Stock markets struggled yesterday as investors contemplated the US interest rate outlook and oil prices slumped on a gloomy outlook for crude demand.
Frankfurt, London and Paris had opened brightly, after a leading US Federal Reserve official tempered comments from her colleagues on the need for an early US interest rate hike.
But the gains faded away after the International Energy Agency warned that the global oil supply glut would last into next year instead of ending this year as it previously thought as oil demand growth was slowing while supply was rising.
“Things are a little screwy right now in the stock market as participants are trying to get a handle on matters...” said Patrick O’Hare at Brifing.com said in a market comment.
Markets globally were sent into a tailspin after Boston Fed president Eric Rosengren and governor Daniel Tarullo on Friday signalled their openness to a September move.
Wall Street had charged higher on Monday as Fed Governor Lael Brainard argued against hiking interest rates quickly.
“The chances of a Fed rate rise in September have diminished to the point of non-existence after Fed governor’s Brainard’s cautious speech last night,” said analyst Jasper Lawler at CMC Markets.
“It is the sudden burst of volatility that has investors scratching their head over whether it is a buying opportunity or a sign of more pain to come,” Lawler added.
London’s FTSE 100 index was up 0.3%, while the DAX 30 in Frankfurt rose 0.2% and in Paris the CAC 40 dipped 0.1% lower.
In opening trading yesterday, Wall Street stocks fell with the Dow Jones Industrial Average sliding 0.9%.
“The ostensible catalyst many reports are pointing to for the early weakness is the IEA’s declaration that global oil demand growth has been slowing at a faster pace than anticipated,” said O’Hare.
Brent crude shed 1.4% in London trading to $47.63 per barrel, while the main US contract.
Shares in many oil companies took a hit.
In London, shares in BP slid 0.7%, while in Paris shares in Total tumbled 1.6% and in New York stock in Exxon Mobil fell 1.3%.
As well as a renewed slump in world oil prices, traders in Europe tracked data yesterday out of Germany and Britain.
German investor sentiment remained unchanged in September from its slightly positive level in August, disappointing analyst expectations, the ZEW economic institute said.
Britain’s annual inflation rate meanwhile held steady last month, giving little indication that the post-Brexit vote collapse in the pound had lifted prices, at least in the immediate aftermath of the referendum.
Elsewhere yesterday, Asian stock markets struggled from the previous day’s hammering, as traders shrugged off Brainard.
While Tokyo and Hong Kong saw mild recoveries from Monday’s sharp sell-off there are growing concerns about the future for central bank policy easing after years of cheap cash.
In London, the FTSE 100 up 0.3% at 6,718.60 points; Frankfurt — DAX 30 up 0.2% at 10,454.33 points and Paris — CAC 40 down 0.1% at 4,434.79 points yesterday.