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Oil racks up more gains on US-Iran tensions, Asia markets dip
HONG KONG, June 21, 2019 (BSS/AFP) – Oil prices rose again Friday,
extending the previous day’s surge on tensions between the United States and
Iran, while Asian equities turned negative as investors took their foot off
the pedal following a recent rally.
Fears of a conflict in the crude-rich Middle East ratcheted up Thursday
when Tehran said it had shot down a US “spy drone” that was violating its
airspace, which Washington denied.
Donald Trump described the move as a “big mistake”, adding: “This country
will not stand for it”.
The news — which comes a week after the US accused Iran of attacking two
tankers in the Gulf of Oman — sent oil prices soaring more than six percent
Thursday, while talk has increased of a military stand-off that could deal a
massive blow to supplies.
Observers said the cost of crude could continue to rise.
“If we meld supply risk fear, a powerfully bullish narrative, (the Federal
Reserve’s) willingness to execute a pro-cyclical rate cut juicing risk assets
and frame it with the potentially game-changing G20, you have the makings of
a solid base for oil to shoot even higher,” said Stephen Innes, managing
partner at Vanguard Markets.
The focus is also on next week’s planned meeting between Trump and his
Chinese counterpart Xi Jinping on the sidelines of the G20 in Japan next
week.
Trump’s tweet about “a very good telephone conversation” between the pair
this week fuelled a surge across global markets on hopes for a deal to end
their countries’ long-running trade war that has impacted the world economy.
However, Asia took a step back Friday, having been given an extra boost by
the Fed indicating it will begin to cut interest rates soon, and other
central banks erring towards softer monetary policies.
MORE/HR/1010
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– Gold breaks $1,400 –
Hong Kong dipped 0.2 percent in the morning session, while Tokyo went into
the break 0.2 percent lower.
Sydney slipped 0.3 percent, while Seoul and Singapore were each off 0.1
percent and Wellington was marginally down.
But Shanghai gained 0.5 percent and Taipei added 0.4 percent.
The recent rises were “built on the potential for monetary policy support
from the Federal Reserve on one side, and the easing of trade tensions on the
other”, Alex Dryden, global market strategist at JPMorgan Asset Management,
told Bloomberg TV.
However, he warned: “That is not the best basis for building an equity
market rally in a sustainable manner.”
The prospect of lower interest rates kept the dollar under pressure
against its major peers as well as most higher-yielding currencies including
the Chinese yuan, which is at levels not seen since mid-May.
A cheaper dollar and tensions in the Middle East have also ramped up
demand for gold — seen as a go-to asset in times of uncertainty and upheaval
— sending it above $1,400 an ounce for the first time since 2013.
“Gold jumped more than three percent on Thursday as the Fed left little
doubt that an interest rate (cut) is coming and with trade and political
tensions still at play the yellow metal was a clear choice for investors
looking for a safe haven,” said OANDA senior market analyst Alfonso Esparza.
– Key figures around 0300 GMT –
West Texas Intermediate: UP 38 cents $57.45 per barrel
Brent North Sea oil: UP 52 cents at $64.97 per barrel
Tokyo – Nikkei 225: DOWN 0.2 percent at 21,420.58 (break)
Hong Kong – Hang Seng: DOWN 0.2 percent at 28,501.20
Shanghai – Composite: UP 0.5 percent at 3,002.43
Euro/dollar: UP at $1.1302 from $1.1289 at 2130 GMT
Pound/dollar: UP at $1.2718 from $1.2702
Dollar/yen: DOWN at 107.17 yen from 107.27 yen
New York – Dow: UP 0.9 percent at 26,753.17 (close)
London – FTSE 100: UP 0.3 percent at 7,424.44 (close)
BSS/AFP/HR/21015