Oil stabilises after big drop on IMF growth cut / Photo: Kazuhiro NOGI - POOL/AFP
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Oil stabilises after big drop on IMF growth cut
Asian markets were flat on Wednesday as oil began clawing its way back up from a big drop after the International Monetary Fund downgraded its global growth forecast for 2022.
The IMF lowered its outlook to 3.6 percent -- a .08 percent slash from its previous estimate released in January -- prompting a five-percent dive in oil prices on Tuesday.
The fund pointed to surging energy prices, rising debt, supply-chain woes, and a series of inflationary crises linked to the war in Ukraine and the coronavirus pandemic.
"The economic effects of the war are spreading far and wide -- like seismic waves that emanate from the epicenter of an earthquake," IMF chief economist Pierre-Olivier Gourinchas said in the report.
While oil prices showed their first sign of susceptibility to global economic trends after the announcement, US stocks rallied on the back of promising housing-starts data and solid corporate earnings.
"In the absence of inventory buffers, there are only two things that can send oil lower, recession and or demand destruction. More folks were more willing to check one or both of those boxes overnight on the back of the IMF economic warning shot and China's protracted lockdown," said Stephen Innes at SPI Asset Management.
Tens of millions are still barred from leaving home in China's economic centre Shanghai and tech hub Shenzhen, where a Covid-19 outbreak has broken down supply lines and shuttered businesses.
Alongside the positive corporate earnings and housing data, much of Wall Street's strength also stemmed from the positioning of the market.
"It's a nice reflex rally from an oversold position," said Art Hogan, strategist at National Securities, who said the dynamics reflected a "pretty oversold market".
In Tokyo, the Nikkei 225 opened slightly higher, buoyed by a cheaper yen, but the Hang Seng Index in Hong Kong was marginally lower after being battered by China growth concerns and Beijing's crackdown on the tech sector on Tuesday.
Shanghai and Seoul were also down while Sydney, Jakarta, and Taipei were inching upward.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.56 percent at 27,135.27
Shanghai - Composite: DOWN 0.64 percent at 3,173.65
Hong Kong - Hang Seng Index: DOWN 0.40 percent at 20,943.35
Dollar/yen: DOWN at 128.65 yen from 128.89 yen
Euro/dollar: UP at $1.0806 from $1.0796
Pound/dollar: UP at $1.3032 from $1.2998
Euro/pound: DOWN at 82.92 pence from 82.98 pence
Brent North Sea crude: UP 0.50 percent at $107.79 per barrel
West Texas Intermediate: UP 0.67 percent at $103.25 per barrel
New York - Dow: UP 1.5 percent at 34,911.20 (close)
London - FTSE 100: DOWN 0.2 percent at 7,601.28 points (close)
burs-ssy/leg
F.Fischer--HHA
