Oil prices drop as new lockdowns hit economic outlook
Asian equities rebound as China data suggest recovery is gathering pace
Oil prices fell as new lockdowns across Europe stoked fears over demand, while stocks bounced after suffering their worst week since the height of the coronavirus-driven market turmoil in March.
Brent crude, the international benchmark, dropped as much as 4.6 per cent to $35.74 a barrel in Asia on Monday, hitting its lowest level since May as economists downgraded their growth forecasts in response to fresh lockdowns throughout the eurozone. West Texas Intermediate, the US marker, was down as much as 6 per cent to $33.64.
Economists now expect the bloc’s economy to shrink 2.3 per cent in the fourth quarter, while the Bank of England is expected to forecast later this week that the UK will at best barely grow in the final three months of 2020.
“The pressure that we are seeing on oil will be a real concern for Opec+, particularly with Brent now well below $40 a barrel,” said Warren Patterson, head of commodities strategy at ING.
“Another key uncertainty for the market is the US presidential election . . . and the consequences this could have on oil,” Mr Patterson added, pointing to the possibility of a Democratic administration under Joe Biden taking a less hawkish stance on Iran.
Stock markets across Asia received a boost from new signs that a recovery in China’s economy is gathering pace. The Caixin China General Manufacturing purchasing managers' index climbed to 53.6 in October — its highest level since January 2011. Any reading over 50 for the private survey means activity is expanding.
“The post-coronavirus manufacturing recovery continued to pick up speed,” said Wang Zhe, senior economist at Caixin Insight Group.
Hong Kong’s Hang Seng index rose 0.9 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks gained 0.4 per cent. Japan’s Topix index added 1.9 per cent and South Korea’s tech-heavy Kospi climbed 1.1 per cent.
Futures for Wall Street’s S&P 500 index were 0.1 per cent higher while those for London’s FTSE 100 fell 0.5 per cent. Low trading volumes during Asian hours can increase volatility in US and European stock futures.
The S&P 500 fell 5.6 per cent last week on concerns over the spread of Covid-19 and a hotly contested US presidential election.