OPEC and Italian unease weigh on global stocks
Uncertainty over whether OPEC countries will back an oil production cut at their meeting this week, as intended, weighed on global stock markets yesterday. Worries over next week’s constitutional referendum in Italy also kept investors at bay.
In Europe, Germany’s DAX index was down 0.7 percent to 10,630 while the CAC 40 in France fell 0.5 percent to 4,526. The FTSE 100 index of leading British shares was 0.3 percent lower at 6,819. US stock markets were poised for a lower opening with Dow futures and the broader S&P 500 futures down 0.2 percent. On Friday, the Dow and the S&P both hit fresh highs.
Major oil producers from the Organization of the Petroleum Exporting Countries meet tomorrow to discuss output cuts to shore up prices, but Iran and Iraq have so far failed to agree to a reduction, raising doubts over the Vienna meeting’s outcome. OPEC’s top producer, Saudi Arabia, has suggested it might be open to no output cut, departing from previous statements in a move analysts said makes an agreement less likely. The Saudis also pulled out of a meeting with Russia and other large non-OPEC producers, leaving all decisions to the Vienna meeting. Oil prices have been exceptionally volatile amid the uncertainty, falling sharply in early Monday trading before recovering. The benchmark New York rate was up 34 cents at $46.40 a barrel while Brent, the international standard, was 54 cents higher at $48.79.
On Dec 4, Italians vote on constitutional changes that would limit the power of the upper house and make it easier for governments to pass legislation. Prime Minister Matteo Renzi has said he will resign in case of a “no” result. New elections, if held, could bring to power the Five Star Movement, which has said it wants to hold a referendum on euro membership.
“Equities have started the week on the back foot, with investors concerned about Wednesday’s OPEC meeting being a waste of time and next Sunday’s Italian referendum having potential to send shivers through Europe’s banking sector,” said Mike van Dulken, Head of Research at Accendo Markets.
China’s yuan rebounded from an eightyear low against the US dollar after a central bank official said Beijing wants it to remain stable. The yuan’s exchange rate is based on a basket dominated by the American currency and has been dragged up by the dollar’s rise while other developing country currencies have weakened. Yesterday, the middle point of the narrow band in which the yuan is allowed to fluctuate against the dollar rose by just over 0.1 percent to 6.9042 to the dollar. That came after Yi Gang, a deputy central bank governor, was quoted on the bank’s website as saying the yuan has “characteristics of a strong and stable currency” and was likely to “remain relatively stable at a reasonable and balanced level.”
The Shanghai Composite Index gained 0.5 percent to 3,277.00 and Hong Kong’s Hang Seng index also advanced 0.5 percent to 22,830.57. Tokyo’s Nikkei 225 gave up 0.1 percent to 18,356.89 and Sydney’s S&P-ASX 200 retreated 0.8 percent to 5,464.40. Benchmarks in Manila and Jakarta also declined. Seoul’s Kospi added 0.2 percent to 1,978.13 and India’s Sensex rose 0.1 percent to 26,343.54.
Most Asia markets up
Hong Kong led a gain in most Asian markets yesterday after officials announced the start of a long-awaited link-up with Shenzhen, but the dollar retreated against most of its peers after its recent surge. Crude prices also saw fresh losses, after both main contracts slumped around four percent on Friday owing to disagreements over plans to cut output, with Iran and Iraq pressing to be excluded and Russia suggesting it will only freeze output.
Officials on Friday’s said the tie-up between the Hong Kong and Shenzhen markets will start on December 5. The scheme will give Hong Kong traders access to the mainland’s second stock exchange, the world’s eighth largest with a market capitalisation of $3.3 trillion as of September.
The tie-up follows a similar “stock connect” between Shanghai and Hong Kong launched two years ago, which gave foreigners new access to Chinese companies not quoted elsewhere, and enabled mainlanders to trade in Hong Kong.
The city’s Hang Seng Index soared more than one percent in the afternoon, though Shenzhen slipped 0.1 percent by the close. Shanghai ended up 0.5 percent.
Most other regional stock markets were up, extending last week’s gains on bets Donald Trump’s spending plans will ramp up growth in the US economy. Seoul rose 0.2 percent, Singapore added 0.8 percent and Wellington added 0.1 percent but Sydney dipped 0.8 percent. Tokyo shed 0.1 percent after a seven-day winning run that took it to an 11-month high, with exporters hit by a slight recovery in the yen against the dollar. — Agencies