Oil extended its losses on Thursday 23rd November, after OPEC announced the unexpected delay of a crucial policy meeting, indicating potential turmoil within the bloc. Concurrently, equities displayed a mixed performance following two US reports that tempered recent optimism regarding future interest rates. Both primary crude contracts experienced declines upon news that the highly anticipated gathering of major producers, including OPEC and 10 allies, would be postponed by four days to November 30.
On Wednesday 22nd November, prices had plunged nearly five percent at one point before recovering some of the losses. Reports suggested that the decision to delay the meeting was influenced by Angola and Nigeria, who opposed lower production targets proposed by others. There were indications that Saudi Arabia was considering extending a one-million-barrel-a-day output cut into the new year.
Earlier this year, Saudi Arabia and Russia implemented substantial cuts in an effort to bolster oil prices, which had come under pressure due to economic challenges in the United States, Europe, and particularly China. Pierre Andurand of Andurand Capital Management noted that global supplies were healthier than anticipated, suggesting that the OPEC+ cartel might need to reduce output.
Equity markets in Asia exhibited fluctuations despite a recent pre-Thanksgiving rally on Wall Street. Hong Kong recovered from morning losses to end higher in the afternoon, with developers gaining ground following reports that China is set to provide more support to the property sector. This news came after Bloomberg reported that authorities had compiled a draft list of 50 firms eligible for additional monetary support.
Among the winners in Hong Kong, Country Garden surged more than 23 percent after reports that the company was on the support list. Another struggling developer, Evergrande, saw an increase of more than three percent. Other Asian markets, including Shanghai, Seoul, Wellington, Mumbai, and Jakarta, also recorded gains. However, Sydney, Singapore, Taipei, Manila, and Bangkok experienced declines. In Europe, London, Frankfurt, and Paris all saw gains at the open.
The somewhat subdued market performance followed data indicating an uptick in inflation expectations among US consumers, who now anticipate a rate of 4.5 percent over the next year, compared to the previously expected 4.4 percent, according to the University of Michigan. Additionally, US jobless claims came in lower than forecast, signaling ongoing strength in the labor market. The Federal Reserve, emphasizing data-driven decisions, has stated that it will consider factors such as inflation and employment in its rate decisions.
Despite these factors causing a temporary disruption in the positive market sentiment, analysts remain optimistic about the outlook for equities. Audrey Goh of Standard Chartered Bank anticipates the continuation of the stock market rally, citing moderated inflation and an expectation that policy rates have peaked.
Key figures around 0810 GMT:
- Hong Kong – Hang Seng Index: UP 1.0 percent at 17,910.84 (close)
- Shanghai – Composite: UP 0.6 percent at 3,061.86 (close)
- London – FTSE 100: UP 0.2 percent at 7,480.41
- Tokyo – Nikkei 225: Closed for a holiday
- West Texas Intermediate: DOWN 0.6 percent at $76.63 per barrel
- Brent North Sea crude: DOWN 0.7 percent at $81.36 per barrel
- Dollar/yen: DOWN at 149.10 yen from 149.59 yen on Wednesday
- Euro/dollar: UP at $1.0914 from $1.0890
- Pound/dollar: UP at $1.2516 from $1.2494
- Euro/pound: UP at 87.20 pence from 87.13 pence
- New York – DOW: UP 0.5 percent at 35,273.03 (close)
