Global stock selloff on seven-year oil lows

(iStock)
(iStock)

Washington - The relentless fall of global oil prices spurred another sharp drop in global share markets Friday, as panicked investors fled the energy sector and financial stocks as well.

Crude futures prices plunged again Friday, with London's Brent contract dropping 4.5% to $37.93 a barrel and New York's WTI fix losing 3.1% to $35.62 a barrel.

That spurred more selling of shares connected to the oil patch - exploration houses, service firms, pipeline operators and the rest - pulling down markets from Asia to the Americas.

In New York, the S&P 500 fell 1.9%. London's FTSE 100 lost 2.2%, the Dax lost 2.4% in Frankfurt, Hong Kong fell 1.1% and Shanghai 0.6%.

Only Tokyo among major bourses avoided the harsh selloff, ending a three-day losing streak with a 1.0% rise as a weaker yen supported exporters.

Oil's losses mounted to around 12% for the week after the International Energy Agency warned that global inventories "are set to keep building at least until late 2016."

Adding to that was another fall in China's yuan, taking its loss against the dollar to one percent this week as Beijing wrestles with a continued outflow of capital on its slowing economy.

Late Friday in Beijing, the People's Bank of China indicated that it would soon begin to weigh the yuan, or renminbi, against a basket of currencies instead of pegging it to the dollar.

"The bilateral renminbi-US dollar exchange rate is not considered a good indicator of the international parity of tradable goods," the bank said in a note on its website.

Analysts said that stirred more instability in secondary currencies.

"Following the shock devaluation back in August, China's interventions are continuing to cause FX market instability," said Nawaz Ali, at Western Union Business Solutions.

Gregori Volokhine of Meeschaert Financial Services said "the energy market is down, the commodities market is down, and the yuan is falling much more than expected."

"All of this is creating more deflationary pressure," he added.

Traders were also positioning themselves before next Wednesday's expected interest rate hike, the first in nine years, from the US Federal Reserve.

The stock selloff was much broader than oil firms, hitting a wide range of shares, with banks taking a heavy hit.

The newest mega-merger, between venerable US industrial heavyweights Dow Chemical and DuPont failed to boost their shares. The all shares-based tieup will create the world's largest chemicals group, DowDuPont, valued at $130 billion and surpassing Germany's BASF in sales.

Despite analysts' praise for the deal, shares of both fell: Dow Chemical ended 2.8% lower and Dow member DuPont gave up 5.5%.

In London, Old Mutual insurance and banking firm slumped 10.62% to 155.70 pence with its close exposure to South Africa, where the surprise removal this week of Nhlanhla Nene as finance minister caused consternation.

French automaker Renault lost 5.3% despite saying it had reached an agreement with its alliance partner Nissan and the Paris government to defuse tensions sparked by France raising its stake in the automaker.

Among tech shares, US-traded Alibaba lost 5.4% after announcing it would buy Hong Kong's leading English-language newspaper.

ZAR/USD
16.83
(+0.36)
ZAR/GBP
21.23
(+0.57)
ZAR/EUR
19.00
(+0.99)
ZAR/AUD
11.72
(+0.85)
ZAR/JPY
0.16
(+0.45)
Gold
1802.68
(-0.29)
Silver
18.64
(-0.18)
Platinum
835.00
(-1.41)
Brent Crude
43.32
(+0.49)
Palladium
1939.00
(+1.81)
All Share
55787.90
(-0.15)
Top 40
51536.91
(-0.04)
Financial 15
10339.64
(+0.63)
Industrial 25
77428.31
(-0.10)
Resource 10
52587.29
(-0.39)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1874 votes
I am taking a hit, but should be able to recover in the next year
23% - 2457 votes
My finances have been devastated
34% - 3654 votes
It's still too early to know what the full effect will be
25% - 2630 votes
Vote