Asian shares skid, crude tumbles after Doha deal fails
Tumbling crude oil futures knocked Asian shares on Monday after producers’ talks failed to agree on a plan to curb the global supply glut, while Tokyo stocks skidded as investors assessed the impact of a devastating earthquake in southwestern Japan.
Oil, energy stocks and commodity-linked currencies are falling after talks in Qatar between major producers to freeze oil output collapsed over the weekend.
The gloom was expected to spread to European bourses, with financial spreadbetter IG predicting Britain’s FTSE 100 would open 0.9 percent lower and Germany’s DAX.
Some 18 oil exporting nations, including OPEC members, had gathered in Doha, the capital of Qatar, over the weekend in an attempt to agree to stabilize output at January levels until October 2016. The pact fell apart after Saudi Arabia demanded that Iran join in.
The pan-European Stoxx 600 equity index is off 1.3 per cent at the open as the oil & gas sector sheds 3.4 per cent. US index futures suggest the S&P 500 will lose 0.6 per cent to 2,067.
Brent crude futures LCOc1 tumbled about 4.2 percent to $41.31, while U.S. crude CLc1 slid about 4.4 percent to $38.5
China’s blue-chip CSI300 index .was down 1.4 percent, while the Shanghai Composite Index .lost 1.5 percent.
S&P 500 e-mini futures SPc1 dropped 0.7 percent. Wall Street ended with modest losses on Friday but major indexes still posted weekly gains.
The Nikkei stock index ended down 3.4 percent, as investors and companies assessed the impact of devastating earthquakes in southwestern Japan’s Kyushu island on manufacturers’ supply chains.
A 7.3 magnitude tremor struck early on Saturday, following a smaller quake on Thursday, centered on the region’s Kumamoto prefecture, an important manufacturing hub.
Brazilian President Dilma Rousseff lost a crucial impeachment vote in the lower house of Congress on Sunday and appeared almost certain to be forced from office. That could end 13 years of leftist Workers Party rule in Latin America’s biggest economy.
Brazil’s stocks and currency have been among the world’s best-performing assets in recent weeks on growing bets that Rousseff would be removed from office, allowing her successor to adopt more market-friendly policies.
A Tokyo-listed exchange-traded fund of Brazilian equities was up 4.5 percent.
The plunge in crude oil prices took a large slice out of commodity currencies.
The greenback gained 1 percent against the Canadian dollar to C$1.2952 while the Australian dollar shed 0.8 percent to $0.7665
The Japanese yen, a perceived safe-haven currency, got a lift from the turmoil, with the dollar skidding 0.7 percent to 107.96 yen.
“The failure of the Doha talks to agree anything serves to underscore the ongoing global supply/demand imbalance and which the fall-off in US shale oil output does little to correct,” said analysts at National Australia Bank.
Since hitting a 12-year low below $30 a barrel in January, the price of Brent has recovered by almost 50 per cent, partly on hopes that big oil producers would be able to reach some form of deal to tackle global oversupply.
The rebound had eased fears not just over the health of the resources sector but banks’ exposure to energy-linked loans. Higher oil prices had also reduced concerns among investors about the fiscal positions of oil producing nations and that some may need to sell financial assets to raise cash.
Consequently, the fallout from Doha has hit trader investor confidence – with energy sensitive assets in particular feeling the pain.
Gold is not seeing much “haven” buying, however, the yellow metal up just $1 at $1,235 an ounce as the dollar index is steady at 94.74 reflecting little change between the euro and buck, currently $1.1287.