Global Shares Extend Losses Amid Oil's Weakness -- 2nd Update
21 Junho 2017 - 8:33AM
Dow Jones News
By Riva Gold and Ese Erheriene
Global stocks extended losses Wednesday following a drop in oil
prices and government bond yields, although Chinese shares got a
modest boost after MSCI Inc. said it would add the country to its
emerging-markets index.
Banks, insurance companies and car makers were the worst
performers in Europe as lower oil prices dragged down inflation
expectations and government bond yields. The Stoxx Europe 600 fell
0.6% midday, with shares of Provident Financial off around 16%
after a profit warning, leading declines.
Asian markets outside China closed lower amid losses in energy
companies and banks, while futures pointed to a 0.2% opening dip
for the S&P 500. The S&P 500 and Dow Jones Industrial
Average posted their biggest daily losses in over a month Tuesday
as oil prices dropped to their lowest level since September,
dragging some shares of oil companies.
WTI crude oil futures were last down 0.3% at $43.35 a barrel
after returning to bear-market territory Tuesday as cuts by the
Organization of the Petroleum Exporting Countries were offset by
increasing production elsewhere. U.S. oil production has climbed
around 7% since OPEC announced plans to cut output in November.
"There's so much shale oil in the U.S. and so much excess
supply," said Patrick Spencer, vice chairman of equities at Robert
W. Baird & Co.
Still, he expects the wider U.S. stock market to continue to
grind higher this year even if oil wobbles, supported by strong
earnings. "Positive earnings revisions and a weaker dollar are
quite a powerful springboard for the U.S.," he said.
Elsewhere in markets, the fall in oil prices added to recent
doubts about the global inflation picture, supporting government
bonds. Yields on 10-year U.S. Treasury notes fell to 2.149%
Wednesday from 2.153% Tuesday, close to their low of the year,
while German bund yields fell to 0.245% from 0.265%. Yields move
inversely to prices.
"Oil, which can be a big inflation contributor, is down around
20% year to date," said Nancy Curtin, chief investment officer at
Close Brothers Asset Management. "Despite improvements in the
growth picture, there seems to be very little inflation," she
said.
Federal Reserve Bank of Dallas President Robert Kaplan also said
Tuesday he would like to see more evidence of inflation before
raising interest rates again.
"I'd like to see now a confirmation in the data that the recent
weakness in March, and to some extent April and May, was
transitory," he said.
The impact of falling oil on credit markets so far has been
limited and largely contained to oil-and-gas companies, according
to strategists at Commerzbank.
Earlier, stocks were lower across the Asia-Pacific region amid
losses in energy companies and banks.
The Nikkei Stock Average was down 0.5% as the yen strengthened,
while Hong Kong's Hang Seng Index fell 0.6%. Australia's S&P
ASX 200 logged its biggest decline of the year, falling 1.6%.
Mainland China markets inched higher, however, after MSCI Inc.
said it would include China A-shares in its emerging-markets index,
meaning funds that track it will automatically allocate money into
China. The Shanghai Composite Index was up 0.5% and stocks in
Shenzhen were up 0.4% as positive sentiment from the MSCI decision
narrowly offset outflows from the energy sector.
"We think today's MSCI move will help to accelerate China's
financial integration into the rest of the world," Aidan Yao,
economist at AXA Investment Managers, said in a note.
"For global investors, while the inclusion will not trigger an
immediate and wholesale change in their asset allocation, it will
put Chinese equities on the map."
In currencies, the WSJ Dollar Index edged down 0.1% after two
days of gains. The British pound swung between small gains and
losses as investors waited for the U.K. government to set out its
legislative program and was last flat, while the dollar fell 0.3%
against the yen.
--Stephanie Yang and Alejandro Lazo contributed to this
article.
Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at
ese.erheriene@wsj.com
(END) Dow Jones Newswires
June 21, 2017 07:18 ET (11:18 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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