Wall Street, New York. — © Digital magazine.
Asian investors struggled to bounce back from the previous day’s losses on Tuesday on growing concerns about a worsening energy crisis in Europe, a slowdown in China and the central bank’s efforts to curb rising inflation.
However, the dollar has lost some of its momentum against its major counterparts due to profit taking, with the euro finding some support ahead of an expected European Central Bank rate hike and the pound sterling gaining due to the election of a new prime minister. .
Russia’s decision not to resume gas supplies to Europe in response to sanctions on Ukraine shocked trading floors on Monday as it fueled expectations of a painful recession in major economies.
European bourses took the brunt of the selling, although they cut back on their earlier losses as commentators said a close was expected at some point.
With Wall Street closed for the holiday, Asia had few new catalysts to spur buying.
Markets fluctuated between profit and loss in early trading, with Hong Kong, Seoul and Wellington falling while Shanghai, Sydney, Singapore, Taipei and Jakarta rose. Tokyo and Manila were flat.
“Many clients are asking if we have already hit rock bottom and are we heading into a global recession?” This was stated by Grace Tam from BNP Paribas Wealth Management Hong Kong.
“We do think that the risk of a global recession, especially next year, is actually quite high” and that the energy crisis is “not fully priced in” by the markets, she said.
The next key event for investors will be the ECB’s interest rate decision on Thursday, with some observers predicting a 75 basis point hike to ease record high inflation.
This will be followed by a Federal Reserve meeting later this month where politicians will discuss a similar move, which will be the third consecutive increase.
However, while central banks are raising borrowing costs to fight rising prices, they have little power over the price of oil, a key driver of growth.
And on Monday, OPEC and other major producers announced unexpected production cuts, pushing both major contracts up. The move comes after the crude oil market has fallen in recent months due to fears of demand caused by a possible recession.
“In absolute terms, a 100,000 bpd supply cut does not make much difference to the global supply balance,” said Noah Barrett of Janus Henderson Investors.
“However, in terms of signals, this move is important as it indicates that OPEC+ is watching demand very closely and is trying to manage supply in order to keep oil prices at a minimum level.”
Several countries, including the United States, had earlier called for an increase in production, followed by a small increase of 100,000 barrels.
“The modest gain we got a month ago is now gone, so OPEC+ is clearly sending a signal that they are not complying with external demands,” Barrett said.
“We should expect oil price volatility to continue, with global demand indicators driving price action.”
Brent and WTI declined from their levels on Monday.
– Key figures around 02:30 GMT –
Tokyo – Nikkei 225: FLAT at 17,624.96 (halt)
Hong Kong – Hang Seng Index: DOWN 0.3% to 19177.54.
Shanghai – composite: up 0.4% to 3213.31.
EUR/USD: rose to $0.9960 from $0.9921 on Monday.
Dollar/yen: DOWN by 140.40 yen from 140.53 yen
Pound/dollar: rose to $1.1587 from $1.1507.
Euro/lb: DOWN by 85.96p from 86.22p.
West Texas Intermediate: REDUCED 1.0% to $88.54/bbl
Brent North Sea Oil: REDUCED 1.0% to $94.80 per barrel
New York – Dow: Closed due to public holidays
London – FTSE 100: up 0.1% to 7,287.43 (close)