The S&P was halted limit-down on Monday morning after plunging 7% at the cash open. The nauseating swoon triggered a market-wide circuit breaker.
Futures had bumped along down 5% (where the overnight curb kicks in) for most of Asia trading and during the European session. Global equities are reeling coming off a weekend that found Saudi Arabia kicking off an oil price war.
The chaos in crude – which fell more than 30% at one juncture – was insult to injury for a world struggling to discern what the future holds for a global economy which is now laboring under myriad lockdowns and travel restrictions.
It’s just “further cross-asset pandemonium, as dealers in both cash- and vol- space are already operating under ‘VaR-down’ reality via coronavirus-tied risk and staffing curbs, which are choking-off market liquidity to even more extreme levels”, Nomura’s Charlie McElligott said Monday morning.
The Dow fell more than 1,800 points.
“Volatility is very likely to persist for the foreseeable future, in case that was not clear before”, Rabobank’s credit team said in a Monday note. “Describing the conditions as turbulent is an understatement given the degree of bipolarity observed in markets all around”, they added.
The VIX printed 60+, the highest since 2008.
Just last Tuesday, Steve Mnuchin remarked that “there would be no reason to halt [the market]”.
“The markets are working properly and we have proper circuit breakers in place”, Mnuchin told reporters. “We will get through this”, he added.
He was right about the circuit breakers. Whether or not the rest of his assessment is accurate remains to be seen.