Oil Retreats Amid U.S. Glut as Asian Stocks Fall; Ringgit Rises

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March 23, 2016

Oil retreated from a three-month high amid a build-up of supplies in the U.S., while Asian stocks fell. Precious metals declined as haven demand sparked by deadly terror attacks in Brussels proved fleeting.

March 23, 2016

Oil retreated from a three-month high amid a build-up of supplies in the U.S., while Asian stocks fell. Precious metals declined as haven demand sparked by deadly terror attacks in Brussels proved fleeting.

Brent crude dropped before data that’s forecast to show American stockpiles, already at the highest level in more than eight decades, are still climbing. Mining shares led losses on the MSCI Asia Pacific Index, which slipped from its highest close since Jan. 1. Gold sank to its lowest level of the month. The British pound held near a one-week low after the explosions that killed at least 31 people in the Belgian capital stoked bets on the U.K. leaving the European Union. Malaysia’s ringgit rose versus all 31 major peers.

The weekly release of data on U.S. oil inventories is watched by the market as investors fret about oversupply issues and producers float the possibility of a freeze in output. Industry figures foreshadowed an increase of 8.8 million barrels in America, which is the world’s biggest consumer of crude. While the bomb attacks at the Brussels airport and a subway station initially hit equities and bolstered the yen, the impact dissipated in the U.S. trading day. Terrorist incidents including the one in France last year and the London bombings in 2005 spurred stock selloffs that were erased in the ensuing weeks.

“Usually such attacks will have only a short-term impact,” said Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm. "Investors focus remains on macro-economic fundamentals and we do need to see more signs of sustainability in the U.S. economy and some stability in the Chinese data. I’m somewhat cautious given the recent rally we’ve seen.”

Both Thailand and the Philippines are expected to keep benchmark interest rates on hold in reviews Wednesday. Singapore updates on consumer prices and Taiwan reports on industrial output.

Commodities

Brent crude fell 0.9 percent to $41.41 a barrel as of 1:28 p.m. Tokyo time. U.S. stockpiles increased by 8.8 million barrels last week, the industry-funded American Petroleum Institute reported Tuesday, according to a document obtained by Bloomberg. Libya will skip a meeting between major oil exporters in Doha next month to freeze output, according to a person familiar with the situation.

“The large U.S. crude stockpiles will act as a headwind to price gains,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “If producers can agree to remove some incremental supply from the market at the Doha meeting, what they lose in production, they gain in a price rise and additional revenue. Just talking about a freeze has helped oil move higher.”

Gold for immediate delivery fell 1 percent, following a 0.4 percent advance in the last session. The metal jumped as much as 1.3 percent in intraday trading on Tuesday following the Brussels bombings. Platinum declined 1.1 percent and palladium lost 0.9 percent.

Stocks

The MSCI Asia Pacific Index fell 0.6 percent, after rallying 0.8 percent on Tuesday. BHP Billiton Ltd., the world’s largest mining company, slid 1.9 percent in Sydney. Newcrest Mining Ltd., Australia’s biggest gold producer, sank 3.8 percent.

Australia’s S&P/ASX 200 Index fell 0.5 percent , while benchmark shares gauges in China, Hong Kong and Japan declined by a maximum 0.3 percent. Futures on the Standard & Poor’s 500 Index slipped 0.1 percent.

Currencies

Malaysia’s ringgit rose as much as 1.2 percent to 3.9597 per dollar, following a 1.2 percent advance on Tuesday. The currency of Asia’s only major net oil exporter is being supported by recent gains in Brent crude, which has rebounded since sinking to a 12-year low of less than $28 a barrel in January.

“The market has been caught short ringgit and as a result of that we’re seeing continued short-covering,” said Divya Devesh, the Singapore-based foreign-exchange strategist for Asia at Standard Chartered Plc, who predicts the currency could appreciate to 3.90 a dollar in one to two months. “Oil has been supportive as well recently, it’s still above the $41 level, so that helps as well.”

The pound was little changed at $1.4207. It slid 1.1 percent on Tuesday amid speculation the Brussels terror attacks will boost the case of campaigners who want to see Britain out of the European Union. Pro-“Brexit” politicians argued that migration leaves the nation vulnerable to attack, while figures in the opposing camp, including Prime Minister David Cameron, have said that being part of the economic and political union aids security.

The Bloomberg Dollar Spot Index, a gauge of the greenback’s strength, advanced for a fourth day as a usually dovish Federal Reserve official signaled his expectation of more interest-rate hikes than the market has priced in. Chicago Fed President Charles Evans on Tuesday said projections for two rate hikes this year were “a pretty good setting” for him. South Korea’s won dropped 0.7 percent, its biggest loss in two weeks.

Bonds

The yield on U.S. Treasuries due in a decade held steady at a one-week high of 1.94 percent, after increasing by two basis points on Tuesday. Rates on similar-maturity debt in Australia and New Zealand rose by six basis points to 2.66 percent and 3.05 percent, respectively.


Courtesy: Bloomberg