World stock markets plunge as oil prices plunge for a second day

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TORONTO –
Global stock markets fell sharply, as crude oil prices fell to their lowest level in more than two decades due to increased supply problems.

After entering unprecedented negative territory on Monday, the May oil contract turned positive on the last day at US $ 10.01 a barrel.

However, the most-negotiated June crude contract plunged more than 43%, or $ 8.86 US, to $ 11.57 a barrel.

“It is not good for producers because during this postponement, the June contract fell to around $ 10 to $ 11 a barrel and no one is really making money at these levels,” said Craig Jerusalim, portfolio manager at CIBC Asset Management.

Oil contracts in a few months will be between $ 20 and $ 30, but the lower the spot price, the more production will be cut and not everyone will survive, he said.

“The remedy for low prices is low prices, and this will eventually be corrected by an offer from the market,” he said in an interview.

“Ultimately, the price of oil should balance where supply equals demand and where the marginal cost of production is higher than where it is located. “

US President Donald Trump tweeted that he had instructed the energy and treasury secretaries to “make funds available so that these very important businesses and jobs are guaranteed in the future!” “

Jerusalim said it would allow unprofitable businesses to avoid bankruptcy.

“It could help this producer in the short term, it doesn’t help the industry in the medium or long term. “

The May natural gas contract fell 10.3 cents to $ 1.82 USBTU.

Despite falling prices, energy was the second best return among the top 11 sectors on the TSX.

It fell 1.2%, just behind materials, which lost less than a percentage point on falling metal prices.

The June gold contract fell US $ 23.40 to US $ 1,687.80 an ounce and the May copper contract fell nearly nine cents to US $ 2.23 per pound.

Technology was the biggest loser of the day, falling 5.45% as stocks of Lightspeed POS Inc. fell 9.2%.

The heavy financial services sector declined by more than 4%, Great-West Lifeco Inc. by 7.6% and the major Canadian banks by 3.5 to 4.5%.

Efforts to flatten the curve in terms of confirmed cases of COVID-19 mean that the path back to normalization will be slow, corporate profits will remain depressed and some firms will not survive.

“Bankruptcies will be high, consumers will not be able to pay their credit cards to the same extent as before, which means that provisions for credit losses will increase and that the overall profitability of many financiers will deteriorate” during a while, “said Jerusalim.

The S & P / TSX composite index closed down 448.22 points or 3.1% to 13,940.06.

In New York, the Dow Jones industrial average is down 631.56 points to 23,018.88 for a drop of more than 1,200 points over two days. The S&P 500 lost 86.60 points to 2,736.56, while the Nasdaq composite lost 297.50 points to 8,263.23.

The Canadian dollar traded at 70.41 cents US, compared to an average of 70.99 cents US on Monday. Investors sought the security of the US dollar, which pushed it higher at the expense of the loonie and commodities.

Jerusalim said the positive news for the day was human history as the global trend for viral infections in hotspots appears to have peaked, which means that the pace of growth has slowed.

“And that is starting to reopen the dialogue.

This report from The Canadian Press was first published on April 21, 2020.

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