Crude Oil below $30, pulling world stocks materially down
New York (Jan 16) Oil prices dove below $30 a barrel yesterday, dragging major equity indices around the world sharply lower, as fears of a global slowdown amid a crude supply glut roiled markets and unsettled investors who snapped up gold and other safe-haven assets.
Major stock indices in Europe and on Wall Street tumbled more than two per cent while crude prices slid on expectations Iran will increase oil exports once international sanctions are lifted, possibly within days.
Yields on the benchmark 10-year US Treasury note were poised to fall below two per cent and gold rose as retreating oil prices and equity markets underpinned demand for assets perceived as safer.
The December futures contract on the federal funds rate surged to its highest since October, implying the Federal Reserve will raise rates only one more time this year.
The Australian, New Zealand and Canadian dollars all sank against the US dollar on the back of another slide in Chinese stock markets and the slide in oil. But the dollar fell against both the euro and yen.
World stock markets were set for a third week of losses.
European shares fell to their lowest since December 2014, hit by losses in commodity-related stocks after BHP Billiton announced a $7.2 billion writedown on its US shale assets.
BHP shed 6.9 per cent, the second-biggest decliner on the pan-European FTSEurofirst 300 index, which fell three per cent. MSCI’s all-country world stock index fell two per cent.
“Oil is deeply oversold. The stock market is deeply oversold. The inability for the market to rally from deeply oversold conditions clearly tells you how weak the market is,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
The Dow Jones industrial average fell 380.56 points, or 2.32 per cent, to 15,998.49.
The S&P 500 slid 43.44 points, or 2.26 per cent, to 1,878.4 and the Nasdaq Composite lost 127.38 points, or 2.76 per cent, to 4,487.63.
US crude futures were down more than five per cent at $29.59 a barrel, after posting their first significant gains for 2016 in the previous session. Earlier they hit $29.28, the lowest since November 2003.
The March Brent contract traded four per cent lower at $29.62, after hitting a 12-year low of $29.30 earlier in the day.
Source: TimesOfIndia
