LONDON – Share markets and heavily commodity-dependent currencies took a fresh beating on Thursday, having been floored again by the latest plunge in oil prices, this time to below $30 a barrel.
MSCI’s 46-country world index was down for its 10th day in the last 11 and Europe took another 2 percent hit, as worries that French carmakers were being dragged into the emissions scandal sent the likes of Renault down as much as 20 percent.
The oil pressure woes had seen heavy selling in Asia overnight and Wall Street, which sank 2.5 percent on Wednesday, looked set for another subdued start too.
The slump has pushed MSCI’s global index to its lowest level in 2-1/2 years, and it is down more than 9 percent since the start of the month. But some individual markets have fared far worse.
Global benchmarks Brent and U.S. crude both bobbed back above $30.70 a barrel in European trading, but the previous day’s slide into the $20s for the first time since 2004 left nerves jangling. [O/R]
Canada, one of the big global oil producers, saw its dollar dive as deep as C$1.4382 per U.S. dollar, its lowest level since April 2003. [FRX/]
“It is more selling of risk and it is difficult to see a way through this,” said Gavin Friend, a strategist at National Australia Bank in London.
“People just can’t seem to get past the fall in oil prices and capex… You can make a case that if oil prices are going to stay low, this overhang stays for a while.”
Adding to the risk-adverse sentiment, a gun and bomb attack in Jakarta sent the rupiah down around 1 percent and stocks 1.7 percent lower.
In Europe, investors were also not getting much encouragement from the region’s two biggest central banks, the ECB and the Bank of England.
The BoE kept its interest rates on hold in its first policy meeting of the year although one member continued to call for a hike which help sterling kick away from a 5-1/2 year low.
The euro, meanwhile, dipped back under $1.09 as the ECB published the minutes of its December meeting, when it disappointed traders with a more modest easing package than expected.
The accounts pointed to room for another minor cut in rates but they also followed a Reuters story that a key group of the bank’s policymakers remained wary about further stimulus steps.
Investors are becoming increasingly worried, though, that the latest oil dive and market rout is a signal that the U.S. economy will not be strong enough to withstand anything like the four rate hikes the Federal Reserve has suggested for this year.
Boston Fed President Eric Rosengren sounded a cautious tone overnight, saying global and U.S. economic growth may be slipping and could force the bank into a more gradual course of rate hikes than officials currently expect.
The benchmark 10-year U.S. Treasury yield plumbed its lowest levels since late October as investors sought safety in government debt. It last stood at 2.0716 percent as the equivalent German Bund yields fell back below 0.5 percent.
Undermined by lower U.S. yields, the dollar lost ground to its perceived safe-haven Japanese counterpart, though it had clawed most of it back and was last buying 117.68 yen.
For data followers, the weekly jobless claims numbers are due at 1330 GMT alongside December import and export price data that should show the early impact of last month’s first increase in U.S. interest rates in almost a decade.
Copper fell to $4,330, its lowest since May 2009, compounding worries about the effect on demand of the fall in Chinese growth.
Japan’s Nikkei was Asia’s big loser. It shed 2.7 percent, as downbeat domestic data added to the broader market gloom. The yield on the benchmark 10-year Japanese government bond also touched a fresh record low of 0.190 percent.
China’s recently volatile main stock indexes reversed earlier losses, however, with the Shanghai Composite Index and the CSI300 index both closing up 2 percent after strong finishes.
Traders continued to keep an eye on China’s yuan, which weakened even after the People’s Bank of China set its midpoint rate at 6.5616 per dollar prior to the market opening, firmer than the previous fix of 6.563.
The PBOC has held the line on its currency in the past few days, calming some fears of a sustained depreciation. – Reuters