NEW YORK, United States — Global stocks mostly tumbled on Wednesday, with the energy sector taking a beating as worries about excess supply and ineffectual Opec policy hit oil prices.
Crude prices slid further after diving more than two percent on Tuesday on increasing fears that moves by Opec won’t be sufficient to prevent another supply glut due in part to rising shale output in the United States.
“Cheap oil is taking its toll on the global equity markets,” noted analyst Ipek Ozkardeskaya at trading firm London Capital Group.
Equity markets fell in Frankfurt, London, Paris and Tokyo. Leading US indices were mostly down, with the Dow and S&P 500 bruised by the oil rout, but the Nasdaq finished higher.
Aside from the drag of petroleum equities, whose profits are directly hit by lower commodity prices, the pullback in oil prices is a source of unease for the broader market because of worries that inadequate demand signifies slowing economic activity.
“The last two trading sessions have been a reminder of late 2015 and the beginning of 2016, when the collapse in the oil price sparked fears about global growth,” said analyst David Madden at CMC Markets.
“Investors are worried a depressed oil price could bring about a period of prolonged low inflation, which would have negative implications for growth.”
Worries about Opec
US oil prices ended at their lowest level since August on growing worries that Middle Eastern members of the Organization of the Petroleum Exporting Countries “will not be able to cooperate and work together,” said John Kilduff of Again Capital.
The pullback comes amid rising tensions between Opec kingpin Saudi Arabia and fellow members Iran and Qatar.
Contributing to the weakness was a mixed US petroleum supply report that showed lower overall commercial inventories, but higher US production and “lackluster” gasoline demand, said Kilduff.
Greg Priddy, an analyst at risk consultancy Eurasia Group, said the cartel is also stuck in a difficult cycle in which higher prices create incentives for producers in the US and other markets to raise production, putting renewed pressure on prices.
Petroleum-linked equities fell across global bourses, with France’s Total, Japan’s Inpex and US company Chevron all lower.
The London and Frankfurt stock markets ended the day down 0.3 percent, while Paris shed 0.4 percent in value.
But the tech-rich Nasdaq was a standout, finishing up a solid 0.7 percent after pharmaceutical and biotech shares advanced on expectations that President Donald Trump’s moves to crack down on runaway drug prices will not be as aggressive as feared.
Shanghai also bucked the trend to end up 0.5 percent after the US-based MSCI finally approved Chinese mainland-listed stocks, or A-shares, for inclusion in its emerging markets index. CBB
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