Equities dip with crude; sterling firm as investors focus on polls

Gold hits six-week high on US jobs report

NEW YORK, June 5: World equity markets dipped with oil prices on Monday amid concerns a diplomatic rift among some key Middle Eastern energy producers may weaken a pact on output cuts, while sterling firmed as investors focused on the impending British election.

The US dollar edged up off seven-month lows hit on Friday after a weaker-than-forecast jobs report as US Treasury yields rose and markets signaled they expected the Federal Reserve to raise interest rates next week.

Key US stock indexes were little changed to lower as investors mostly shrugged off weekend attacks in London and after Arab states cut ties with Qatar over alleged support for Islamist and Iran.

The pan-European FTSEurofirst 300 index lost 0.09 percent and MSCI’s gauge of stocks across the globe shed 0.10 percent.

In the Middle East, Qatar’s main stock index fell more than 7 percent after Saudi Arabia — the world’s biggest crude oil exporter — the United Arab Emirates, Egypt and Bahrain cut ties with Qatar, accusing the Gulf Arab state of supporting terrorism.

Qatar is the world’s biggest supplier of liquefied natural gas (LNG) and a major supplier of condensate.

Brent crude oil, the international benchmark, rose more than 1 percent at one point, recouping some of last week’s 4 percent losses, but turned tails to drop back below $50 a barrel.

It was last at $49.16, down 1.58 percent, with US crude falling 1.45 percent to $46.97 per barrel.

The dollar index rose 0.12 percent, having hit its lowest since Nov 9 after Friday’s report showing the US economy added fewer jobs than expected last month.

The euro fell 0.27 percent to $1.1249 and the Japanese yen weakened 0.05 percent versus the greenback at 110.46 per dollar.

Gold hit a six-week high of $1,282 an ounce, with traders citing the US jobs report and reduced prospects of aggressive Fed rate increases. It last traded at $1,281.01.

US

Wall Street edged lower in early afternoon trading on Monday as Apple weighed on all the three major indexes following a rating cut and ahead of its developer conference.

The iPhone maker’s stock was down 1 percent at $153.88 after brokerage Pacific Crest downgraded it to “sector weight” from “overweight”.

There is also a possibility that the company may take the unusual step of introducing a new product at the fiveday conference, which kicks off on Monday.

Investors appeared to have shrugged off weekend attacks in London that came just days before Britain’s general national election on Thursday.

Opinion polls in the past week have put Prime Minister Theresa May’s Conservatives ahead, though with a narrowing lead over the Labour opposition.

Data on Monday showed services sector activity slowed in May as new orders tumbled, while orders for manufactured goods fell in April for the first time in five months.

At 12:53 pm ET (1653 GMT), the Dow Jones Industrial Average was down 3.34 points, or 0.02 percent, at 21,202.95 and the S&P 500 was down 1.75 points, or 0.07 percent, at 2,437.32.

The Nasdaq Composite was down 8.34 points, or 0.13 percent, at 6,297.46, slightly easing from its record high of 6310.61.

Eight of the 11 major S&P 500 sectors were lower, with the health index’s 0.34 percent fall leading the decliners.

The financial sector’s 0.54 percent rise led the gainers and Goldman Sachs’ 0.8 percent increase boosted the Dow.

Alphabet hit the $1,000 mark and was among the biggest boosts to the S&P and the Nasdaq.

Herbalife was down 7.3 percent at $68.54 after the nutritional supplement maker lowered its sales outlook for the current quarter.

Oil prices fell more than 1 percent on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to reduce oil production.

Declining issues outnumbered advancers on the NYSE by 1,757 to 1,083. On the Nasdaq, 1,765 issues fell and 1,018 advanced.

The S&P 500 index showed 28 new 52-week highs and 11 new lows, while the Nasdaq recorded 82 new highs and 70 new lows.

Europe

Stock markets were lower Monday as traders reacted to the latest terror attacks in London, just days ahead of a British general election.

Markets also fell after Friday’s poorly-received US jobs data and an escalating diplomatic crisis involving Qatar and its Gulf neighbours.

After opening slightly higher, London’s benchmark FTSE 100 index ended the session around 0.3 percent lower than the close on Friday.

In the eurozone on Monday, the Paris CAC 40 was more than half a percent lower, while Frankfurt’s DAX 30 index was shut for a German public holiday.

“The pound is expected to remain volatile this week against the backdrop of the tragic weekend events in London and the flakiness of the polls in predicting what the outcome of Thursday’s general election vote is likely to be,” said Michael Hewson, chief market analyst at CMC Markets UK.

