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| 04 October, 2018

Thursday outlook: Asian shares, oil prices drop

Asian shares fell in early trading on Thursday, failing to track a rise on Wall Street overnight. Middle East markets mostly added gains on higher oil prices. More commentary on oil prices, currencies and precious metals

A man is seen against an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China March 23, 2018.

A man is seen against an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China March 23, 2018.

REUTERS/Stringer
  • Asian shares retreat
  • Middle East markets edge higher
  • Oil prices drop on higher U.S. output
  • The dollar adds gains, gold prices steady

Global markets

Asian shares fell in early trading on Thursday, failing to track a rise on Wall Street overnight.

Strong U.S. economic data drove Treasury yields to their highest since mid-2011. Higher U.S. yields pressure Asian markets as borrowing costs rise.

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MSCI’s broadest index of Asia-Pacific shares outside Japan skidded 1.1 percent.

“A simple dynamic is playing out in the global economy right now - the U.S. is booming, while most of the rest of the world slows or even stagnates,” HSBC economist Kevin Logan, told Reuters.

“A Federal Reserve that is raising rates to prevent the U.S. economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying.”

Overnight on Wall Street, the Dow rose 0.2 percent, while the S&P 500 gained 0.07 percent and the Nasdaq 0.32 percent.

Middle East markets

Stock markets in the Middle East mostly traded higher on Wednesday as better level of oil prices have been pushing stock markets in the region.

Saudi Arabia’s index added 0.3 percent. Shares in Sahara Petrochemicals and Saudi International Petrochemical Company (Sipchem) rose 3.64 percent and 0.71 percent respectively during trading on Wednesday, after the two companies announced to the Saudi Exchange that they had “entered into a non-binding memorandum of understanding (the "MOU")” to effect a business combination.

Dubai’s index dropped 0.8 percent as real estate stocks kept weighing on the index.

DAMAC Properties fell 2.4 percent after saying it expects Dubai's real estate market to face another few quarters of "soft market conditions" before starting to rebound from late 2019.

Abu Dhabi's index rose 0.2 percent, helped by a nearly 2 percent gain in RAK Properties and a 0.4 percent rise in First Abu Dhabi Bank.

Qatar’s index rose 0.7 percent as Qatar Islamic Bank was up 1.3 percent and Masraf Al Rayan rose 1.2 percent.

Egypt’s index dropped 0.5 percent. Eastern Co was the biggest drag, slipping 5.9 percent.

Bahrain’s index edged up 0.03 percent, Kuwait’s index gained 0.1 percent and Oman’s index dropped 0.4 percent.

Oil prices

Oil prices dropped in early trading on Thursday on higher U.S. crude oil stocks.

U.S. crude oil stocks C-STK-T-EIA rose by nearly 8 million barrels last week to about 404 million barrels, the biggest increase since March 2017, Energy Information Administration data showed on Wednesday.

Brent crude oil futures LCOc1 were trading at $85.85 per barrel at 0104 GMT, down 44 cents, or 0.5 percent, from their last close.

Brent on Wednesday hit a four-year high of $86.74 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were down 30 cents, or 0.4 percent, at $76.11 a barrel.

“Data for last week showed a much more significant than expected ... build in U.S. commercial crude (inventories), which generally suggests that oil prices should tumble,” Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, told Reuters.

“This on top of the other big news of the day from Riyadh that ... Saudi Arabia and Russia will boost output,” Innes said.

Currencies

The dollar was trading near 11-month highs on Thursday against the yen on strong U.S. economic data, as an influential survey of the U.S. services sector showed activity at its strongest since August 1997.

The dollar shot to its highest so far this year on the yen at 114.55 before steadying at 114.35.

Precious metals

Gold prices steadied on a stronger dollar.

Spot gold was up 0.1 percent at $1,198.16 an ounce at 0103 GMT, after falling about 0.5 percent in the previous session.

U.S. gold futures were down 0.1 percent at $1,202.1 an ounce. 

(Writing by Gerard Aoun; Editing by Mily Chakrabarty)

(gerard.aoun@thomsonreuters.com)


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