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Stocks Extend Rout, Oil Slides on China as Soros Warns of Crisis

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Global markets shuddered as turmoil emanating from China spread around the world and billionaire George Soros warned of a crisis.

Chinese shares fell 7 percent within a half hour of opening, triggering a full-day trading halt, after the central bank cut the yuan’s reference rate by the most since August. Other equity markets tumbled, with European shares falling the most since September and U.S. futures indicating a lower open. Commodities weren’t spared as crude headed for its lowest settlement in 12 years. Haven assets gained, with Treasuries rising for a sixth day, the yen reaching a four-month high and gold surging.

“China has a major adjustment problem,” Soros said Thursday at an economic forum in Colombo, Sri Lanka. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

Contagion from China helped wipe $2.5 trillion off the value of global equities in the first six days of this year as the nation’s tolerance for a weaker currency is viewed as evidence that policy makers are struggling to revive an economy that’s the world’s biggest user of energy, metals and grains. The World Bank cut its global growth forecasts for this year and next as China’s slowdown prolongs a commodity slump and contractions endure in Brazil and Russia. Chancellor of the Exchequer George Osborne plans to highlight a “dangerous cocktail” of global threats faces the British economy this year.

China

The Hang Seng China Enterprises gauge of mainland shares listed in Hong Kong tumbled 4.2 percent, its lowest close since October 2011. The Hang Seng Index dropped 3.1 percent.

The Shanghai Composite Index tumbled 7.3 percent before trading was suspended. New circuit breakers, which kicked in on Monday, have been criticized by analysts for exacerbating declines as investors scramble to exit positions before getting locked in by the halts.

After the stoppage, the securities regulator announced rules to limit selling by major shareholders when a ban expires this week. The watchdog also held an unscheduled meeting on the tumbling stock market without coming to a decision on policy action, according to a person familiar with the discussions.

“The Chinese yuan is smack bang at the heart of concerns,” Chris Weston, chief market strategist in Melbourne at IG Ltd. “For risk assets to stabilize and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency. It’s clear that the market is becoming increasingly concerned by the global inflation outlook.”

The offshore yuan swung from a 0.3 percent gain to a 0.7 percent loss and back in the space of about 30 minutes in early activity in Hong Kong’s freely-traded market. It was subsequently 0.4 percent higher versus the greenback, while the onshore rate weakened 0.6 percent.

“We saw aggressive intervention in the offshore yuan market,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “We don’t really understand the rationale behind the market movements in the past few days. Obviously, these movements have reminded us of the market rout last year.”

The central bank is considering new measures to prevent high exchange-rate volatility in the short term, according to people familiar with the matter.

China’s foreign-exchange reserves slid more in December than forecast, capping their first-ever annual decline, as authorities sought to prop up a weakening yuan.

Stocks

The Stoxx Europe 600 Index slid 3.2 percent at 1:07 p.m. in London, as all but 10 stocks fell. Commodity producers and carmakers, among those with the most sales exposure to China, led declines.

Anglo American Plc tumbled 9.6 percent and ArcelorMittal slid 6.1 percent, dragging a gauge of miners to its lowest level since 2009. A measure of energy producers also fell to a near six-year low, with Royal Dutch Shell Plc dropping 6.2 percent, the most since August.

Daimler AG, BMW AG and Volkswagen AG each lost at least 4.5 percent, helping pull Germany’s benchmark DAX Index below 10,000 for the first time since October.

The VStoxx Index measuring volatility expectations in euro-area shares jumped 17 percent, heading for its biggest weekly advance since April.

Futures on the Standard & Poor’s 500 Index lost 2.2 percent, after the U.S. benchmark slipped Wednesday to its lowest level in three months.

The MSCI Asia Pacific Index retreated 2.1 percent. Benchmark stock indexes in Australia, Japan, Singapore and Thailand all lost more than 2 percent.

Currencies

The yen, which has been the best-performing major currency so far this year amid the demand for safe-haven assets, rose as much as 1 percent to its strongest level since August versus the dollar.

The pound fell to the weakest level since June 2010, touching $1.4555. The U.K. currency slid 1 percent to 74.46 pence per euro. It has fallen every day this week against the dollar. Disappointing manufacturing and services data added to the view that the Bank of England will have to keep its benchmark interest rate lower for longer.

The Aussie tumbled 0.8 percent to 70.13 U.S. cents, and touched 70.09, its lowest since Oct. 2. It fell more than 3 percent through Wednesday, its worst start to any year since currency controls were scrapped in December 1983, according to data compiled by Bloomberg.

Commodities

The Bloomberg Commodity Index dropped 0.7 percent, headed for its lowest close since 1999.

