Thursday Morning Briefing: Crude Below $44, Japan Drops
Weakness persists in Asia over policy uncertainty; Oil below $44
The selloff that’s wiped out $2 trillion from global stocks in the past week continued on stimulus uncertainty and falling crude prices.
Japanese shares dropped for the seventh day in a row, while the MSCI Asia Pacific Index fell for the sixth day. The Nikkei 225 Index’s longest losing streak in more than two years comes as economists remain divided over what the Bank of Japan will do at its September 21 policy meeting.
The yen touched a one-week low as economists from Morgan Stanley wrote that the BOJ may opt for steps including a ‘marginal increase in purchase of Japanese government bonds next week.’
Markets in China, Taiwan and South Korea are shut on account of a holiday.
The S&P 500 Index closed largely unchanged after energy shares dropped. The NASDAQ Composite Index bucked the trend and gained 0.3 percent after Apple Inc. stock climbed to a five-month high.
Odds of a U.S. Federal Reserve rate hike post next week’s policy meeting fell another two percentage points to 20 percent compared to last week, according to futures rates tracked by Bloomberg.
The West Texas Intermediate crude dropped below $44 per barrel towards a two-week low, amidst speculation that the global glut will expand. Libya, a member of the Organisation of Petroleum Exporting Countries, lifted curbs on sales from three ports thereby unlocking 3 lakh barrels per day. Another OPEC member Nigeria is seeking to boost exports as well.
Investors will keenly watch the policy stance from the Bank of England which is expected to keep rates on hold after stronger-than expected economic data quashed fears of a post Brexit meltdown in the U.K. economy. The central bank is also likely to stick to its other emergency measures of raising its bond-buying program and purchase of corporate bonds worth 10 billion pounds.
The SGX Nifty Index fell as much as 0.3 percent to 8,743 as of 7.00 a.m. indicating further weakness for Indian equities. Stocks of Reliance Communication Ltd. and other telecom majors will be in focus after the Anil Ambani owned company announced plans to merge its wireless business with Aircel Ltd.