Oil fluctuations still dictate market

Economy

Published: 09 Dec. 2015, 20:40

Oil fluctuations still dictate market

Oil halted its sell-off near a six-year low, providing a boost to Asian energy producers following a global equity rout. Australia’s dollar flirted with a rebound, while copper declined ahead of data on prices out of China.

Energy stocks in the Asia-Pacific region rallied from a two-month low as U.S. equity-index futures also edged higher. American crude advanced for the first time in four days, trading just above $38 a barrel after OPEC’s decision to abandon a limit on production sent futures tumbling to their lowest level since 2009. The Aussie dollar rallied with the Norwegian krone.

Anxiety over Asia’s biggest economy has returned, with evidence of ongoing weakness in Chinese trade helping oil roil global markets this week. Data Wednesday is projected to show Chinese producer prices slid for a 45th month in November, potentially fanning slowdown concerns that unsettled investors last quarter. Ever present is the specter of next week’s Federal Reserve meeting, with traders now pricing in 78 percent odds that the central bank will boost benchmark U.S. interest rates from near zero.

“We are in a situation where the market’s had a big fall and speculators have taken a bit off the table,” Chris Weston, chief market strategist in Melbourne at IG Limited, said by phone. “Perhaps this move has gone a little bit too far. Equity traders are voting that way as well.”

MSCI’s Asia Pacific Index fluctuated during the first hour of Japanese trading, slipping 0.2 percent as of 10:12 a.m. Tokyo time, as Japan’s Topix index fell 0.4 percent. Shares in the Asia-Pacific energy sub-index climbed 0.3 percent following a five-day sell-off, while industrial companies tracked declines in the U.S.

Australia’s resource company-heavy S&P/ASX 200 index swung between gains and losses with materials producers rallying from their lowest point since 2005. New Zealand’s S&P/NZX 50 index rose 0.2 percent with Korea’s Kospi gauge.

U.S. index futures signaled a potential rebound in the Standard & Poor’s 500 Index, which fell 0.7 percent on Tuesday for its fourth daily drop this month. S&P 500 e-mini contracts gained 0.3 percent to 2,064.50, while those on the Nasdaq 100 Index added 0.2 percent.

Yahoo climbed more than 2 percent in after-hours trading as CNBC reported the company will scrap its long-planned spinoff of its stake in Chinese web-retailing giant Alibaba Group Holding Limited.

The Aussie climbed 0.2 percent to snap a three-day slide, while the krone rallied 0.3 percent as oil checked its fall. Malaysia’s ringgit, which is also sensitive to crude prices, gained 0.1 percent to 4.2580 a dollar, resuming its advance following last session’s 1.1 percent slump.

The New Zealand dollar retreated 0.2 percent with the country’s central bank expected to cut interest rates back to a record low in a review Thursday.

Japan’s currency was little changed at 123 per dollar after rising 0.4 percent on Tuesday amid demand for the safest assets as oil plunged. The euro, also regarded as a haven, was steady at $1.0881 after gaining 0.5 percent last session.

West Texas Intermediate crude futures climbed 1.7 percent to $38.17 a barrel, rising for the first time four days after sliding to as low as $36.64 last session.

OPEC’s decision to set aside its 30 million-barrel-a-day output target has fueled concern the global oil glut will worsen as additional crude from countries such as Iran comes on line next year. Government data Wednesday is projected to show that U.S. crude inventories climbed by 1.3 million barrels last week, with supplies at 489.4 million in the week ended Nov. 27, the highest level for this time of year since 1930.

“We remain of the view that oil will stay below $50 a barrel into the foreseeable future,” Evan Lucas, a markets strategist in Melbourne at IG Limited, said in an e-mail to clients. “The industrial metals and iron-ore thematics are basically facing the same factors that are influencing oil.”

Iron ore sank for a seventh day on Tuesday, slipping 1.1 percent to a record-low $38.65 a dry metric ton.

Copper for three-month delivery slipped 0.3 percent in London, with China - the world’s biggest consumer of industrial metals - also due to update on consumer prices Wednesday. Economists predict inflation will rise to 1.4 percent, from 1.3 percent in October. BLOOMBERG