Asian markets mixed on growing pessimism over OPEC deal
Bloomberg News
Monday’s OPEC meeting is looming large on Asian markets.
Expectations that an Organization of the Petroleum Exporting Countries production deal was unraveling dominated Asian trade Monday, adding volatility to regional stocks and currencies.
OPEC officials said Saudi Arabian oil officials won’t attend a meeting Monday with Russia and others ahead of the 14-nation cartel’s closely watched meeting Wednesday.
Japan’s Nikkei 225 NIK, -0.38% was down 0.8% and Australia’s S&P/ASX 200 XJO, -0.56% was down 0.4%, while Hong Kong’s Hang Seng Index HSI, +0.71% was up 0.5%.
The price of Brent crude, a global benchmark, fell 3.6% on Friday. This showed the market was starting to price in a failure at this week’s meeting, said Ric Spooner, chief market analyst at CMC Markets. Brent crude extended its decline Monday, shedding 0.4% in early Asia trade.
“We could see a big rally if they see a plausible agreement [on a production cut],” said Spooner. “But assuming that OPEC does not agree, for the next few months it does set up for a lower oil price [in the] high 30s to low 40s range. We’ve still got big inventories and supply overhang.”
The oil gloom hit Asia’s biggest energy stocks. In Australia, Woodside Petroleum WPL, -2.60% was down 2.5% and BHP Billiton BHP, -2.45% , whose second-biggest division is petroleum, was down 2.3%. Japanese oil explorer Inpex 1605, -1.32% was down 1.7% and in Hong Kong, Chinese oil major Cnooc 0883, -1.00% fell 1.4%.
The drop in oil prices is hitting U.S. inflation expectations, which has pulled down U.S. Treasury yields, which has finally knocked back a lengthy dollar rally.
The yield on 10-year U.S. Treasurys was last at 2.330%, down from 2.359% on Friday, according to Thomson Reuters.
Asian currencies were broadly up Monday. The Korean won gained 0.4% and the Singapore dollar rose by 0.5%.
The Japanese yen was the biggest gainer in Asia on Monday, rising 1.3%, partly as traders sought the safety of the yen on the view OPEC’s production deal was unraveling.
“Guys are very, very nervous about the oil scenario and you see that expressed in the sensitive pair,” said Oanda senior foreign-exchange trader Stephen Innes, referring to the U.S. dollar and the yen.
