Daily Management Review

As Oil Prices Fall Back Below $30, Stocks, Commodity and Currencies Slide


As Oil Prices Fall Back Below $30, Stocks, Commodity and Currencies Slide
As oil prices fell back below $30 global stocks kept alive concerns about global growth as world stocks were set for a third straight week of losses on Friday and commodity currencies took another drubbing.
While Asian shares skidded to 3-1/2 year lows, European stocks fell more than 1 percent, heading back toward Thursday's 13-month lows.
Oil prices came under fresh selling pressure as the prospect of additional Iranian supply loomed over the market. Oil prices had posted their first significant gains for 2016 on Thursday.
Brent crude headed for a weekly loss of more than 10 percent as it fell 3 percent to $29.86. Sliding almost 5 percent to $29.75, U.S. crude fared even worse and was set for a weekly decline of 10 percent.
With a slowdown in China and volatility in its markets making for a nervous start to the year, the collapse in oil prices has spooked financial markets as investors worry about the health of the global economy.
"It's been another immensely volatile week," said Philip Shaw, chief economist at Investec in London.
While the CSI300 tumbled 3.2 percent, the Shanghai Composite lost 3.5 percent. That put the former for a decline of 7.2 percent and the latter on track for a 9 percent loss for the week.
In China data showed new yuan loans in December were well below the previous month's lending, and broad M2 money supply growth also slowed which resulted in Chinese shares extending their losses with both missing expectations.
A host of data is expected to be published by China on Monday and Tuesday which would include fourth quarter gross domestic product.
On the investor’s radar would be U.S. retail sales data as they try to gauge the likelihood of the Federal Reserve raising interest rates again in March.
The commodity-linked currencies took another knock by the combination of sliding oil prices and China concerns.
While the Australian dollar fell to a seven-year low at $0.6880, the Canadian dollar fell to C$1.4521 against its U.S. counterpart, its lowest level since early 2003.
The dollar index was helped pushed down 0.18 percent to 98.895 by the falling of the U.S. dollar against the euro and the yen.
"It's another risk-off day. We had an awful session in Asia and that has spilt over into Europe," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Global shares have also been hit this month over worries that a depreciating Chinese yuan could spark competitive currency devaluations across the region.
Modest gains were posted by the yuan on Friday. While the Chinese gained 0.1 percent compared to the week, it was still around 1.4 percent weaker against the dollar than it started the year. The yuan has lost nearly 5 percent against the dollar since August.
A marginally weaker midpoint of 6.5637 was set by the People's Bank of China.

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