Shares fall with oil prices, yen in de­mand

The Pak Banker - - MARKETS/SPORTS -

Shares fell in Europe and Asia on Wed­nes­day as oil prices dipped af­ter Saudi Ara­bia ef­fec­tively ruled out out­put cuts by ma­jor pro­duc­ers, lift­ing in­vestor ap­petite for low-risk as­sets such as the Ja­panese yen and gold. Top-rated govern­ment bonds were also in de­mand as the prospect of per­sis­tently low oil prices, which have fallen some 70 per­cent since mid-2014, raised con­cerns about weak global eco­nomic growth.

The yen JPY=, of­ten sought by in­vestors as a shel­ter when riskier as­sets are un­der pres­sure, hit an al­most three­year high against the euro EURJPY= of 123.04 yen. Ster­ling, how­ever, plumbed a seven-year low around $1.3961 in Asian trad­ing, on con­cern Bri­tons might vote to leave the Euro­pean Union in a June ref­er­en­dum. It last traded at $1.3976 GBP, down 0.3 per­cent on the day and at 78.66 pence per euro EURGBP=.

The pound has shed al­most 3 per­cent against the dol­lar this week af­ter sev­eral se­nior mem­bers of Prime Min­is­ter David Cameron's Con­ser­va­tive Party threw their sup­port be­hind the cam­paign to leave the EU. The euro fell 0.2 per­cent to $1.0991. "The euro is also get­ting dragged down a bit by the EU con­cerns, so if you're look­ing for a safe haven you're prob­a­bly less likely to choose the euro, more likely to choose the yen," said Rabobank cur­rency strate­gist Jane Fo­ley.

The pan-Euro­pean FTSEurofirst 300 share in­dex .FTEU3 fell 1.4 per­cent, led lower by com­mod­ity-re­lated stocks. SXPP, which fell nearly 4 per­cent. Bri­tain's FTSE 100 in­dex . FTSE lost 1 per­cent. MSCI's broad­est in­dex of Asi­aPa­cific shares out­side Ja­pan .MIAPJ0000PUS fell 1.2 per­cent, slip­ping fur­ther from Mon­day's six-week high. Tokyo's Nikkei in­dex closed down 0.9 per­cent on the lower oil prices and a stronger yen. Chi­nese shares bucked the trend, with the CSI 300 in­dex .CSI300 of the largest listed com­pa­nies in Shang­hai and Shen­zhen clos­ing up 0.7 per­cent, led by in­dus­trial . CSI300IN and in­fra­struc­ture .CSI300II stocks.

Oil prices re­mained weak af­ter Saudi Oil Min­is­ter Ali Al-Naimi told oil ex­ec­u­tives on Tues­day that mar­kets should not view the agree­ment by four ma­jor oil pro­duc­ers to freeze out­put at Jan­uary lev­els as a pre­lude to pro­duc­tion cuts.

While Naimi said he was con­fi­dent more coun­tries would join the pact, Iran was seen as un­likely to agree to the out­put cap be­cause it won't al­low the coun­try to re­gain the mar­ket share it lost dur­ing sanc­tions. Brent crude LCOc1, the global bench­mark, slid 50 cents, or 1.5 per­cent to $32.77 a bar­rel. "I sus­pect few peo­ple were ex­pect­ing a deal to cut pro­duc­tion so his com­ments are hardly a sur­prise. Yet, the lat­est de­vel­op­ment seems to sug­gest that for oil pro­duc­ers to get more united they will have to feel more pain," said Ayako Sera, se­nior mar­ket econ­o­mist at Su­mit­omo Mit­sui Trust Bank.

The low oil price has raised con­cerns that some U.S. shale oil pro­duc­ers could be forced into bank­ruptcy. JPMor­gan (JPM.N), the largest U.S. bank by as­sets, said on Tues­day it planned to in­crease pro­vi­sions for ex­pected losses on en­ergy loans by $500 mil­lion.

The fall in stocks and oil pushed down yields on the low­est-risk govern­ment bonds.

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