Oil prices fell further Wednesday but stocks diverged as traders tracked fallout from Iran’s attack on Israel and assessed the outlook for interest rates.
The top two global oil contracts fell more than one percent, with analysts highlighting that crude supplies had not been affected after the firing of missiles and drones at the weekend by crude-rich Iran.
“Oil prices are under pressure again for the third straight session after a sharp rally last week with the market waiting to see how Israel plans to respond,” noted Victoria Scholar, head of investment at Interactive Investor.
“Investors are trying to weigh up the geopolitical risks in the Middle East and the size of US crude inventories on the supply side versus the outlook for the US and Chinese economies on the demand side.”
In Asia, Tokyo stocks slumped for a second session running as the yen remained under pressure near 34 year lows.
European equities rebounded strongly for much of the session, but gave up part of the gains as Wall Street stocks turned lower.
“European markets have enjoyed a welcome reprieve from the selling pressure that has dominated much of the week,” noted Joshua Mahony, chief market analyst at Scope Markets.
Paris led the way, climbing 0.6 percent.
“The French index has been given a boost by the luxury sector, including Hermes and LVMH, after steady results eased market fears about a slowdown in sales at LVMH,” said Kathleen Brooks, research director at XTB.
LVMH, the world’s top luxury group, said late Wednesday sales slipped two percent in the first quarter from the strong performance during the same period last year, and said Chinese sales were recovering.
“Its results were not as weak as feared and they could act as a catalyst for a recovery in this sector, after LVMH shares fell five percent in the past month,” added Brooks.
LVMH shares climbed 2.8 percent.
London won 0.4 percent, helped by another drop to UK inflation. Analysts expect the Bank of England to start cutting interest rates later this year, though the exact timing is unclear with prices growing more than expected.
Across the Atlantic, hotter-than-expected US inflation and jobs data has forced investors to whittle down their bets on how many interest rate cuts the Federal Reserve will make this year.
Fed boss Jerome Powell on Tuesday indicated that US borrowing costs could stay higher for longer.
“The hawkish tone from Powell didn’t come as much of a surprise, considering the persistent inflationary challenges, the robust state of the US economy, and the Fed’s commitment to data-driven decision-making,” said Stephen Innes of SPI Asset Management.
Traders are also keeping an eye on developments in the Middle East amid worries of a region-wide conflict.
“At the moment, there just isn’t a lot of conviction on the part of buyers in general,” said Briefing.com analyst Patrick O’Hare.
“Worries about the geopolitical scene, particularly in the Middle East, continue to fester, and market participants continue to wait on the earnings results from the ‘biggies’ that begin next week with Tesla, Microsoft, Alphabet, and Meta Platforms slated to report,” he added.
– Key figures around 1530 GMT –
New York – Dow: DOWN 0.3 percent at 37,672.92 points
New York – S&P 500: DOWN 0.4 percent at 5,032.27
New York – Nasdaq Composite: DOWN 0.5 percent at 15,780.51
London – FTSE 100: UP 0.4 percent at 7,847.99 (close)
Paris – CAC 40: UP 0.6 percent at 7,981.51 (close)
Frankfurt – DAX: FLAT at 17,770.02 (close)
EURO STOXX 50: DOWN less than 0.1 percent at 4,914.13 (close)
Tokyo – Nikkei 225: DOWN 1.3 percent at 37,961.80 (close)
Hong Kong – Hang Seng Index: FLAT at 16,251.84 (close)
Shanghai – Composite: UP 2.1 percent at 3,071.38 (close)
Euro/dollar: UP at $1.0640 from $1.0622 on Tuesday
Dollar/yen: DOWN at 154.66 yen from 154.72 yen
Pound/dollar: UP at $1.2448 from $1.2426
Euro/pound: UP at 85.46 pence from 85.45 pence
Brent North Sea Crude: DOWN 1.3 percent at $88.87 per barrel
West Texas Intermediate: DOWN 1.2 percent at $84.33 per barrel
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