Crude knocks energy sector with latest slide

Sustained pressure on oil prices set a fractious tone to trade yesterday, hitting energy stocks, which were among the main fallers on European and US stock indices.

The pre-Christmas rebound in Brent crude prices was little more than a memory, with the international oil benchmark down 3 per cent at $36.64 per barrel. That left it within reach of the intraday low of $35.98 that was touched on December 22, from where it rallied to close at $37.98 on Christmas Eve.

West Texas Intermediate fell 3.1 cent to $36.69.

The pressure was being felt on equities markets. The Euro Stoxx 600 fell 0.5 per cent. Germany’s Xetra Dax 30 fell 1.1 per cent, with exporters and financial stocks making notable losses. The UK’s resource-heavy FTSE 100 fell 0.6 per cent, with its energy stocks accounting for 11 of the 41 points shed by the index.

Commodities trader and miner Glencore took up a familiar place at the bottom of the market, with its shares down 3.5 per cent over the session, taking its loss for 2015 to 69 per cent. The selling ate into the Euro Stoxx 600’s gains for 2015, but left it on course for an advance of more than 7 per cent for the calendar year.

The FTSE’s dominant mining and energy stocks took a toll on its wider performance for 2015, leaving it down more than 4 per cent.

Yesterday’s trading pattern held into US trade.

The S&P 500 and the Dow Jones Industrial Average both slipped 0.3 per cent in morning Wall Street trade.

“Markets still can’t escape the clutches of soft commodities and their impact on inflation,” said Kit Juckes at Société Générale.

“The first effects of the commodity price downtrend were felt in macro indicators [including] lower capital spending and lower growth in producers’ economies, and soft consumer price inflation.

Second-round effects, including how the corporate sector reacts to weaker income in the longer run, may dominate in 2016,” he said.
Moody’s overnight downgrade of commodity trader Noble Group’s credit rating to “junk” status chimed with the wider, fragile mood. Asian stocks were unable to hold their high points for the day as the faltering oil price rattled nerves.

Japan’s Nikkei 225 held above the flatline, closing up 0.3 per cent, but it lost wider gains of 0.7 per cent. It was the final trading day of the year in Tokyo, and the move took the Nikkei’s gain for 2015 to 9.1 per cent, after a decline of 3.6 per cent over December.

In China, the Shanghai Composite inched up 0.3 per cent and the Hang Seng fell 0.5 per cent.

The dollar was stronger overall, with the index tracking the world’s reserve currency up 0.2 per cent at 98.314.

The euro failed to hold above the flatline, surrendering modest gains. The shared currency slipped 0.1 per cent to $1.0909.