Oil Gains on OPEC+ Deal, Stocks Stymied by Pandemic Worries
Global equities weakened on Monday as investors braced for more indications of economic damage from the coronavirus pandemic while oil prices rose in choppy trade following a landmark deal by OPEC and its allies to cut output.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 3.9% at $23.6 per barrel in a volatile session, having fallen more than 3% to $22.03 earlier in the day.
Those moves came after a group of oil producing countries known as OPEC+, which includes Russia, agreed to reduce production by 9.7 million barrels per day (bpd) for May-June, after four days of marathon talks.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 0.3%. The Nikkei fell 1.9%, South Korean shares dropped 1.3% while China's CSI300 index lost 0.5%.
“The combined OPEC+ and G-20 cuts should set in place a bottoming process for oil prices and significantly limit the tail risk of free-falling into the single digits in our view,” Bank of Singapore, the private banking arm of OCBC, said in a report.
International benchmark Brent futures LCOc1 rose 2.7% to $32.65 per barrel but were trading below the day’s highs.
Oil prices have slumped more than 50% from their January peak as the novel coronavirus pandemic brought the global economy to a standstill and hit fuel demand.
Investors are now looking to see if the novel coronavirus pandemic, which has battered global economic growth, will soon peak in the United States and Europe, as had been initially expected.
U.S. S&P 500 mini futures EScv1 dropped 1.4%, erasing a brief gain to a one-month high hit earlier in the Asian session. Financial markets in Australia, New Zealand and Hong Kong were closed for a public holiday on Monday as are European markets such as Britain, Germany and France.
Asia’s main ex-Japan stocks gauge is up 18% from a four-year low struck around mid-March following unprecedented global stimulus. But the index is off about 18% so far this year as investors are unconvinced that the worst is over for the markets.
Earnings scorecards from U.S. companies are in focus this week, with banks among the first to report, while China releases its trade data on Tuesday and closely watched gross domestic product figures on Friday.
Companies are only now adjusting their behavior to deal with an expected global recession, which the International Monetary Fund (IMF) has said will be “way worse” than the global financial crisis a decade ago.
Kia Motors Corp. told its labor union in South Korea that it wants to suspend operations at three of its domestic factories as the outbreak weighs on exports to Europe and the United States.
In foreign exchange markets, commodity currencies were softer while the safe-haven yen strengthened.
The Australian dollar fell 0.2% to $0.63337. The euro stood steady at $1.0937 and the yen gained 0.5% to 107.91 to the dollar.
Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.