Plunging oil price drags global indices lower

By Trevor Hoey. Published at Jun 21, 2017, in Features

A further 2% fall in the oil price which saw it trade at sub-US$43 per barrel levels before closing at US$43.34 per barrel contributed to the negative sentiment that eroded all major global indices.

Weakness in the oil price is associated with scepticism surrounding the supply/demand dynamics, with the main concerns surrounding supply from non-OPEC countries flooding the market.

The Dow fell 0.3% to close at 21,467 points, but it should be remembered that the index is coming off an all-time high.

The NASDAQ is also retracing from near record highs, but its fall of 0.8% only a day after tech stocks were identified as oversold, sparking a solid day a buying could raise concerns.

In the UK, it was energy and financial stocks that placed a drag on the index as the FTSE 100 fell nearly 0.7% to close at 7472 points. The decline in the oil price resulted in sharp share price falls of more than 2% by Royal Dutch Shell Plc and BP Plc.

Elsewhere, investors exited banks as Bank of England Governor Mark Carney pointed to maintaining interest rates on hold, a factor that generally has a negative impact on lenders as they struggle to generate reasonable margins.

Financial institutions to come under pressure included Royal Bank of Scotland plc, Lloyds Banking Group plc and Standard Chartered plc.

Mainland European markets also experienced a downturn as the DAX fell 0.6% to 12,814 points.

The Paris CAC 40 shed 0.3%, closing at 5293 points.

On the commodities front, gold fell slightly to US$1244 per tonne.

The iron ore price was relatively unmoved at US$56.45 per tonne.

There were some steep falls across base metal prices.

Nickel fell 2%, revisiting the circa US$3.97 per barrel mark for the fifth time in June, effectively negating bounces which at times resembled what could have been the early stages of a recovery.

Copper fell circa 1% to US$2.55 per pound.

Zinc and lead only moved marginally with the former consolidating above the US$1.15 per pound mark, while lead continues to hover just above US$0.95 per pound.

The Australian dollar is fetching US$0.758.

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