NEW YORK/LONDON (Reuters) - Global stock markets plunged on Monday and oil prices tumbled by as much as a third after Saudi Arabia launched a price war with Russia, sending investors already spooked by the coronavirus outbreak fleeing for the safety of bonds and the Japanese yen.
A benchmark pan-Europe index entered bear market territory and a 7% slide in the S&P 500 at the open on Wall Street triggered a circuit-breaker put in place after the financial crisis a decade ago, halting U.S. stock trading for 15 minutes.
The yield on the 10-year U.S. Treasury note slid as low as 0.318% - a level unthinkable just a week ago - and German government debt yields set record lows as investors rushed to cut risk assets and snap up safe-havens. Gold briefly topped $1,700 an ounce for the first time since 2012 and is up more than 10% so far this year.
The rout's depth, sparked after Saudi Arabia stunned markets on Sunday with plans to hike oil production sharply following the collapse of the Organization of the Petroleum Exporting Countries' supply-cut agreement with Russia, unnerved investors.
"The oil price plunge adds a huge disruptive dynamic to markets that are already very fragile," said Paul O'Connor, multi-asset head at Janus Henderson in London.
"We are seeing this week, finally, a full-scale liquidation and signs of capitulation, full-scale panic - we see this in every asset," O'Connor said.
Jim Vogel, interest rate strategist at FHN Financial in Memphis, Tennessee, said that "nobody thought that Saudi Arabia would start a price war. Suddenly you have to re-evaluate what else could impact this."
Saudi Arabia's grab for market share was reminiscent of a drive in 2014 that sent prices down by about two-thirds, while the renewed plunge on Wall Street came exactly 11 years after U.S. stocks touched bottom during the financial crisis. [O/R]
Brent <LCOc1> and U.S. crude <CLc1> futures slid $14 a barrel to as low as $31.02 and $27.34 in volatile trade.
Both crude benchmarks recouped some losses but still fell almost 25% in their biggest daily drop since 1991, the start of the first Gulf War. [O/R]
Brent <LCOc1> fell $10.91 to settle at $34.36 a barrel, while U.S. crude <CLc1> settled down $10.15 at $31.13 a barrel.
The Dow fell a record 2,000 points when trading opened and the S&P 500 was poised for its largest single-day percentage drop since December 2008, the depths of the financial crisis.
The benchmark index was almost 19% below its all-time high of Feb 19 - just 1 percentage point shy of bear territory.
Equity markets in Frankfurt <.GDAXI> and Paris <.FCHI> tumbled about 8.5% and London <.FTSE> tanked 11%. Italy's main index <.FTMIB> slumped 14.3% after the government over the weekend ordered a lockdown of large parts of the north of the country, including the financial capital, Milan.
The pan-regional STOXX 600 <.STOXX> fell into bear market territory from an all-time high in February. Oil stocks bore the brunt of losses, with energy giants BP <BP.L> 19.5% lower and Royal Dutch Shell </RDSb.L> off 18.2%.
The energy sector in Europe was at lowest since 1997.
The losses in Europe followed sharp declines in Asia. MSCI's broadest index of Asia-Pacific shares ex-Japan <.MIAPJ0000PUS> lost 4.4% in its worst day since August 2015 and Japan's Nikkei <.N225> dropped 5.1%. Australia's commodity-heavy market <.AXJO> closed down 7.3%, its biggest daily fall since 2008.
'DO SOMETHING!'
Investors piled into safe-haven debt, driving the 30-year U.S. Treasury yield <US30YT=RR> below 1% on bets that the Federal Reserve will cut interest rates by at least 75 basis points when policy-makers meet next week.
The Fed last week cut rates by half a percentage point after an emergency meeting.
Katie Nixon, chief investment officer at Northern Trust Wealth Management in Chicago, said people know the turbulence will pass as in past crises and that ultimately, markets recover, but emotions can overcome rational behavior."Our hearts, however, tell us to, 'Do something!' The sense of market chaos feeds into our most damaging behavioral biases," Nixon said in a note to high net-worth clients.
The number of people worldwide infected with the coronavirus rose above 111,600, and 3,800 have died from the virus.
There were mounting worries that U.S. oil producers carrying a lot of debt would be made uneconomic by the price drop.
The mood was also hit by North Korea's firing three projectiles off its eastern coast.
BOND BONANZA
The European Central Bank meets on Thursday and will be under intense pressure to act, but rates are already deeply negative.
The 10-year Bund yield <DE10YT=RR> - the euro zone's leading safe asset - fell to a record low of -0.906%, while inflation expectations for the euro zone sank below 1% for the first time.
Data suggested the global economy toppled into recession this quarter. Figures from China over the weekend showed exports fell 17.2% in January-February from a year earlier.
The fall in U.S. yields and Fed rate expectations pushed the dollar to its largest weekly loss in four years before it recovered some ground. <=USD>. [USD/]
The dollar extended its slide to 101.20 yen <JPY=>, depths not seen since late 2016. It was last down 3.1% at 102.07.
The euro shot to the highest in over 13 months at $1.1492 <EUR=> and was last at $1.1431.
Gold <XAU=> retreated from the $1,700 level it briefly touched as investors sold bullion to cover margin calls in plummeting securities, overshadowing the metal's safe-haven status. U.S. gold futures <GCcv1> settled up 0.2% at 1,675.70 an ounce.
(Reporting by Herb Lash; Additional reporting by Ross Kerber in Boston, Sujata Rao and Thyagaraju Adinarayan in London, Wayne Cole in Sydney and Sumeet Chatterjee in Hong Kong, Editing by Catherine Evans, Timothy Heritage, Toby Chopra and Dan Grebler)
