United States, Saudi Arabia, Corona discussed on The Journal.

The Journal.


In Saudi Arabia Sunday is the start of the work week which also means the country's stock market is open and this Sunday started off badly so the first thing that happens is Sunday afternoon the first market really to open was in. Riyadh reopens in Aramco. Crashes Stock for ARAMCO THE STATE OIL COMPANY IN SAUDI ARABIA CRATERED. And while that might seem like just one company in one place it was the first domino to fall in what would become a massive market collapse around the world a collapse the investing editor. Jeff Rogo sign next in New Zealand. Is that because the first Monday in the world is in New Zealand. Yeah there's your market comes on it starts. Crashing oil is starting trading at that time oil's crashing thirty percent and so you have oil you've dow futures and you have the first market opening at roughly the same time on Sunday afternoon our time a couple of hours later. Australia's starts crashing the Australian Stock Exchange recording. Its worst day since the global financial crisis. Hong Kong three hours later starts crashing download and focus and world markets tumbling here. Asian markets closed sharply lower and. Eventually we all go to sleep Sunday night a little nervous little scared of a pretty sure. We're going to see a pretty ugly Monday when we wake up and it was about as expected by the end of the day on Monday the Dow Jones Stock Index had dropped more than seven percent. It's the worst one day performance since two thousand eight since peaking in February the Dow Jones is down almost twenty percent. Can you put this stock collapse into context? Just how big is this fall? Yeah I've been covering the market for sixteen years this. We're going back to the days that have lived infamy right now. We're going back to black Friday. We're going back to black Monday. This was a terrible day in the stock market today on the show what drove one of the worst days in stock market history and what the US government might do about it. Welcome to the Journal. Our show about money business and power. I'm Kate Lima and I'm Ryan Canadian. It's Tuesday march tenth by the time trading opened in the US on Monday markets fell so far and so fast that it triggered something called a circuit breaker. They're meant to sort of calm during moments of panic. So if we hit certain either up times or downtime. Certain games or declines if we reach a level that's predisposed by the exchange operators we just shutdown shutdown is intriguing stops for fifteen minutes just like a circuit breaker and a house. If there's a surge of electricity circuit breaker shots and all the power goes off. Yes but for markets to hit a circuit. Breaker selling needs to be pretty extraordinary. We didn't have a circuit breaker during the financial crisis. And even the two thousand eight. We did not have a eight percent down day on two thousand eight. We didn't hit a circuit breaker on. May Six two thousand and ten when there was a flash crash. It's been since ninety seven since we the circuit breaker. This is a very fast. Turn and in these types environment the parts of the ecosystem that are sort of rattling break and parts of the economy have been rattled by one thing in particular. The Corona virus fear about the spread of Corona virus has worried investors. Their job is to look ahead at whether companies will make or lose money which means they're always on the lookout for economic shocks and Corona virus has proved to be a big shock especially to the travel industry. So if you're an airline like if people aren't flying on planes I had a friend who flew from Atlanta New York last weekend usually it's oversubscribed. He said they were twenty percent seats. Were full in eighty percent remedy. Airlines are facing that across the country and on international travel. You've hotels or a big industry in this country. And there's a lot of towns and municipalities that survive on tourism. The drop in demand for flights has gotten so bad that this morning four major airlines said there would be taking action. The CEO of Southwest Airlines said. He'd take a ten percent pay-cut while United's CEO said he forgo his base pay entirely and Delta United and American have all canceled flights united and Delta. You've even offered employees unpaid leave but while it may be obvious that travel is affected other industries have been hit too like oil over the last fifteen years. Us oil production is spiked. Thanks to fracking. The US is now the largest oil producer in the world but when there's less demand for oil like when everyone stops traveling oil prices fall in oil companies. Can't make as much money facing that situation this weekend. To giant oil producers Russia and Saudi Arabia disagreed over how to respond and that disagreement boiled over to the point where Saudi Arabia decided to go on a price. Cutting streak driving the price of oil lower and lower just like Walmart data across the country for two decades lower prices than competitors that survive on high prices. Go Out of business. Saudi Arabia's oil is like the Coca Cola will mark oil that they provide is the best in class number one product in and they decide to cut the price of that. And when you do that that has this. Massive implication across the world with Krona virus. Being sort of the first Straw. That was the rest of the. Hey barrel this is what set off the latest market crash on Sunday. His oil prices fell oil. Stocks around the world fell to because with an oil price war it becomes almost impossible for oil to make money and that could have a real impact on the US economy if US oil producers and energy producers can't survive. That's a huge amount of jobs. That's a huge amount of the economy. It's an entire S. and P. Five hundred or one of the largest sectors that gets squeezed so investors in stock market weren't just reacting to the to the price of oil falling. They were more concerned about the idea. That you as oil companies might go bankrupt the estate reacting to the solvency of the. Us Energy Industry. Wow the US. Energy Industry can't survive at twenty and thirty dollars oil at forty fifty. They do okay at Sixty. They make a fair bit of money at twenty and thirty. They don't exist. Oil is a reflection the economy and a lot of things are tied to it. You have that crashing and it will have a massive impact on a bunch of industries that employ a lot of Americans. Monday's crash really came down to two things. The fear of the economic damage the Kroto viruses beginning to pause and a price war in the oil industry combined. Those two factors added up to a seven percent drop in the stock market on Monday. A very bad day reminded jeff of the feeling he had another terrible day in the stock market. One of the worst days of the financial crisis. You on the Monday of that crisis. The Monday after Leeann goes under and a bunch of firms go under the question was can America. Survive is capitalism dead. This is not that the financial industry behind the market is doing okay. So this in some sense feels more like you know in the dot com bubble burst in an industry went under because of that. And I think that's what we're seeing right now. Okay so this crash is not two thousand. But what about it feels similar the uncertainty? I think these need the same level of people trying to predict what they can't predict. We have no idea how long the corn scarce GonNa last in two thousand and eight and early two thousand nine. The government opened its checkbook to stabilize the markets and the economy bailing out banks in the auto industry in passing major stimulus spending. Yeah I mean look the government. Basically through every dollar they could at the system and they had a coordinated effort with central banks to make this happen so the feds cutting rates. The Fed is finding every place it can throw money decrease ability in the market at the same time. The government is bailing out financial firms in throwing money at the of the world to get them stable. And so you have this coordinated effort from the government and the Central Bank to stabilize. Those efforts did seem to work. In two thousand eight the markets eventually stop crashing in. The economy began to recover and now more than a decade later in another moment of economic worry. People are beginning to ask. What could the government do now? Not just to fight corona virus but also to stabilize the economy coming up our first glimpse of the trump administration's economic response to the Corona.

Coming up next