Oil prices tumble on growth worries, stocks diverge

AFP , Tuesday 10 Sep 2024

Oil's main international benchmark fell below $70 per barrel for the first time since the end of 2021 amid mounting concerns about slowing global growth.

New York Stock Exchange
Traders work on the New York Stock Exchange (NYSE) floor in New York City. AFP

 

Meanwhile, global stock markets diverged Tuesday as traders assessed the outlook for interest rates in the United States and Europe and awaited the US presidential debate.

Brent crude slumped more than three percent to below the $70 per barrel level since December 2021, while the main US contract, West Texas Intermediate (WTI), tumbled four percent at one point.

Oil analyst Tamas Varga at PVM Oil Associates said the OPEC oil cartel revising its demand estimates lower was one reason for the fall, but not the main one as the changes were minimal.

"Chinese economic woes, August crude oil imports fell 7 percent on the year, and the growing belief that the Fed will only cut 0.25 percent next week weigh more heavily in the current sell-off," he told AFP.

Swissquote analyst Ipek Ozkardeskaya said even mitigating factors like impending interest rate cuts and OPEC+ holding off on production increases were not enough to stem the downward trend.

"Oil bulls are not willing to swim against such a strong tide, and that also adds to the momentum," she said.

US equities slumped Friday after disappointing US jobs data rekindled fears the Federal Reserve had waited too long to begin cutting interest rates and the economy could fall into recession.

While they rebounded on Monday, the recovery lost steam on Tuesday with the Dow lower in late morning trading while the S&P 500 and Nasdaq Composite held onto gains.

Traders were also keeping an eye on US politics.

The sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump is a potentially game-changing moment for the 2024 US presidential election.

Investors were also looking ahead to US inflation data due Wednesday.

"Tomorrow's US inflation figures could be the next key test of investor sentiment," noted AJ Bell investment director Russ Mould.

The Federal Reserve is widely expected to cut US interest rates at next week's meeting but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.

But Tuesday's plunge in oil prices may indicate that those fears are outweighed by concern that policymakers are behind the curve.

"Financial markets have shifted their focus from bringing down inflation to shoring up economic growth," said Saira Malik, chief investment officer at asset manager Nuveen.

"Market volatility has climbed amid downside surprises in macroeconomic data -- especially labor market indicators."

Fresh worries about China's economy are also dampening sentiment, with mixed trade data doing little to soothe investor concerns.

Data showed exports jumped in August but imports fell well short of expectations as the country's leaders struggled to boost consumption.

That came a day after news that inflation rose less than expected in July, reinforcing the view that moves to boost consumer demand and business activity have not taken hold.

China's leaders are now facing pressure to unveil fresh stimulus for the world's number two economy, although they have shown little desire to embark on the bazooka-like spending seen during the global financial crisis.

European stocks finished the day lower, with the ECB set to cut rates at a meeting on Thursday.

Official data in Britain on Tuesday showed wages grew at the slowest pace in two years, indicating that the Bank of England could next week decide against cutting interest rates for a second meeting in a row.

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