Global Shares Pause as Oil Price Continues to Drag -- Update
June 23 2017 - 5:04AM
Dow Jones News
By Riva Gold and Kenan Machado
Global stocks found little traction Friday, while the British
pound inched up on the first anniversary of the U.K.'s vote to
leave the European Union.
Futures pointed to a 0.1% opening gain for the S&P 500,
following a muted session in Asia. The Stoxx Europe 600 was down
0.1% in morning trading as oil prices remained a drag on the wider
index.
Brent crude oil was last up 0.4% at $45.40 a barrel but on track
to end the week over 4% lower and off roughly 10% from the start of
the month. While a lower oil price should support consumers and oil
importing countries, it has put pressure on ' shares of energy
companies and equipment makers. It has also added to investors'
doubts about the inflation picture and the ability of central banks
to lift interest rates. Some analysts expect to see traces of the
oil price drop showing up in eurozone and Japanese inflation
figures next week.
Investors poured into so called "deflation" assets this week and
took money out of inflation bets, according to analysis of EPFR
Global data by Bank of America Merrill Lynch. Real-estate funds
posted their first inflows in 11 weeks, while utilities funds had
their best week in 51 weeks as both tend to benefit from softened
inflation expectations. Treasury Inflation-Protected Securities,
known as TIPS, suffered outflows. TIPS increase their payout to
holders if inflation measures exceed certain thresholds.
In the U.K., London's export-heavy FTSE 100 was down 0.4% in
morning trading Friday as the pound climbed 0.4% to $1.2728,
recovering from losses earlier this week. Since the June 23 U.K.
referendum, the index, which generates roughly two-thirds of its
revenue overseas, has climbed by around 17%, while the pound has
fallen roughly 15%.
More domestically-oriented U.K. shares have significantly
underperformed the wider rally in global equity markets. Data from
independent trade ideas network TIM Group suggests that while in
June 2016, the long-short ratio for U.K. and other European shares
was nearly identical, continental Europe has since rebounded
significantly, while the outlook for U.K. stocks has remained
daunting.
In the U.K.: "There are starting to be signs Brexit is starting
to have an impact on business confidence," said François Savary,
chief investment officer at Geneva's Prime Partners.
That has had little impact on the eurozone, however. Shortly
after the Brexit vote: "There was a fear it was opening the door to
a more profound movement and the European project was under
significant threat, " he said. But since then, French and Dutch
elections have eased political fears around the Continent, and the
eurozone economy has continued to improve.
Earlier, Shanghai stocks recovered to trade up 0.3% in a
volatile session after increased regulatory scrutiny over the
borrowings of China's most prolific overseas deal makers sent
markets lower.
The moves could heighten apprehensions about volatility that
bogged down Chinese markets for most of last year, just days after
index compiler MSCI decided to include A-shares in its emerging
markets indexes next year.
A dominance of retail traders that move in and out of the
world's second-biggest stock market has meant that trades often
happen on rumor and sentiment. On Friday, the Shanghai Composite
Index dropped as much as 0.9% before recovering following news that
regulators had ordered banks to check their loans to major Chinese
conglomerates.
Japan's Nikkei Stock Average rose 0.1% despite a preliminary
survey showing that the nation's manufacturing activity slowed in
June. Air-bag maker Takata surged Friday after dropping 50%
Thursday, as reports circulated that the company will seek
bankruptcy protection on Monday to minimize payments to
creditors.
In South Korea, shares climbed 0.4% after the country's
president, Moon Jae-in, said he would lobby China to lift
restrictions it imposed on his country's businesses following the
installation in Korea of a U.S. missile defense system that Beijing
opposes.
Australia's S&P ASX 200 was up 0.2% as gains from mining and
energy stocks were mostly offset by selling in banking stocks,
after one of the country's states proposed a tax on liabilities
that would piggyback a recently-launched federal levy on the
biggest lenders.
Shen Hong contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at
kenan.machado@wsj.com
(END) Dow Jones Newswires
June 23, 2017 05:49 ET (09:49 GMT)
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