NEW YORK – Oil prices tanked yesterday and global stocks mostly sank on worries that the latest wave of Covid-19 infections will crimp global growth.
“Investors are spooked by the virus once more, compounded by news that the Federal Reserve in the United States (US) may be on the brink of reducing its economic support for the US economy,” said analysts at Hargreaves Lansdown.
In late morning deals, the main Paris stock index briefly tumbled 3% before paring losses, with the luxury sector hit hard – especially amid worries over the stumbling economic recovery in China and a looming crackdown on the rich by the authorities in Beijing.
Luxury firms have come to heavily rely on well-heeled Chinese in recent years, and shares in Paris-listed luxury groups suffered.
Shares in LVMH fell 6.4%, Kering dropped 9.5% and Hermes lost 4.7%.
Analysts at UBS said investor concerns are “driven by three primary factors: renewed Covid-19-related restrictions; potential macro slowdown; and, most recently policy concerns amid the government calling for wealth distribution and clampdown on high incomes”.
The Frankfurt and London indices also slumped, mirroring Asia’s weak performance.
But Wall Street stocks finished little changed following a better-than-expected US jobless claims report.
US stocks had dropped the last two sessions, with analysts pointing to a weak retail sales report amid the Delta variant and Federal Reserve signal that it will begin to pull back on stimulus this year.
But Oxford Economics analysts said the fast-spreading variant “risks slowing, but not derailing, the recovery”.
They predicted that authorities will focus on vaccine diffusion and “resort to harsh restrictions only if there is a huge spike in severe Covid-19 cases”.
Stronger dollar
The dollar strengthened against most key rival currencies on talk of Fed moves to taper bond purchases will be followed by higher US interest rates, according to analysts.
The rising greenback weighed on dollar-priced oil, which slumped more than 3% at one point also hit by weaker demand expectations amid rising virus fears, notably in commodities-hungry China.
“Concerns about dampening demand expectations as a result of an increase in coronavirus cases worldwide have contributed to the drop” in oil, said AvaTrade analyst Naeem Aslam.
“The rise in the dollar... has added to the downside pressure.”
Petroleum-linked equities had an ugly session on Wall Street, falling with oil prices, as climbing virus cases raise doubts about crude demand.
ConocoPhillips, Chevron and ExxonMobil all lost at least 2%. – AFP, August 20, 2021
