The New York Stock Exchange and the Toronto Stock Exchange temporarily paused trading Monday morning as stocks plunged at open after plummeting oil prices compounded investor anxiety over the new coronavirus outbreak.
The New York Stock Exchange halted trading after the benchmark S&P 500 index dropped seven per cent. Trading resumed at 9:49 a.m. ET.
In Toronto, the benchmark S&P/TSX composite index was down more than 1,200 points, or nearly 7.9 per cent, to 14,898 at 9:31 a.m. ET. The Toronto Stock Exchange announced a trading halt at 9:46 a.m. ET with trading resuming at 9:50 a.m. ET.
Oil prices collapsed on Monday after Saudi Arabia said it would ramp up its crude production in April despite an already weak global demand for oil due to COVID-19. The announcement came after the OPEC+ group of oil-producing countries, which includes Russia, failed to reach an agreement over curtailing oil output in order to support prices.
Russia, one of the world’s top producers alongside Saudi Arabia and the United States, also said it could lift output, adding that it could cope with low oil prices for six to 10 years.
The price of U.S. West Texas Intermediate (WTI) crude, the North American oil-price benchmark, tumbled more than 28 per cent to US$32 a barrel in its biggest drop since the Gulf War of 1991.
“From a Canada perspective, the timing clearly couldn’t be much worse,” BMO economist Benjamin Reitzes said in a morning note to clients before North American markets opened.
With energy prices pummelled by the drop in crude demand related to the COVID-19 outbreak, the Bank of Canada cut its trend-setting interest rate by half of a percentage point to 1.25 per cent on March 4.
Now, however, Canada’s central bank will likely be forced to implement further, deeper cuts.
“Revisiting the crisis lows of 0.25 per cent looks like it is unavoidable,” Reitzes wrote.
The economy will also need Ottawa to intervene with a stimulus package to shore up the economy, Reitzes added.
“This is when Canada’s healthy federal balance sheet will be useful and why we’ve been advocating for domestic governments to improve their fiscal positions when times were good.”
— With files from Reuters and the Canadian Press