Global equities retreat as crude price slumps on supply concern

Dollar extends gains against major currencies

NEW YORK, June 20, (Agencies): World stock markets lost ground on Tuesday, pressured by a sharp drop in oil prices to their lowest in more than a year, while the US dollar strengthened on hawkish comments from US Federal Reserve officials.

Brent crude touched its lowest level since April 2016 and WTI hit its lowest since February 2016 following news of increases in supply by several key producers.

That slide weighed down energy stocks on Wall Street and in Europe. The S&P energy index dropped 1.9 percent as the worst performing of the 11 major S&P sectors and Europe’s oil & gas sector slumped 2.1 percent.

The Dow Jones Industrial Average fell 2.1 points, or 0.01 percent, to 21,526.89, the S&P 500 lost 7.26 points, or 0.30 percent, to 2,446.2 and the Nasdaq Composite dropped 13.97 points, or 0.22 percent, to 6,225.05.

The pan-European FTSEurofirst 300 index lost 0.43 percent and MSCI’s gauge of stocks across the globe shed 0.44 percent.

US crude fell 2.99 percent to $42.88 per barrel and Brent was last at $45.67, down 2.64 percent.

The US dollar strengthened for a second day as Federal Reserve officials maintained a hawkish tone on hiking interest rates.

The dollar index, tracking the unit against other key world currencies, rose 0.31 percent, with the euro down 0.22 percent to $1.1124. The greenback is up nearly 1 percent for the month.

Sterling was last trading at $1.261, down 0.96 percent on the day. Bank of England Governor Mark Carney doused speculation that he might soon back higher interest rates, telling bankers on Tuesday that he first wanted to see how the economy coped with Brexit talks in coming months.

US

US stocks extended their losses in early afternoon trading on Tuesday, slipping from record levels, as a sharp drop in oil prices squeezed energy stocks and a rebound in technology shares faded out.

Oil majors Chevron and Exxon were down about 1.5 percent and were among the biggest drags on the Dow and the S&P 500.

The S&P energy sector’s 1.7 percent fall led the decliners.

At 12:49 pm ET (1649 GMT), the Dow Jones Industrial Average was down 33.44 points, or 0.16 percent, at 21,495.55, the S&P 500 was down 12.05 points, or 0.49 percent, at 2,441.41.

The Nasdaq Composite was down 36.55 points, or 0.59 percent, at 6,202.46.

A recovery in technology stocks also appeared to have lost momentum, adding to the overall weakness.

“Investors are hunting for value and while the ‘buy-the-dip’ crowd showed up when tech stocks fell, we are seeing a mini-rotation among sectors where underperforming sectors such as healthcare and biotech stocks are being snapped up right now,” said Sarhan.

The health index was the only gainer among the 11 major S&P sectors, with a rise of 0.62 percent.

The S&P technology sector was down 0.5 percent, with big tech names such as Apple and Microsoft dragging on the S&P and Nasdaq.

The sector had posted two straight weeks of losses on concerns regarding valuation and a move into defensive sectors in a rising interest rate environment.

On Tuesday, Boston Fed President Eric Rosengren said that the era of low interest rates in the United States and elsewhere poses financial stability risks and that central bankers must factor such concerns into their decisionmaking.

Among stocks, Lennar rose 1.8 percent to $53.66 after the No. 2 US homebuilder reported a higher-thanexpected quarterly profit. D.R. Horton was up 1.3 percent, while Pultegroup rose 0.7 percent.

Chipotle fell 6.3 percent to $429.86 after the burrito chain said its operating costs in the second quarter will be slightly higher than the first quarter.

Declining issues outnumbered advancers on the NYSE by 2,095 to 736. On the Nasdaq, 1,948 issues fell and 862 advanced.

Europe

Stocks sensitive to the price of oil fell on Tuesday, putting pressure on European shares, with the pan-European benchmark ending lower after a strong start to the session.

Euro zone blue chips closed 0.4 percent lower and the regional STOXX index fell 0.6 percent, retreating from a two-week high and giving up most of the gains made in the previous session.

Europe’s oil and gas companies fell more than 2 percent with Royal Dutch Shell down 2.3 percent and BP down 2.6 percent after oil prices hit sevenmonth lows . Mining shares fell more than 3 percent.

Britain’s FTSE 100 index, the worst-performing major benchmark in Europe this year, fell 0.7 percent, hit by its heavy weighting in commodities stocks.

Aside from the slide in oil-related stocks, Germany’s Prosiebensat 1 was a bright spot, after it sold its online travel agency Etraveli to CVC. Germany’s benchmark DAX index touched a fresh record high before retreating 0.6 percent.

