North American stock markets were halted shortly after opening on Monday morning as circuit breakers designed to slow down panic selling kicked in within minutes of opening.
The NYSE, Nasdaq and TSX all hit what’s known as a level 1 trading halt within minutes of opening on Monday morning. Such a halt automatically suspends all trading on the market for 15 minutes after a decline of more than seven per cent.
A level 2 halt is automatically imposed after a decline of 13 per cent, for another 15 minutes. If the decline hits 20 per cent, a level 3 halt comes in to shut down trading for the rest of the day.
The TSX lost more than 1,400 points, or eight per cent, within minutes of opening, so the Canadian index’s circuit breaker was triggered. That’s the worst day for the TSX since the financial crisis.
The trading halts were lifted 15 minutes after being implemented and the selling continued both in the U.S. and Canada — although not by enough to implement a level 2 halt, so far.
“This is basically panic selling,” said Peter Cardillo, chief market economist at Spartan Capital in New York. “There’s a lot of fear in the market and … it’s an indication that a global recession is not far away.”
The panic started on Sunday evening after Saudi Arabia kicked off an all-out price war in the oil market, announcing it would be removing any production caps. That move sent the price of crude crumbling more than 25 per cent, and came on top of existing fears over the coronavirus currently spreading around the world.
Canadian energy companies sold off, hard. Suncor lost more than 25 per cent of its value. Cenovus is down by almost half.
Bond yields in the U.S. and Canada fell to their lowest levels on record as investors ran toward the perceived safety of government debt.
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