The European stock markets have been at a heavy loss all day. The AEX noted a loss of 7 percent in the afternoon, but was just 8.6 percent just before the opening of Wall Street. Frankfurt, London and Paris lose 7 to 8 percent.
The shares of banks, airlines and oil companies are suffering serious damage. Shell loses 14 percent, on opening even 22 percent, which in one fell swoop lost 30 billion euros in market capitalization.
The AEX recorded another three weeks ago peak of 628 points, but dropped to below 500 points in three weeks, a decrease of 20 percent.
The panic meters of the stock markets, the The American VIX index and the Amsterdam VAEX index, which show the agility and nervousness of the trade, have shot through the roof and have not been this high since the end of 2008. Investors want to get rid of their shares en masse, reinforced by the automatic buying and selling programs.
Corona and oil
The extremely large price falls are the result of the global problems caused by the corona crisis and the unexpected sharp fall in oil prices. There is a growing fear in the markets that the ever-expanding corona virus will cause much more damage to the economy. The long-term disruption of production and trade is putting all sorts of large and small companies in trouble and the growth of the world economy is being reduced. The word recession is falling more and more often.
On top of that there are falling oil prices. The slowdown in the growth of the world economy due to the corona virus is depressing energy demand. Since the outbreak, oil prices have fallen steadily from $ 68 to $ 50. OPEC, the cartel of oil-producing countries, wanted to stop falling oil prices by further limiting oil production, but Russia did not want to cooperate in this. Russia is the third largest oil producer in the world, but not a member of OPEC.
Saudi Arabia, the OPEC leader, then decided to lower oil prices and open the oil tap further, so as to force the Russians to participate in a price war. Pumping up more oil in a market that requires less oil, pushes prices down and costs oil countries billions. The sharp fall in prices may force the Russians to return to the negotiating table, that is the idea. But it doesn’t look like that. Russia has already announced an increase in oil production.
The oil price fell by a little 30 percent after Saudi Arabia’s threat to increase oil production. A barrel of Brent crude oil costs $ 36, half that of oil in early January.