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European stock markets drop on Italy’s high debt
Oil prices advanced yesterday after Saudi Arabia unveiled plans to cut output in the face of global oversupplies, and pressed other producers to follow suit.
Higher crude prices failed to lift the market overall in London however, with the FTSE 100 index lower 0.7% at 7,053.08 points as trading came to a close amid opening declines on Wall Street.
Tobacco stocks were among those that slumped, with British American Tobacco shedding 10.62% to £29.96 and Imperial Tobacco losing almost 2.2% on reports of a planned US ban on menthol cigarettes, which researchers have said posed a greater health risk than traditional ones.
In the eurozone, the Frankfurt and Paris stock markets dropped as well, weighed down in part by lingering concerns over Italy’s high debt and today’s EU-deadline for Rome to revise its 2019 budget.
Frankfurt’s DAX 30 was down 1.8% at 11,325.44 and Paris’s CAC 40 fell 0.9% to 5,059.09 points at the close yesterday.
In New York, tech shares led stocks lower, with equity markets open but Treasury markets closed to mark Veterans Day.
Shares in Apple fell “after it was reported that a supplier was asked to materially reduce shipment for iPhone parts,” a Schwab market Update said.
The euro struck a 17-month low at $1.1240 before recovering slightly after it was hit by Brexit clouds that weighed on the pound as well.
“Continued uncertainty over the pathway for Brexit is providing greater downside for sterling,” noted Joshua Mahony, market analyst at IG trading group.
The European Union’s chief Brexit negotiator warned ministers from the other 27 member states yesterday that no deal has been sealed on Britain’s departure from the bloc.
Back in the energy sector, “a Saudi output cut for December has helped boost ailing oil prices,” Mahony said.
Saudi Arabia’s Energy Minister yesterday called for a global output cut of 1mn barrels per day to re-balance the market, as Riyadh unveiled plans to trim its own production by 500,000 bpd from December.
Khalid al-Falih’s comments follow a meeting in Abu Dhabi at the weekend, where the Opec group and its allies had already started laying the groundwork to reduce supply in 2019.
Oil prices have shed about one fifth of their value over the past month on oversupplies and signs of a softerthan-expected impact from US sanctions on Iranian crude exports.
In Vienna, the IAEA said yesterday that Iran was sticking to the terms of a nuclear deal reached with global powers in 2015.
In London, the benchmark oil contract for Brent North Sea crude nonetheless gained ground.
“In the short term this (Saudi output cut) is a positive for oil, but we must question the impact longer term unless it’s the sign of more to come from Opec,” said Neil Wilson, chief market analyst at markets.com.
“Saudi Arabia cannot act alone though – realistically it needs to pull together Opec allies, and critically Russia, to curb production if it wants prices to hold. The language from Russia suggests it is not ready to follow the Saudis yet.”
Last week, higher US energy stockpiles drove WTI crude to its longest losing streak in more than 30 years, while Brent dropped below $70 a barrel for the first time since April.