|05 August, 2019

Monday outlook: Trade tensions weigh on oil prices, Asian shares drop

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2.1 percent to more than six-month lows

Image used for illustrative purpose. Distillation tank of oil refinery plant, twilight time.

Image used for illustrative purpose. Distillation tank of oil refinery plant, twilight time.

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  • Asian shares track Wall Street lower
  • Oil prices drop on weaker demand outlook
  • Regional markets retreat in line with global markets
  • Dollar edges lower, gold gains 

Global markets

Asian shares dropped sharply in early trading on Monday over a rapid escalation in the trade war between the US and China, that kept investors away from equities.

US President Donald Trump threatened on Thursday to raise tariffs by 10 percent on another $300 billion in Chinese exports to the US, after US-Chinese trade talks in Shanghai failed to lead to progress. China vowed on Friday to fight back.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2.1 percent to more than six-month lows. In China, the blue-chip index CSI300 fell 0.8 percent.

“Everything is selling off right now,” Ray Attrill, head of forex strategy at National Australia Bank in Sydney told Reuters.

“Our working assumption is that we are unlikely to see any meaningful resolution to the trade dispute anytime soon.”

On Friday, the Dow Jones Industrial Average fell 155.36 points, or 0.58 percent, to 26,428.06, S&P 500 lost 24.58 points, or 0.83 percent, to 2,928.98 and the Nasdaq Composite dropped 118.91 points, or 1.47 percent, to 7,992.21.

Oil prices 

Concerns over lower demand following trade tensions between the world’s two biggest economies weighed on oil prices early on Monday.

Brent crude was down 50 cents, or 0.8 percent, at $61.39 a barrel by 0029 GMT.

U.S. crude was down 24 cents, or 0.4 percent, at $55.42 a barrel.

Last week, Brent dropped more than 2 percent and US crude ending the week around 1 percent lower.

A Reuters report said that US crude oil exports surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, suggesting there is plenty of oil in the market.

Also in the US, the weekly oil rig count, an indicator of future production, fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling, the report said.

Middle East markets

Stock markets in the region traded mostly lower on Sunday, tracking a retreat in global markets at the end of last week.

Saudi Arabia’s index fell 1.3 percent as National Commercial Bank, the country's largest lender, was down 2.9 percent. Al Rajhi Bank, the country's biggest Islamic lender, was down 1 percent.

Dubai’s index dropped 1.5 percent with Emaar Properties down 4 percent. After market closure, Emaar Properties reported a drop a 7.4 percent drop in Q2 profit.

In Abu Dhabi, the index declined 1 percent, dragged lower by the market heavyweight lender First Abu Dhabi Bank, which was down 1.4 percent.

Qatar's index fell 0.4 percent with the Gulf's biggest lender Qatar National Bank retreating 0.8 percent and Qatar Navigation losing 3.8 percent.

Egypt’s blue-chip index EGX30 was the best performer in the region, adding 0.8 percent. Commercial International Bank rose 1.6 percent.

Kuwait’s premier market index lost 0.4 percent while Bahrain’s index and Oman’s indices were mainly flat.

Currencies

The dollar was trading a shade lower early on Monday.

The dollar index .DXY, which measures the greenback against a basket of six major currencies edged 0.1 percent lower.

Precious metals

Gold prices gained on a weaker dollar.

Spot gold rose 0.2% to $1,443.56 per ounce as of 0107 GMT.

U.S. gold futures inched down 0.1% to $1,455.40 an ounce.

(Reporting by Gerard Aoun; Editing by Seban Scaria)

(gerard.aoun@refinitiv.com)


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