Global equity markets lost ground on Tuesday, slowing the recent recovery in riskier assets as oil prices reversed some of their recent bounce and benefited safe-haven assets like the Japanese yen and gold.
After gains of more than 5 percent on Monday, which helped push a gauge of world equities up more than 1 percent, both Brent (LCOc1) and U.S. crude (CLc1) were down more than 1 percent.
The decline in crude weighed on both the energy (.SPNY) and financial (.SPSY) sectors on Wall Street. Concerns about bank exposure to the energy sector were highlighted by JP Morgan’s (JPM.N) announcement that it will put aside an additional $500 million to cover potentially bad loans to energy companies.
“It is looking for its direction from oil, there has to at some point be a disconnect between what oil does and what the broader market does,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.
“But at the moment it is too connected right now.”
U.S. crude futures were last down 3.4 percent at $32.26 a barrel and Brent (LCOc1) lost 2.4 percent to $33.85 a barrel. The commodity had shown signs of stabilization above $30 a barrel on plans for a production freeze by major producers, but lost ground on Tuesday amid doubts about the impact a freeze could have on oversupply.
The Dow Jones industrial average (.DJI) fell 109.3 points, or 0.66 percent, to 16,511.36, the S&P 500 (.SPX) lost 14.64 points, or 0.75 percent, to 1,930.86 and the Nasdaq Composite (.IXIC) dropped 41.65 points, or 0.91 percent, to 4,528.96.
European shares also moved lower on the crude weakness, along with and disappointing updates from Standard Chartered (STAN.L), down 5.8 percent, and BHP Billiton (BLT.L), down 4.9 percent. A weak sentiment reading of German manufacturers also raised concerns about the health of the region’s largest economy.
Resources stocks (.SXPP), down 2.7 percent, weighed heavily on European equity indices after the world’s largest miner, BHP Billiton, posted its first loss in 16 years.
The pan-European FTSEurofirst 300 (.FTEU3) index of leading shares was off 0.9 percent. MSCI’s index of world shares was down 0.7 percent.
In currency markets, the British pound (GBP=) remained vulnerable, a day after falling nearly 2 percent, its biggest one-day percentage drop in almost six years, on worries Britain may leave the European Union. Sterling was last down 0.4 percent at 1.4087.
The euro (EUR=) also fell to $1.0987 on Monday, its lowest in almost three weeks, on fears Brexit could undermine the European Union. It was last down 0.15 percent at $1.1009.
Investors’ shift toward safer ground on Tuesday pushed the dollar lower against the yen, down 0.7 percent to 112.09 yen (JPY=) after hitting a low of 111.75. The risk-aversion helped lift gold 1.2 percent to $1,223.06 an ounce (XAU=).
The dollar’s index against a basket of six major currencies (.DXY) was little changed, up 0.05 percent at 97.424.
[“Source-finance”]
