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Saturday August 13, 2022

Oil slides below $100 as euro sags further

Recession worries pushed the price of Brent oil briefly back under $100 on Wednesday, and the euro moved closer to parity with the dollar

By AFP
July 07, 2022
Oil slides below $100 as euro sags further. Photo: AFP/File
Oil slides below $100 as euro sags further. Photo: AFP/File

NEW YORK: Recession worries pushed the price of Brent oil briefly back under $100 on Wednesday, and the euro moved closer to parity with the dollar.

European stocks rebounded thanks to lower bond yields and bargain hunting, while US stocks also advanced, climbing after Federal Reserve minutes maintained a tough line on inflation.

Europe´s benchmark crude oil contract, Brent North Sea, fell briefly under $100 per barrel in afternoon deals, following its US counterpart WTI, which slumped below the symbolic level on Tuesday.

Citi analysts have forecast that Brent could strike $65 later this year in the event of a prolonged worldwide economic downturn.

Meanwhile, the euro hit a fresh 20-year low point under $1.02 -- the European single currency fast closing in on parity with the dollar as traders eye recession for the eurozone and the ECB´s slower moves to raise interest rates than the US Fed.

"A dip in government bond yields has paved the way for bargain hunters to swoop in and snap up European equities," said market analyst David Madden at Equiti Capital.

Paris stocks rose 2.0 percent, while Frankfurt climbed 1.6 percent.

Nevertheless, "the mood remains febrile," said Chris Beauchamp, chief market analyst at online trading platform IG.

"The drop in the euro and weakness in yields shows that investors remain very nervous about the economic prospects of the global economy, and the opportunistic bargain hunting in stocks may not have much staying power," he warned.

London´s benchmark FTSE 100 index managed to gain 1.2 percent despite the political turmoil after UK Prime Minister Boris Johnson was rocked by dozens of resignations from his scandal-hit government.

But two staunchly pro-government outlets, the Daily Mail and The Sun, as well as other media said Johnson had refused to bow to their calls for him to go.

"Political risks do not seem to be having a major impact on UK assets," noted Markets.com analyst Neil Wilson.

"There are far too many bigger things on our minds right now -- inflation, the economy slowing down, strikes."

Britain is in the midst of nationwide strikes -- affecting in particular the transport sector -- as wages are eroded by rocketing inflation.

Later, Wall Street stocks also pushed higher as Fed policy makers reiterated their willingness to continue raising interest rates to tamp down price pressures in minutes recounting the central bank´s big interest rate hike in June.

Market watchers said investors were pleased to see the tough line on inflation, although Briefing.com analyst Patrick O´Hare noted the Fed´s stance was a restatement of its posture in recent statements.

"It´s more because it had been such a terrible first half of the year," O´Hare said of Wednesday´s gains. "We got so oversold in the month of June. The market is just looking for a ray of hope."

Elsewhere Wednesday, Asian equity markets closed mostly lower amid a fresh flare-up of coronavirus cases in parts of China, which has seen some cities locked down as part of officials´ zero-Covid policy.