West Texas Intermediate crude slid 3.3 percent to $32.86 a barrel, poised for the lowest settlement since February 2004. Crude supplies at Cushing, Oklahoma, the delivery point for U.S. crude, climbed to an all-time high, government data showed Wednesday. Brent oil will slump to $30 in the next 10 days, according Nomura Holdings Inc., while UBS Group AG sees an oversupply pushing prices even lower.

Copper retreated 2.6 percent in London to the lowest since Nov. 24 and zinc slumped 3.6 percent. Cocoa for March delivery fell for a fifth day to an eight-month low on ICE Futures U.S. in New York. Gold rose as much as 0.8 percent to a two-month high of $1,102.85 an ounce.

Bonds

Yields on 10-year Treasury notes fell one basis points to 2.16 percent, after earlier touching the lowest since October. Japanese government bond futures advanced to a record high after 30-year notes were auctioned at a higher price than dealers forecast. South Korea’s 10-year yield fell to a record low as the weakening yuan dimmed the outlook for exports to China and North Korea’s fourth nuclear test, conducted on Wednesday, spurred demand for safer assets.

Germany’s 10-year break-even rate, a gauge of the market’s outlook for inflation, tumbled to the lowest level since February amid concerns that the rout in commodity markets would subdue price-growth.

The cost of insuring investment-grade corporate debt climbed to the highest since Oct. 6. The Markit iTraxx Europe Index of credit-default swaps on highly rated companies rose four basis points to 85 basis points. The Markit iTraxx Europe Crossover Index of default swaps on junk-rated companies jumped 16 basis points to 351 basis points, the highest since Dec. 15.

Emerging Markets

Energy producers led losses in developing-nation stocks, driving the MSCI Emerging Markets Index down 2.7 percent. Benchmark gauges in South Africa, Thailand, the Philippines and Abu Dhabi slid more than 2.5 percent and those for Saudi Arabia, Dubai and Qatar tumbled at least 3 percent. Russian markets were closed for a holiday.

A gauge tracking 20 emerging-market currencies dropped for a fifth day, headed for its longest losing streak since October. The rand in South Africa, which counts China as its biggest trading partner, tumbled 1.5 percent to a record low. Russia’s ruble slid 1.1 percent in offshore trading while Mexico’s peso and Brazil’s real slid at least 0.6 percent.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Oil Steadies, But Outlook Gloomy as Coronavirus Cases, Supply Grow

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Oil price

Oil prices eked out small gains on Tuesday after sharp losses, but sentiment remained subdued as a surge in global coronavirus cases hit prospects for crude demand while supply is rising.

Brent crude was up 43 cents, or 1%, at $40.87 a barrel. U.S. oil gained 43 cents, or 1.1%, at $38.99 a barrel. Both contracts fell more than 3% on Monday.

A lack of progress on agreeing a U.S. coronavirus relief package added to market gloom, although U.S. House of Representatives Speaker Nancy Pelosi said on Monday she hoped a deal can be reached before the Nov. 3 elections.

A wave of coronavirus infections sweeping across the United States, Russia, France and many other countries has undermined the global economic outlook, with record numbers of new cases forcing some countries to impose fresh restrictions as winter looms.

“We think demand from this point onwards is really going to struggle to grow. COVID-19 restrictions are all part of that,” said Commonwealth Bank of Australia (CBA) commodities analyst Vivek Dhar.

CBA expects U.S. oil to average $38 and Brent to average $41 in the fourth quarter this year.

Prices got some support from a potential drop in U.S. production as oil companies began shutting offshore rigs with the approach of a hurricane in the Gulf of Mexico.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the worst is over for the crude market.

But his comment contradicted an earlier remark from OPEC’s secretary general, who said any oil market recovery may take longer than hoped as coronavirus infections rise around the world.

Meanwhile, Libyan production is expected to reach 1 million barrels per day (bpd) in the coming weeks, the country’s national oil company said on Friday, a quicker return than many analysts had predicted.

That is likely to complicate efforts by the Organization of the Petroleum Exporting Countries (OPEC) to restrict output to offset weak demand.

OPEC+ – made up of OPEC and allies including Russia – is planning to increase production by 2 million bpd from the start of 2021 after record output cuts earlier this year.

An analyst survey by Reuters ahead of data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday estimated that U.S. crude stocks rose in the week to Oct. 23, while gasoline and distillate inventories fell.

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Nigel Farage Urged to Highlight Perils of DIY Investing

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Nigel Farage appears to be advocating a DIY approach to investing – and this could be “monumentally risky” for inexperienced investors, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as a daily finance-orientated newsletter from the team of the Brexit Party leader and political activist urges its readers to “tell us about your successes by going it alone – leaving the money men and middlemen by the side of the road…”

Mr Farage’s email is provided for correspondence.

