LONDON (Reuters) – Global stocks fell on Tuesday, a day after U.S. crude oil prices turned negative for the first time ever, as dismal corporate earnings underlined worries about economic damage from the coronavirus pandemic.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 20, 2020. REUTERS/Staff/File Photo

The dollar rose against a basket of other currencies as investors shunned riskier assets.

MSCI’s All Country World Index, which tracks stocks across 49 countries, was down 0.9%. European stock markets followed their Asian counterparts lower, with the pan-European STOXX 600 index down over 2% by midday in London.

Monday’s plunge in oil, which saw some prices reach minus $40 a barrel, resulted from growing crude stockpiles and dwindling storage space as lockdowns to contain the spread of the novel coronavirus slashed global fuel use. First-month West Texas Intermediate continued to trade in negative territory on Tuesday, at -$7.13 a barrel.

Graphic – Crude oil’s historic crash below zero: here

“I have always thought of oil a little bit like a currency; it stores value, is controlled by world leaders and makes the world go round,” said Gregory Perdon, Co-Chief Investment Officer at Arbuthnot Latham.

“But yesterday was a wake-up call and investors would be remiss to ignore that low oil means lower inflation, higher defaults, lower growth and more political instability as less petrodollars circulate in the system.”

Signs the pandemic is taking a toll on the global economy continued to roll in.

Australia’s central bank now forecasts the country’s economy will shrink 10% in the first half of 2020. South Korea is set for its biggest first-quarter contraction since 2008, with the latest data showing exports plunged by almost a third in the first 20 days of April.

There was a glimmer of hope in Europe: the mood among German investors improved in April as concern about the impact of the coronavirus pandemic on Europe’s largest economy seemed to ease, a survey from the ZEW research institute showed.

The euro edged lower against the dollar, and Southern European bond yields traded near recent highs before a European Union summit later this week on how the EU will try to revive an economy hit by the pandemic.

AWASH IN OIL

Monday’s plunge in U.S. crude came as the May contract expiry looms at the end of Tuesday’s trade.

International benchmark Brent crude, more readily seaborne than its U.S. counterpart, fell 15.7% to $21.69 per barrel.

That is still some 60% below January’s peak, highlighting the disruption to energy consumption and the long road back to global growth that underpins oil demand.

“This level of oil price is not sustainable for any global oil producer. Even for Saudi Arabia, which has a low cost of production, this is not viable,” said Jai Malhi, global market strategist at J.P. Morgan Asset Management.

“Such low prices will not last and the pressure on storage will likely force OPEC+ into further production cuts in order to boost prices.”

The yield on benchmark 10-year U.S. Treasuries, which falls when prices rise, dropped under 0.6% to 0.5769%..

Spot gold prices traded 1.5% lower at $1,667.36 per ounce.

Reporting by Ritvik Carvalho; additional reporting by Tom Westbrook in Singapore; editing by Catherine Evans, Larry King

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