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Futures frozen as US awaits Monday opening

First time futures limit reached since 2016 election

Trading in futures on the Dow Jones Industrial Average and the S&P 500 were frozen on Sunday night after both fell by more than their 5 per cent daily limit. This was the first such freeze since the election of Donald Trump as president in 2016.

While the coronavirus outbreak has affected the world economy since mid-January, Saudi Arabia’s recent decision to slash its oil price has sent shockwaves around global markets.

After Russia rejected OPEC’s proposal to cut oil production in order to buoy the commodity’s price, Saudi Arabia flooded the market. This triggered the steepest drop in oil prices since the First Gulf War in 1991.

Futures on the Dow Jones indicate an opening drop of more than 1,300 points, while S&P futures suggest a drop of at least 5 per cent.

Such significant drops have already occurred in earlier markets. Japan’s Nikkei 225 and Hong Kong’s Hang Seng indices fell by 5.07 and 4.23 per cent respectively.

Western European markets have fared even worse. By early-afternoon trading the leading indices in France, Germany, Spain, Italy and the Netherlands had all fallen by more than 7 per cent.

Amid the ongoing economic uncertainty investors continue to flock to safe havens such as bonds and some precious metals. The yield on 10-year Treasury bonds reached an all-time low of 0.318 in overnight trading, while the 30-year Treasury yield fell beyond 1 per cent for the first time in history, to as low as 0.702 per cent.

While these two key economic indicators have now increased slightly, both are still much lower than they were only weeks ago.

Pre-market, energy-related stocks are making the biggest moves. Exxon Mobil (XOM) and Chevron (CVX) are expected to suffer from the recent oil price drop.

Travel and tourism stocks look set to continue to struggle, particularly cruise lines after the US State Department recommended that Americans avoid trips on cruise ships.

Despite the widespread stockpiling in the United States and elsewhere, there is uncertainty as to what direction Costco (COST) stock will take. While the wholesaler is still up almost 6 per cent on the year-to-date, it did fall in Friday trading and momentum is looking downward in pre-market trading.

FURTHER READING: Oil price plunge triggers stock market freefall

FURTHER READING: Bitcoin falls to two-month low

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