Mr Green comments: “Successful DIY (Do It Yourself) investing can be possible, but for most people it is not recommended – indeed, it could be a costly and traumatic accident waiting to happen.

“Going it alone can be monumentally risky for inexperienced investors as the complexities involved can sink their portfolios.

“Perhaps this is why around two-thirds of wealthy individuals have a professional financial adviser of some sort, according to new independent research from the University of Toronto.”

He continues: “I would urge anyone who extols the virtues of a DIY approach to investing to also underscore the risks and potential pitfalls to be avoided.”

A pro will help you make the best investment decisions in five key ways, says Nigel Green.

“First, helping you to diversify a portfolio. Spreading money around is vital to curb risk. However, it must be used correctly – diversification will only add real value if the new asset has a different risk profile.

“Second, investing with a plan: Unless you have a sound plan, you’re gambling, not investing.

“Third, avoiding emotional decisions. Overly emotional decisions can prove deadly when it comes to investments because they are blighted by prejudices and biases.

“Fourth, regularly reviewing your portfolio: Investments need to be consistently reviewed to ensure they still deserve their place in the portfolio and that they are still on track to reach your long-term financial objectives.

“Fifth, not focusing excessively on historical returns: The future investment situation is likely to be different from time-aged averages.”

The deVere CEO concludes: “While investing remains almost universally regarded as one of the best ways to create, grow and safeguard wealth, considering the pitfalls of getting it wrong, it could be an expensive mistake for you and your family not to seek professional advice.”

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Top Five US Oil and Gas Firms Lost $307bn in Market Value Amid COVID-19 Crisis

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Crude oil

Market Value of US Five Largest Companies Decline by $307bn in 2020

Even before the coronavirus pandemic, the oil and gas industry was faced with slumping prices. However, with a record collapse in oil demand amid the coronavirus lockdown, the COVID-19 crisis has further shaken the market, causing massive revenue and market cap drops for even the largest oil and gas companies.

According to data presented by StockApps.com, the top five oil and gas companies in the United States lost over $307bn in market capitalization year-over-year, a 45% plunge amid the COVID-19 crisis.

Market Cap Still Below March Levels

Global macroeconomic concerns such as the US-China trade war and the oil overproduction set significant price drops even before the coronavirus outbreak. A standoff between Russia and Saudi Arabia in the first months of 2020 sent prices even lower.

After global oil demand plunged in March, Saudi Arabia proposed a cut in oil production, but Russia refused to cooperate. Saudi Arabia responded by increasing production and cutting prices. Shortly Russia followed by doing the same, causing an over 60% drop in crude oil prices at the beginning of 2020. Although OPEC and Russia agreed to cut oil production levels to stabilize prices a few weeks later, the COVID-19 crisis already hit. Statistics show that oil prices dropped over 40% since the beginning of 2020 and are hovering around $40 a barrel.

Such a sharp fall in oil price triggered a growing wave of oil and gas bankruptcies in the United States and caused a substantial financial hit to the largest gas producers.

In September 2019, the combined market capitalization of the five largest oil and gas producers in the United States amounted to $674.2bn, revealed the Yahoo Finance data. After the Black Monday crash in March, this figure plunged by 45% to $373bn. The following months brought a slight recovery, with the combined market capitalization of the top five US gas producers rising to over $461bn in June.

However, the fourth quarter of the year witnessed a negative trend, with the combined value of their shares falling to $367bn at the beginning of this week, $6.2bn below March levels.

Exon Mobil`s Market Cap Halved in 2020, Almost $155bn Lost YoY

In August, Exxon Mobil Corporation, once the largest publicly traded company globally, was dropped from the Dow Jones industrial average after 92 years. As the largest oil and gas producer in the United States, the company has suffered the most significant market cap drop in 2020.

Statistics indicate the combined value of Exxon Mobil`s shares plunged by 52% year-over-year, falling from almost $300bn in September 2019 to $144bn at the beginning of this week.

Phillips 66, the fourth largest gas producer in the United States by market capitalization, witnessed the second-largest drop in 2020. Statistics show the company`s market cap dipped by 49.6% year-over-year, landing at $22.9bn this week.

The Yahoo Finance data revealed that EOG Resources lost over $21bn in market cap since September 2019, the third-largest drop among the top five US gas producers.

Conoco Phillips witnessed a 42% drop in market capitalization amid the COVID-19 crisis, with the combined value of shares plunging by almost $30bn year-over-year.

Statistics show Chevron witnessed the smallest market cap drop among the top five companies. At the beginning of this week, the combined value of shares of the second-largest US gas producer stood at $141.5bn, a 36.9% plunge year-over-year.

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