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Why global stock markets are plummeting (it’s not just because of coronavirus)

The Australian economy plummeted yesterday, closing with the largest single-day demise since 2008, and it looks set to fall further today.

The share market yesterday fell by 7.3 per cent in the worst daily performance since the Global Financial Crisis. Australia’s top 200 companies lost a massive $137.1 billion.

Wall Street also plummeted overnight, with trading halted at one point because of the rate of the fall.

The Dow Jones closed down by 7.8 per cent, the largest fall since the GFC.

But the horror performance of share markets is not just due to coronavirus fears, with falling oil prices also playing a critical role.

“You’d think that would normally be good news but unfortunately it’s bad news because what happened is Saudi Arabia and Russia sort of went to war by trying to sell more and more oil, and they’re two of the three biggest producers. The oil price plunged,” Herald Sun business guru Terry McCrann told 3AW’s Ross and John.

“It’s bad news for the US, because they require a high oil price to make money out of their fracking.

“So, the worry yesterday was the US economy was going to lose its big advantage, i.e. producing its own oil.

“That sent the price of oil companies down dramatically, and then people start worrying about the banks who have lent to the oil companies and so we’ve got this whole new ball game adding to the dynamic that’s been running with the coronavirus.”

Mr McCrann said uncertainty about the coronavirus is also fuelling market anxiety.

“The bottom line in 2008, when we had the GFC, was this was a financial event, banks were going broke around the world,” he said.

“This time around you really don’t know how to fight the economic and financial consequences of the virus because the very things we’re doing to try and stop the virus, closing down borders, closing down countries … all of this is whacking the economy and we haven’t even really seen it begin to play out here.”

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Image: Peter Parks / Getty