Crude oil resumed its slump, heading for its worst year since 2008 amid speculation United States stockpiles data on Wednesday will fuel concern over a global supply glut. Gold rose for a second day, while copper retreated.
An employee looks out over the illuminated petroleum cracking complex at the Lukoil-Nizhegorodnefteorgsintez oil refinery, operated by OAO Lukoil, in Nizhny Novgorod, Russia. (Bloomberg photo)
West Texas Intermediate crude fell 0.9% to $53.65 a barrel by 9.04am in Hong Kong, slipping for the fourth time in five days to trade near a five-year low. Gold added 0.2% while copper futures fell. The S&P/ASX 200 Index (AS51) fell less than 0.1% in Sydney, amid volumes 56% below their 30-day average. Standard & Poor’s 500 Index futures rose 0.1% after the US gauge retreated from a record. The Bloomberg Dollar Spot Index was little changed after a 0.4% drop Tuesday pared its 2014 advance to 11%.
Crude has plunged more than 45% this year, languishing in a bear market as the largest US oil output in 30 years collides with waning global demand and OPEC’s refusal to cut its own production to boost prices. Analysts predict a government report on Wednesday will show US supplies rose last week to a record level for the period in data going back to 1982. A final reading on the HSBC Holdings Plc/Markit Economics China manufacturing gauge is due on Wednesday, with many Asian markets either closed or shutting early before New Year holidays.
"Heading into 2015, many of the challenges the market has faced this year will be recurring," Stan Shamu, a markets strategist in Melbourne at IG Ltd, wrote in a client note e-mailed Wednesday. "The beginning part of the year will be dominated by Europe and then we’ll switch to the US toward the middle of the year."
Dollar strength
Signs of strength in the US economy spurred the Federal Reserve to end its bond-buying program this year, fueling gains in the dollar as investors speculated that their next move will be to raise key interest rates. The greenback has strengthened against all of its 31 major peers this year, with Russia’s ruble posting the worst performance, sinking 42% amid the tumble in oil. Russia is the world's biggest energy exporter.
While the stronger dollar has helped the S&P 500 gain 13% in 2014, a third straight annual advance, it has hit raw materials, with the Bloomberg Commodity Index (BCOM) down 16% in a fourth year of declines. The yen and the euro are both down more than 11% as policy makers in Japan and the euro area strive to ignite growth and ward off deflation. The dollar-denominated MSCI All-Country World Index of global stocks has climbed 2.7% this year.
US supplies
WTI fell Wednesday day after gaining 1% last session, when Brent crude traded rose less than 0.1% to $57.88 a barrel in London. US oil inventories probably rose by 900,000 barrels to 388.1 million barrels last week, according to a Bloomberg survey of energy analysts before today’s Energy Information Administration report.
Gold increased to $1,202.75 an ounce, after jumping 1.5% last session. The precious metal is down 0.3% in the spot market this year, after tumbling 28% in 2013, its biggest decline since 1981. Copper futures for March delivery on the Comex dropped 0.2% to $2.8475 a pound, after the metal climbed in London on Tuesday.
While markets in South Korea are closed today, data released in Seoul showed inflation grew a less-than-projected 0.8% this month from a year earlier, after expanding 1% in November. A preliminary report on the HSBC China PMI for December released earlier in the month saw the gauge drop to 49.5, its first reading below 50 -- the level that marks expansion -- since May.
Early closing
Indonesia, Thailand and the Philippines are also shut on Wednesday, while markets in Australia, New Zealand, Hong Kong and Singapore close early. In the US, jobless claims data and pending home sales are due.
The NZX 50 Index fell for a second day in Wellington, dropping 0.2% to reduce its annual advance to 17%. It’s still the biggest annual gain among 24 developed markets tracked by Bloomberg after Denmark.
Energy producers and mining stocks rose in Sydney, with the price of iron ore, Australia's biggest export, up 3.6% in Qingdao, China yesterday, to $71.15 a dry metric tonne, the first time it is closed above $70 since Dec 5. Iron ore has tumbled more than 47% this year.
Futures on Hong Kong's Hang Seng Index were little changed in most recent trading, with the stock gauge up 0.8% in 2014. The Shanghai Composite Index is the second-best performer among primary equity indexes this year, soaring 50% for its biggest climb since 2009. The Hang Seng China Enterprises Index, which tracks mainland Chinese shares listed in Hong Kong, has gained 9.5%.
Greek concerns
The yen strengthened as much as 1.5% to 118.87 per dollar Tuesday, its steepest intraday advance since Dec 16 as political concerns over Greece stoked demand for haven assets. It was little changed at 119.55 on Wednesday.
Greece will hold early elections next month after the prime minister failed in an attempt to have his nominee for president endorsed. The situation puts Greece's bailout agreement at risk, with anti-austerity groups leading in opinion polls.
Australia's dollar was near its weakest level versus neighbouring New Zealand’s currency since the Aussie was freely floated in 1983. The Aussie was steady at NZ$1.0452 after slipping to as low as NZ$1.0422 last session.