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

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 per cent 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 per cent to 5,607 and the FTSE 100 in Britain climbed 0.1 per cent 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 per cent.

The United States (US) and international benchmarks for crude fell back slightly after vaulting more than 14 per cent 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 per cent of the world’s daily crude oil production.

Clouded by uncertainty

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 per cent on Monday, comparable to a 14.5 per cent 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 per cent 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 per cent 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 per cent to 2,978.12 and Hong Kong’s Hang Seng slipped 1.2 per cent to 26,790.24.

Weaknesses

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 per cent 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 per cent, while Cathay Pacific Airways shed 2.1 per cent.

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.

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 per cent to two per cent. 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.

AP