Need to Know: Extreme volatility will last two more weeks as oil prices crash and coronavirus spreads. Here’s how to trade it, strategist says

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It’s already being called Black Monday.

Oil prices CL00, -22.19% have crashed in the biggest daily drop since the Gulf War in 1991. This follows Saudi Arabia slashing its export prices, appearing to start a price war after failing to reach an agreement with Russia over production cuts. And Italy has placed around 16 million people in quarantine as it imposes a lockdown of its northern regions in a bid to contain the coronavirus. Those developments, along with the continued spread of Covid-19 cases around the world, have sent markets into a tailspin — with the Dow YM00, -4.86% set to open more than 1,000 points lower.

In our call of the day, Nordea Asset Management, said investors should prepare for another two weeks of “extreme volatility.”

“What we are faced with is a capitulation trade coming in waves, compounded by an oil crisis and eventually buffeted by a credit crisis,” senior macro strategist Sebastien Galy said. “Faced with a period of elevated volatility, we prefer flexible solutions and to keep some eventual upside listed real estate and listed infrastructure.”

He added: “We remain steadfastly proponents of covered bonds as a safe position.”

The S&P 500 SPX, -1.70% topped 3,300 points earlier this year, hitting all-time highs. But Saxo Bank market strategist Eleanor Creagh said the index could fall as low as 2,650 as a first support in the short term.

She said: “There is considerable uncertainty, but in our central scenario the Covid-19-related shock, liquidity pressures and now oil price hit exacerbate heightened anxieties and could see the S&P 500 heading towards 2650-2700 range as a first support.”

She added that the “lagging” U.S. response to the crisis could mean another bout of market volatility as improved virus testing leads to a surge in the number of cases.

The tweet

Consumers have taken to panic-buying toilet roll as the coronavirus crisis deepens globally. Elon Musk, chief executive of Tesla TSLA, -2.90%, had something to say about it.

The market

After the Dow Jones Industrial Average DJIA, -0.98% settled 1% lower on Friday, closing positive for the week, Dow futures YM00, -4.86% tumbled more than 1,200 points — close to 5% — on Monday. S&P 500 futures ES00, -4.89% and Nasdaq futures NQ00, -4.82% also fell 4.9%. European stocks plunged in early trading, with the U.K.’s FTSE 100 down 7.3% and the pan-European Stoxx 600 SXXP, -6.43% dropping 6.3%. Oil prices plummeted more than 20% after Saudi Arabia slashed export prices, starting a global price war.

The buzz

Oil plunged 25% as an all-out OPEC ‘price war’ erupted between Saudi Arabia and Russia as the former slashed its oil export prices.

The total value of the world’s cryptocurrencies dropped by $21 billion on Sunday as the asset class proved it was not immune to the global selloff.

U.S. senator Ted Cruz has quarantined himself after shaking hands with a man who has tested positive for coronavirus. Cruz said he met the man at the Conservative Political Action Conference last month.

The U.S. State Department has warned passengers not to travel on cruise ships as there’s an “increased risk of infection.”

Apple AAPL, -1.32% CEO Tim Cook has allowed employees at most of the company’s offices to work from home this week as it contends with what he called in a memo the “unprecedented event” and “challenging moment” of the coronavirus outbreak.

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