Risk rally fades as stocks, oil slip back into the red

The Pak Banker - - MARKETS/SPORTS -

The re­cent re­cov­ery in riskier as­sets fiz­zled out on Tues­day, with a fall in stocks, oil and the value of China's yuan cur­rency boost­ing in­vestor de­mand for safer as­sets such as the Ja­panese yen, govern­ment bonds and gold.

Oil fell more than 2 per­cent and the main Euro­pean stock indices fell as much as 1 per­cent, giv­ing back some of their re­cent gains: oil rose more than 5 per­cent on Mon­day and world stocks recorded their big­gest rise last week since early Oc­to­ber.

Ster­ling re­cov­ered from its seven-year low against the dol­lar struck on Mon­day but strug­gled to make much head­way as un­cer­tainty over Bri­tain's mem­ber­ship of the Euro­pean Union con­tin­ued to swirl ahead of the June 23 ref­er­en­dum. "Yes­ter­day, higher oil prices, surg­ing com­mod­ity stocks and bounce in bank­ing shares prompted an ex­ten­sion of the rally that be­gan on Fe­bru­ary 12," said Jasper Lawler, an­a­lyst at CMC Mar­kets in Lon­don.

"To­day though, Euro­pean mar­kets look to pull back from those gains, along­side a dip in oil as China stocks fall and min­ing gi­ant BHP Bil­li­ton slashes its div­i­dend." The world's big­gest miner an­nounced a $5.67 bil­lion net loss in the six months to the end of De­cem­ber, its first loss in 16 years, and said it would slash its in­terim div­i­dend by 75 per­cent.

Its shares were down 4 per­cent (BLT.L) in Lon­don, help­ing to pull the FTSE 100 down 0.9 per­cent . FTSE. Among the big­gest losers was Stan­dard Char­tered, whose shares were down 5 per­cent af­ter the emerg­ing mar­ket-ex­posed bank re­ported an 84 per­cent fall in an­nual profit.

Ger­many's DAX was last down 0.6 per­cent .GDAXI, France's CAC 40 was 0.3 per­cent lower .FCHI and Europe's in­dex of lead­ing 300 shares was down 0.2 per­cent at 1303 points .FTEU3. Ear­lier in Asia shares re­treated from a seven-week high as the oil price rally that had boosted global equity mar­kets re­versed. MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan .MIAPJ0000PUS fell 0.3 per­cent and Ja­pan's Nikkei . N225 erased morn­ing gains to close down 0.4 per­cent.

Chi­nese stocks . SSEC closed 0.9 per­cent lower, their big­gest fall in three weeks, while U.S. fu­tures pointed to a fall of around 0.2 per­cent on Wall Street ESc1.

Oil mar­kets jumped as much as 7 per­cent on Mon­day - and had ral­lied around 30 per­cent from their lows a month ago - as spec­u­la­tion about fall­ing U.S. shale out­put fed the no­tion that crude prices may be bot­tom­ing af­ter their 20-month col­lapse.

But they re­treated on Tues­day on con­cern that any cuts to U.S. pro­duc­tion may be coun­tered by ris­ing out­put from Iran. U.S. crude fu­tures CLc1 fell 2.2 per­cent to $32.66 a bar­rel and the in­ter­na­tional bench­mark Brent LCOc1 slid 2.1 per­cent back below $34 a bar­rel. In cur­rency mar­kets the Bri­tish pound GBP=D4 re­mained vul­ner­a­ble a day af­ter fall­ing nearly 2 per­cent, its big­gest one-day drop in al­most six years, on wor­ries Bri­tain may leave the Euro­pean Union.

The pound hit a seven-year low of $1.4057 on Mon­day, af­ter Lon­don Mayor Boris John­son, one of the coun­try's most pop­u­lar rul­ing party politi­cians, an­nounced his sup­port for Bri­tain to leave the EU in June's ref­er­en­dum.

Ster­ling last stood at $ 1.4113, down slightly on the day. "The 30-year low is $ 1.373 seen in June 2001, so the whole 'Brexit' dis­cus­sion is push­ing us against what has been a well held level at around $1.40 that ster­ling has bounced off sev­eral times over the last three decades," said Jim Reid, mar­ket strate­gist at Deutsche Bank.

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