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Energy firms dive in Asia after oil slump, broader markets slip
HONG KONG, Nov 14, 2018 (BSS/AFP) – Asian energy firms took another
battering on Wednesday after oil prices suffered their worst day in three
years, while the region’s equity markets fell into negative territory.
The pound enjoyed some support after Britain and the EU said they had
reached a draft Brexit deal, though observers were cautious as it faces a
number of hurdles before being given the green light.
Both main crude contracts plunged Tuesday — Brent lost 6.6 percent and
WTI 7.1 percent — on oversupply fears just as demand falters in the face of
the China-US trade war and easing economic growth.
With prices now down more than a fifth from their four-year highs seen in
early October, oil kingpin Saudi Arabia this week said it will cut output.
The announcement fuelled an initial surge in the crude market before a Donald
Trump tweet calling for it to keep prices low sent the commodity plunging.
The selling continued on Tuesday and then Wednesday in Asia after OPEC
trimmed its outlook for demand this year.
And energy firms were caught in the crossfire.
Hong Kong-listed CNOOC dived four percent while Sinopec and PetroChina
each lost around three percent. In Tokyo, Inpex was more than two percent
down and Woodside Petroleum sank 3.5 percent.
“Oil prices remain the hottest topic in capital markets if not in the
world after extending their slide to 12 days and suffering one of the more
precipitous falls in years,” said Stephen Innes, head of Asia-Pacific trade
at OANDA.
“It’s all about the toxic combination of weakening global demand and
oversupply that has sent prices tumbling.”
Broader markets were also lower. Tokyo ended the morning down 0.1 percent,
with traders also taking note of data showing the Japanese economy shrunk in
July-September owing to weakness in China and a series of natural disasters
hitting domestic spending.
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– Sterling uncertainty –
Hong Kong and Shanghai were each down 0.4 percent, Sydney lost more than
one percent and Singapore was off 0.3 percent.
Seoul dropped 0.4 percent and Wellington gave back 0.3 percent, though
Manila, Taipei and Jakarta edged up.
There was little movement after comments from the White House’s top
economics adviser Larry Kudlow that US and Chinese officials were “having
communications at all levels” on trade ahead of a possible meeting between
Trump and President Xi Jinping this month.
With both sides digging their heels in, expectations for a breakthrough
are low, analysts said.
On currency markets the pound managed to hold on to small gains that came
on the back of news that Prime Minister Theresa May finally had a Brexit
agreement to put to her cabinet.
However, she must now get it past a divided cabinet before putting it to
parliament, where both pro- and anti-Brexit MPs unhappy with the few details
that have so far emerged from the pact.
“Failure to pass the deal will raise the prospects of a disorderly Brexit,
a general election and also a second referendum,” said Rodrigo Catril, senior
foreign exchange strategist at National Australia Bank.
“By the end of the week with some certainty the pound won’t be trading
near current levels, it could be significantly higher or massively lower.”
The euro was also enjoying some lift from the Brexit news, though the
gains were tempered by news that Italy’s populist government had stuck to its
wallet-busting budget plan, putting it on course for a standoff with
Brussels.
– Key figures around 0250 GMT –
Tokyo – Nikkei 225: DOWN 0.1 percent at 21,784.17 (break)
Hong Kong – Hang Seng: DOWN 0.4 percent at 25,699.63
Shanghai – Composite: DOWN 0.4 percent at 2,643.15
Oil – West Texas Intermediate: DOWN 39 cents at $55.30 per barrel
Oil – Brent Crude: DOWN 31 cents at $65.16 per barrel
Euro/dollar: UP at $1.1305 from $1.1287 at 2200 GMT
Pound/dollar: UP at $1.3010 from $1.2964
Dollar/yen: UP at 113.94 yen from 113.82 yen
New York – DOW: DOWN 0.4 percent at 25,286.49 (close)
London – FTSE 100: FLAT at 7,053.76 (close)
BSS/AFP/HR/0920