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Oil shock weighs on global equities

Global stock markets extended losses to end the week as the conflict involving Iran and disruptions around the Strait of Hormuz kept oil prices elevated and stoked fresh inflation concerns, dampening expectations for interest rate cuts by the US Federal Reserve (Fed) this year. US equities sold off on Thursday, while European markets also closed lower with airlines under particular pressure from the prospect of sustained high energy costs. In Asia, most equity markets were trading in negative territory on Friday, with Japan and South Korea among the weakest performers, while safe-haven demand supported gold and bitcoin. Investors will be watching a heavy slate of economic releases on Friday, with particular focus on the US personal consumption expenditures data for further signals on the inflation outlook and the Fed’s policy path.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

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Most Asian equity markets traded lower on Friday as investors remained unsettled by the ongoing US-Israel conflict with Iran and its potential to fuel inflation, although US oil waivers on Russian crude helped cap oil price increases after strong gains earlier in the week. Brent crude oil futures remained elevated, trading just above USD 100 per barrel, while West Texas Intermediate (WTI) was above USD 95 per barrel. Gold was stable near USD 5100 per ounce, while bitcoin bounced back, trading near USD 71,300 on Friday. Japan’s Nikkei 225 was trading 1.2% lower, while Korea’s Kospi was down 1.7%, with the Nikkei down roughly 3.3% so far this week, while the Kospi was headed for a 1.4% weekly decline. Australia’s S&P/ASX 200 was trading 0.1% weaker at 8617.10 points, Hong Kong’s Hang Seng Index was 0.8% lower at 25,516.00 points and mainland China’s CSI 300 was down 0.2% at 4677.56 points.

US equities fall on oil price surge

US stock indices fell sharply on Thursday as escalating conflict involving Iran pushed Brent crude prices higher and fuelled fresh inflation concerns, dampening hopes of US Federal Reserve rate cuts this year. The Dow Jones Industrial Average dropped 1.6%, the broad S&P 500 declined 1.5% and the technology-heavy Nasdaq 100 slid 1.7%, reversing its Oracle-driven resilience from Wednesday. Market sentiment deteriorated after attacks on two oil tankers in Iraqi waters and renewed threats by Iran’s new supreme leader to use the Strait of Hormuz, a key choke point for global energy supplies, as leverage, with the International Energy Agency describing the disruption as the largest supply shock in the history of the oil market. Shares of energy producers such as Exxon Mobil, Chevron and ConocoPhillips advanced, fertiliser makers Mosaic and CF Industries rallied strongly on supply concerns.

European stocks fall on oil concerns

European equity indices extended recent losses on Thursday, with trade characterised by heightened inflation worries and reduced risk appetite. The euro area blue-chip benchmark EuroStoxx 50 fell 0.8% and Switzerland’s SMI lost 0.9%. Bank shares were the weakest sector as analysts warned that sustained high oil prices could significantly damage global growth and pointed to mounting outflows and liquidity strains in private equity. Airlines such as Air France-KLM and Easyjet came under pressure from higher fuel costs.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: UK gross domestic product and trade balance (08:00), French Consumer Price Index (08:45), Spanish Consumer Price Index (09:00), Italian industrial production (10:00), euro-area industrial production (11:00), US gross domestic product (13:30), US personal consumption expenditures (13:30), US durable goods orders (13:30), Canadian unemployment rate (13:30) and US JOLTS jobs report (15:00).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.