased demand for storage,” said Ole Hansen, head of commodities at Saxo Bank.
“With storage filling up, the price of oil for immediate delivery has tanked.”
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Analysts also said the price was tumbling because the current futures contract expires tomorrow, making investors reluctant to buy it.
The oil price fall hit energy stocks, with the S&P 500 energy index down 2.6 per cent in early trading.
US stocks fall amid uncertainty about reopening economies
Debates about waking economies from their enforced hibernations also weighed on investors minds.
US President Donald Trump and state governors last week signalled they were working on plans to ease lockdown measures, cheering markets.
But tensions have risen as state governors say there is a shortage of tests that are crucial if restrictions are going to be lifted. Trump has also drawn criticism for seemingly encouraging anti-lockdown protests.
The return of investor uncertainty today came after a sustained rally that has seen Wall Street and European stocks bounce back in recent weeks after crashing in February and early March.
Rupert Thompson, chief investment officer at Kingswood, said that although the rebound had been swift, there is still a great deal of uncertainty.
“What makes us cautious and fearful that markets could fall back again, is that they now seem to be pricing in a fairly rapid return to normality which is far from assured,” he said.