Also occupying investors’ minds was a US employment report that showed wages growth and hiring coming in below expectations and testing confidence in the global economic outlook. n Key figures around 1540 GMT London — FTSE 100: Down 0.3 percent at 7,525.76 (close)

Paris — CAC 40: Down 0.7 percent at 5,307.89 (close)

EURO STOXX 50: Down 0.3 percent at 3,579.55 (close)

Frankfurt — DAX 30: Closed for public holiday

Asia

Asian markets began the week mostly lower Monday as investors mulled the impact of a weekend terror attack in London that saw the pound lose ground.

A weaker-than-expected US employment report also weighed on markets, with wage growth and hiring coming in below expectations and testing confidence in the global outlook.

In Tokyo the Nikkei 225, which closed Friday at its highest level for nearly two years, ended marginally down. Hong Kong ended 0.2 percent lower and Shanghai closed down 0.5 percent. Sydney was off 0.6 percent while Singapore was flat and Seoul closed 0.1 percent off.

The dollar fetched 110.50 yen, up from 110.44 yen in New York, but well off the levels around 111.60 yen earlier Friday in Asia owing to the soft US jobs data.

Key figures around 0810 GMT Tokyo — Nikkei 225: Flat at 20,170.82 (close)

Hong Kong — Hang Seng: Down 0.2 percent at 25,862.99 (close)

Shanghai — Composite: Down 0.5 percent at 3,091.66 (close)

Oil

Oil prices fell more than 1 percent on Monday on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to reduce oil production.

Saudi Arabia, the United Arab Emirates, Egypt and Bahrain closed transport links with top liquefied natural gas (LNG) and condensate shipper Qatar, accusing it of supporting extremism and undermining regional stability.

The move initially pushed Brent crude prices up as much as 1 percent as geopolitical fears rippled through the market. But Brent later reversed gains, trading down 59 cents at $49.36 a barrel by 1322 GMT.

US West Texas Intermediate futures were at $47.14 a barrel, down 52 cents.

With production capacity of about 600,000 barrels per day (bpd), Qatar’s crude output is one of OPEC’s smallest but tension within the Organization of the Petroleum Exporting Countries could weaken the supply deal, aimed at supporting prices.

“I think it’s still going to be a bit of a debate on the true impact it can have on the oil market,” said Olivier Jakob, strategist at Petromatrix.

“In terms of oil flows it doesn’t change very much but there is a wider geopolitical impact one needs to consider,” Jakob added, explaining that a breakdown in relations between Qatar and Saudi Arabia could make the OPEC-led agreement on production cuts less effective.

There are already doubts the effort to curb production by almost 1.8 million bpd is seriously denting exports.

While there was a dip in OPEC supplies between February and April, a report on Monday by Thomson Reuters Oil Research said OPEC shipments likely jumped to 25.18 million bpd in May, up over 1 million bpd from April.

Brent futures are down about 7 percent from their open on May 25, when OPEC opted to extend production cuts into 2018.

Crude output in the United States, which is not participating in the cuts, has jumped more than 10 percent since mid-2016 to 9.34 million bpd, close to levels of top producers Saudi Arabia and Russia.

Gold

Gold prices hit a six-week high on Monday, buoyed by disappointing US jobs data that dimmed the prospects for an aggressive run of interest rate increases in the world’s biggest economy.

US job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, data showed on Friday, suggesting a loss of momentum in the labour market.

Higher interest rates put pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Spot gold was steady at $1,280.31 per ounce by 1350 GMT, after climbing 1.1 percent on Friday. It hit a peak of $1,282 early in the session, its highest level since April 21.

“Gold has got a bit of a lift from payroll numbers from Friday which has carried through to today but there is also support from terrorist events,” ETF Securities commodities strategist Nitesh Shah said, referring to an attack in London at the weekend.

“Gold tends to be the port of call when people are anxious and events like that make people anxious,” he said.

British Prime Minister Theresa May resumes campaigning on Monday for the national election due in three days. The vote is expected to be much tighter than previously predicted.

“(European elections have) been an underlying supportive factor for some time, providing some good safe-haven buying but not enough to spark any panic buying. That’s why we think things will be relatively subdued,” ANZ analyst Daniel Hynes said.

US gold futures were up 0.2 percent at $1,283.10 an ounce.

The dollar index, which tracks exchange rates against a basket of six major currencies, kept a lid on gains in bullion by edging higher on Monday. But it was not far from Friday’s low of 96.654, its weakest since Nov 9.