June 25, 2024

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Coronavirus: Oil skids on oversupply fears, stocks jump on virus slowdown

Oil prices skidded on Monday after Saudi-Russian negotiations to cut output were delayed, keeping oversupply concerns alive, while stocks jumped as investors were encouraged by a slowdown in coronavirus-related deaths and new cases.

In currency markets, sterling fell after British Prime Minister was admitted to hospital following persistent coronavirus symptoms as the pandemic rapidly spreads.

Brent crude fell as much as $3 in early Asian trading after Saudi Arabia and Russia postponed a meeting over a potential pact to cut production to Thursday.

Analysts said the news could lead to some sell-off in currency markets too.

Also weighing on the pound were fears other senior government officials who were in the same briefing as Prime Minister Boris Johnson could be affected by the virus, said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, Canada.

The pound fell 0.4 per cent in early trade on Monday in a knee-jerk reaction and was last down 0.3 per cent at $1.2222.

It is stating the obvious to say the viral outbreak and the containment measures to fight it are central to market action, said Michael McCarthy, chief market strategist at CMC Markets.

Indeed, equity investors looked at the positives with major European nations including France and Italy reporting lower fatality rates.

US stock futures jumped more than 1.5 per cent in early Asian trading on Monday after US President Donald Trump expressed hope the country was seeing a levelling off of the coronavirus crisis.

The gains came despite New York Governor Andrew Cuomo cautioning that it was not yet clear whether the crisis in the state had reached a plateau.

Investors took solace from the fact that Covid-19 cases appeared to be reaching a peak in Europe with Italy seeing the number of patients in intensive care falling for the second consecutive day.

In Asia, Australia’s benchmark index added 0.5 per cent, Japan’s Nikkei was up 0.2 per cent while South Korea’s KOSPI index climbed 1.4 per cent.

That left MSCI’s broadest index of Asian shares outside of Japan up 0.1 per cent. China markets were closed for a public holiday.

“Focus in markets will now turn to the path out of lockdown and to what extent containment measures can be lifted without risking a second wave of infections,” National Australia Bank analyst Tapas Strickland wrote in a note.

“Key to a strong rebound in China will be the ongoing lifting of containment measures with Wuhan — the epicentre of the outbreak — set to lift containment measures on April 8.”

Strickland, however, noted many in China were still subject to social distancing and isolation restrictions to prevent a resurgence in infections.

The pandemic has claimed more than 64,000 deaths as it further exploded in the United States and the death toll climbed in Spain and Italy, according to a Reuters tally.

Concerns about heavy damage to the global economy have pushed investors into the perceived safety of government bonds where yields are at or near all-time lows.

Elsewhere in currencies, the dollar was up a touch against the yen at 108.58. The euro was barely moved at $1.0803 while the risk sensitive Australian dollar was up 0.2 per cent at $0.6004.

In commodities, Brent crude futures slipped 6.2 per cent, or $2.13, to $31.98 a barrel while US crude dived 7.4 per cent, or $2.12, to $26.12.

Spot gold was down 0.2 per cent at $1,612.9 an ounce.

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