Oil price decline weighs on markets ahead of US tax vote
European and Asian shares tumble
LONDON: Global share prices fell sharply yesterday as sinking oil prices weighed on oil producers and other energy stocks. Investors are also monitoring developments surrounding President Donald Trump’s attempt to get sweeping legislation to revamp the US tax system through Congress.
In Europe, Germany’s DAX fell 1 percent to 12,903 while the CAC 40 in France fell 0.6 percent to 5,285. The FTSE 100 index of leading British shares was 0.5 percent lower at 7,375. US stocks were poised for a lower opening, with Dow futures and the broader S&P 500 futures down 0.5 percent.
A report from the International Energy Agency pointing to strong production growth in the years ahead, particularly in the US, has weighed on oil prices and that’s had a knock-on effect on energy stocks, such as BP, which was down 1.3 percent and Total, which was trading 1.2 percent lower. In early afternoon London trading, a barrel of Brent crude was down another 58 cents at $55.12 a barrel while the New York benchmark fell 66 cents to $61.55 a barrel. The MSCI world equity index, which tracks shares in 47 countries, fell 0.2 percent and was set for its fifth straight day of declines, its longest run in the red since March.
The pan-European STOXX 600 index fell 1 percent and at its lowest level since Sept. 13. The index is still up nearly 6 percent so far this year. The UK’s top share index, the FTSE 100, declined half a percent while Germany’s exportoriented DAX fell 1 percent, weighed down by a stronger euro, which had risen nearly half a percent in European trading hours.
Traders were also a tad nervous about the upcoming vote in Congress on President Donald Trump’s tax-cutting package, which would be his first major legislative achievement after nearly 10 months in office.
“The deterioration in global stocks clearly has a footing in last week’s Senate announcement that we may not see a US corporate tax cut until 2019,” said Joshua Mahony, market analyst at IG. “However, the worst may not be over yet. With Senate Majority leader Mitch McConnell hoping to add a repeal of the ‘individual mandate’ into the bill as a way to undermine Obamacare, the pathway to tax reform just got more complicated.”
Tokyo’s Nikkei 225 index tumbled 1.6 percent to 22,028.32, as manufacturers’ shares were stung by a stronger yen. Hong Kong’s Hang Seng lost 1.0 percent to 28,851.69 and the Shanghai Composite index lost 0.8 percent to 3,402.52. Australia’s S&P ASX 200 fell 0.6 percent to 5,934.20 and the Kospi of South Korea declined 0.3 percent to 2,518.25.
MSCI’s broadest index of Asia-Pacific shares outside Japan had earlier fallen 0.6 percent.
China’s Shanghai index was down 0.55 percent, Australian stocks dropped 0.6 percent and South Korea’s KOSPI shed 0.4 percent. Japan’s Nikkei lost 1.5 percent. “It was nearly a week ago when we had that sharp and unexpected selloff in the Nikkei and given that we’ve lost over a percent in Japan yet again overnight, it appears this negative move has yet again spread to this part of the world,” said David Madden, analyst at CMC Markets in London.
“I think it’s a combination of people just viewing it (last week’s selloff) as a wake up call that even though the political and economic outlook haven’t changed a whole lot, equity markets just don’t go up forever.” Lifted by steady economic growth, supportive monetary policies and solid corporate earnings, global equities have rallied hard, with those in the United States, Germany and South Korea scaling record heights recently, while Japan’s Nikkei climbed to a 26-year peak. —Agencies