“We are slightly surprised that the company did not sell a group of travel assets, but management suggests the rest of the travel portfolio remains under review,” they added.

Among the stocks falling the most was Groupe Eurotunnel , which runs Eurostar trains; the shares fell 6 percent after the second broker downgrade in as many weeks. Barclays cut the company to “sell”, citing slowing traffic and recent militant attacks, which could weigh on tourism.

Broker action also took Domino’s Pizza shares to fall 6.5 percent to 16-month lows. Investec began its coverage of the stock with a “sell” rating, saying that it expects like-for-like growth to slow.

Shares in British services office provider IWG were the biggest fallers, down more than 7 percent after founder and CEO Mark Dixon sold down his stake.

Swedish real estate company Castellum fell 4.3 percent after pension fund AP2 sold the majority of its stake.

Asia

Tokyo’s Nikkei rallied Tuesday as the dollar extended gains against the yen on fresh indications the Federal Reserve will lift interest rates again this year, while technology firms tracked a sector rebound on Wall Street.

The greenback jumped in US trade and kicked on in Asia, heading towards 112 yen for the first time since the end of May.

Tokyo stocks ended 0.8 percent higher, with exporters key winners thanks to the weaker yen, while tech firms bounced after two weeks of sharp losses.

However, airbag maker Takata plummeted 20 percent, meaning it has lost a third of its value in just two days following reports it will file for bankruptcy protection and sell its assets to a US company.

Japan’s Nikkei business daily said last week the company, with liabilities exceeding $9 billion, would make a formal decision about the filing at a board meeting this month.

Other major markets struggled, though. Hong Kong lost 0.3 percent, Sydney fell 0.8 percent and Seoul gave up 0.1 percent. Singapore was marginally lower while Wellington and Manila were also down.

Shanghai slipped 0.8 percent as investors await a decision by MSCI on whether to include it in its list of emerging market benchmark indexes.

The bourse has been denied for the previous three years over concerns about certain restrictions, despite Beijing providing greater access to its domestic, yuan-based capital markets.

MSCI said China still maintains problematic restrictions including a 20 percent monthly repatriation limit, which it called “a significant hurdle for investors,” and too many restrictions on new financial product offerings.

In early European trade London rose 0.1 percent, Paris added 0.4 percent and Frankfurt put on 0.3 percent.

Key figures qaround 0820 GMT Tokyo - Nikkei 225: UP 0.8 percent at 20,230.41 (close)

Hong Kong - Hang Seng: DOWN 0.3 percent at 25,843.04 (close)

Shanghai - Composite: DOWN 0.8 percent at 5,757.30 (close)

Dollar/yen: UP at 111.62 yen from 111.54 yen at 2100 GMT

Oil

Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and others to support the market through reduced output.

Benchmark Brent dropped $1.29 to a low of $45.62 a barrel, its weakest since Nov. 15, two weeks before OPEC and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.

Brent was trading around $45.81, down $1.10, by 1330 GMT.

The US crude futures contract for July, due to expire later on Tuesday, fell $1.27 to $42.93, its lowest since Nov. 14, before recovering to around $43.10.

Both benchmarks are down more than 15 percent since late May, when the Organization of the Petroleum Exporting Countries, Russia and other producers extended limits on output until the end of March 2018.

“At the moment sentiment is bearish and traders seem happy to keep selling into every rally,” said Fawad Razaqzada, financial markets technical analyst at Forex.com.

OPEC supplies jumped in May as output recovered in Libya and Nigeria, both exempt from the production reduction agreement.

Libya’s oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany’s Wintershall, a Libyan source told Reuters.

Nigerian oil supply is also rising. Exports of Nigeria’s Bonny Light crude are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programmes show.

US oil production has been rising quickly this year, feeding the global glut. Data on Friday showed a record 22nd consecutive week of increases in US oil drilling rigs.

Gold

Gold hit a five-week low on Tuesday as the dollar rallied following hawkish comments from an influential US Federal Reserve official and dovish remarks from the Bank of England governor.

New York Fed President William Dudley said on Monday that labour market tightness should help drive up inflation, reinforcing the message that recent weak data is unlikely to derail plans to keep raising interest rates.

The greenback had a further lift on Tuesday following dovish comments from Bank of England Governor Mark Carney. Also on Tuesday, Boston Fed President Eric Rosengren said that the era of low interest rates in the US and elsewhere poses financial stability risks and that central bankers must factor such concerns into their decisionmaking.