Oil prices on Monday slumped on oversupply concerns while stock markets largely rose despite dampened hopes of an early cut to US interest rates.
US and European oil futures fell around four percent after top exporter Saudi Arabia cut the price of its crude, weighing also on shares of energy majors, analysts said.
“This all adds to concerns that the global market is drowning in oil that it can’t use up quickly enough, even at attractive prices for consumers,” said market analyst David Morrison at Trade Nation.
“No doubt the ongoing geopolitical tensions across the Middle East are preventing an even steeper sell-off,” he added.
On Wall Street, both the S&P 500 and Nasdaq pushed higher.
But the Dow dipped 0.2 percent, pulled down by shares in Boeing, which slumped almost nine percent after a mid-air emergency on Friday in which a piece of fuselage came off a 737 MAX 9 jetliner as it flew over the US west coast. They were down 6.5 percent in late morning trading.
Shares in Alaska Airlines, whose airliner suffered the blowout of the door panel, initially lost nearly six percent, but clawed back most of those losses.
CMC Markets analyst Michael Hewson called the incident a setback as Boeing is still trying to recover from the damage to its reputation after two crashes of 737 MAX 8 planes, in 2018 and 2019, caused by flaws in the flight control software.
“This most recent incident raises a host of new questions about Boeing’s quality control as well as manufacturing processes, at a time when confidence in the 737-MAX is already wafer thin,” said Hewson.
European stocks ended higher, although London only turned barely positive in the final minutes of trading. The drop in oil prices weighed on energy shares, with Shell down 2.9 percent as investors reacted to a mixed trading update ahead of the British oil major’s annual earnings due next month.
A selloff in tech giants hammered Hong Kong, while Shanghai was also deep in retreat. Tokyo was closed for a holiday.
Keenly awaited non-farm payrolls data released on Friday showed the US economy remained resilient despite interest rates sitting at a two-decade high and inflation still well above the Federal Reserve’s target.
The figures dealt another blow to expectations the central bank would start to cut borrowing costs in the next few months.
“Friday’s US jobs report brought fresh concerns over the likeliness of the Fed to cut rates in March as markets have been widely anticipating, with a hot payrolls figure coming alongside a higher wage growth reading,” said Joshua Mahony, chief market analyst at Scope Markets.
Attention now turns to the release this week of US consumer price figures.
“This report is destined to be a driving factor of the market’s rate-cut expectations,” said Patrick O’Hare at Briefing.com.
Equities ended 2023 with a surge as traders bet on a string of rate reductions this year thanks to falling inflation and a softening of the labour market.
But the release of minutes last week from the Fed’s December meeting showed decision-makers were happy to keep rates elevated for some time to make sure they have prices under control.
Policymakers have signalled 75 basis points of cuts this year, but markets have priced in as much as 150 points, leaving investors open to disappointment.
– Key figures around 1630 GMT –
West Texas Intermediate: DOWN 4.5 percent at $70.48 per barrel
Brent North Sea Crude: DOWN 3.9 percent at $75.70 per barrel
New York – Dow: DOWN 0.2 percent at 37,388.65 points
New York – S&P 500: UP 0.5 percent at 4,721.41
New York – Nasdaq: UP 1.1 percent at 14,686.15
London – FTSE 100: UP less than 0.1 percent at 7,694.19 (close)
Paris – CAC 40: UP 0.4 percent at 7,450.24 (close)
Frankfurt – DAX: UP 0.7 percent at 16,716.47 (close)
EURO STOXX 50: UP 0.5 percent at 4,485.48 (close)
Hong Kong – Hang Seng Index: DOWN 1.9 percent at 16,224.45 (close)
Shanghai – Composite: DOWN 1.4 percent at 2,887.54 (close)
Tokyo – Nikkei 225: Closed for a holiday
Euro/dollar: UP at $1.0974 from $1.0942 on Friday
Dollar/yen: DOWN at 143.84 yen from 144.69 yen
Pound/dollar: UP at $1.2755 from $1.2718
Euro/pound: UP at 86.03 pence from 86.01 pence
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