Sunday 20 October, 2019

Stocks mixed, oil down as markets await news on Saudi plant

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 17, 2019. Shares were mostly lower in Asia on Tuesday after an attack on Saudi Arabia’s biggest oil processing plant caused crude prices to soar, prompting selling of airlines and other fuel-dependent industries. (AP Photo/Ahn Young-joon)

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 17, 2019. Shares were mostly lower in Asia on Tuesday after an attack on Saudi Arabia’s biggest oil processing plant caused crude prices to soar, prompting selling of airlines and other fuel-dependent industries. (AP Photo/Ahn Young-joon)

World shares were mixed on Tuesday and oil prices eased back pending updates on restoring output at a Saudi Aramco oil processing plant damaged by an attack over the weekend.

Chinese benchmarks led declines in Asia after the credit ratings agency Moody's downgraded Hong Kong, citing its recent political turmoil.

Germany's DAX lost 0.2 percent to 12,362 after the ZEW index showed a drop in investor confidence in current economic conditions, pointing to the possibility of a brief recession, but sees a pick-up later in the year.

The CAC 40 in Paris added 0.1 percent to 5,607 and the FTSE 100 in Britain climbed 0.1 percent to 7,331. On Wall Street, the future contracts for the Dow Jones Industrial Average and the S&P 500 were both down 0.1 percent.

The US and international benchmarks for crude fell back slightly after vaulting more than 14 percent overnight due to an attack on Saudi Arabia's largest oil processing plant.

The weekend attack on the facility halted production of 5.7 million barrels of crude a day, more than half of the country's global daily exports and more than five percent of the world's daily crude oil production.

The attack raised worries about the risk of more disruptions in the supply of oil at a time when the global economic outlook is clouded by uncertainty.

Crude prices jumped 14 percent on Monday, comparable to a 14.5 percent jump on August 6, 1990, following Iraq's invasion of Kuwait.

On Tuesday, benchmark US crude oil was trading $1.06 lower at $61.84 per barrel in electronic trading on the New York Mercantile Exchange. On Monday, it soared $8.05 to settle at $62.90 a barrel. Brent crude oil, the international standard, declined $1.09 to $67.93 per barrel. It jumped $8.80 to close at $69.02 a barrel in London.

In Asia, shares were mixed.

Japan's Nikkei 225 index recovered from early losses to edge 0.1 percent higher, closing at 22,001.32. South Korea's Kospi was flat at 2,062.33 and the S&P ASX/200 in Sydney added 0.3 percent to 6,695.30.

Chinese benchmarks skidded after the credit ratings agency Moody's downgraded Hong Kong, citing the city's recent political turmoil.

The Shanghai Composite index shed 1.7 percent to 2,978.12 and Hong Kong's Hang Seng slipped 1.2 percent to 26,790.24.

Moody's said in a statement that the protests and their handling showed weaknesses in Hong Kong's institutions. The turmoil was "damaging its attractiveness as a trade and financial hub," it said.

Hong Kong's beleaguered chief executive, Carrie Lam, said the downgrade was "disappointing."

Elsewhere in Asia, India's Sensex fell 1.7 percent to 36,478.74. Shares also lost ground in Taiwan and Singapore but rose in Indonesia and Thailand.

The spike in oil prices boosted oil producers but weighed on shares in airlines, whose operations can be hurt by any rise in the price of fuel. China Eastern Airlines' shares dropped 2.6 percent, while Cathay Pacific Airways shed 2.1 percent.

Asian countries are the most affected by the drop in Saudi supplies.

"Higher oil imports will weigh on trade balances. For countries that are running trade deficits, such as Indonesia and Philippines, this will widen their deficit and subsequently exert downward pressure on the currency. A weakened currency will then push up oil import bill further," said analysts at Mizuho Bank said in a commentary.

However, the bank said there is still no cause for big concern.

The oil price gyrations have somewhat overshadowed this week's headline event, the Federal Reserve's meeting on interest rates. Investors are confident the central bank will cut short-term rates by a quarter of a percentage point to a range of 1.75 percent to two percent It would be the second such cut in two months, as the Fed tries to protect the economy from a global slowdown and the effects of the US-China trade war.

In currency trading, the dollar was steady at 108.15 Japanese yen, while the euro gained to $1.1022 from $1.1001 on Monday.

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