Oil prices slide on demand worries as US stocks rebound from rout

Oil prices dropped Thursday, October 29, on demand fears as more nations go into lockdown to staunch the spread of the coronavirus, while global stocks mostly rose after the prior session’s routs.

Both main oil contracts fell 5% for part of the day before clawing back some of their losses, extending this week’s meltdown to plumb 4-month lows on virus-driven demand fears.

“The new lockdowns have since yesterday caused a carnage in the oil market,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

“Oil demand will lose ground as a result of the new lockdowns…. Prices now naturally decline on this grim prospect,” he added.

Meanwhile, stocks were spared the bloodbath on Wednesday, October 28, which saw losses of more than 3 percentage points in several major markets.

Wall Street enjoyed a much better session, led by the Nasdaq, which jumped 1.8% ahead of major earnings reports from large tech companies.

Apple, Amazon, Facebook, and Google parent Alphabet all won gains during the session, but Apple and Amazon fell after their reports were released in after-hours trading.

The gains came as the United States reported a 33.1% growth rate in the 3rd quarter, a stunning improvement following a similar drop in the prior quarter.

The record result was driven by consumer spending supported by a massive $3 trillion in government aid, much of which has since expired.

Analysts have cautioned that Washington’s inability to approve a new stimulus package leaves the economy vulnerable in the 4th quarter, especially if the US coronavirus outbreak worsens.

The data are “akin to looking in the rear-view mirror, as the US economy is now slowing and the economic outlook deteriorating amid surging new cases of COVID-19 across almost all US states,” said UniCredit analyst Daniel Vernazza.

ECB: More stimulus ahead

After spending part of the day in the red, European stocks moved higher in the afternoon after the European Central Bank (ECB) signaled it would bolster its pandemic response in December.

The recovery is “losing momentum more rapidly than expected” after the partial rebound seen in the summer, ECB President Christine Lagarde said after a virtual meeting of the 25-member governing council.

With risks “clearly tilted to the downside,” she said ECB governors will use next month’s updated growth and inflation forecasts to “recalibrate our instruments” to keep credit flowing in the 19-nation currency club.

Frankfurt ended the day 0.3% higher while Paris lost its gains going into the closing bell, as did London, which is outside of the eurozone.

European equities were hammered on Wednesday as the German and French governments unveiled tighter restrictions to curb soaring COVID-19 infection rates.

The deadly second wave could potentially spark another painful global recession, as businesses and economies buckle again under the restrictions, analysts warn.

“Risks of a double-dip recession are rising for the global economy,” said Agathe Demarais, global forecasting director at The Economist Intelligence Unit.

“A second wave of the coronavirus pandemic is raging across Europe, prompting several countries, including heavyweights France and Germany, to reimpose stringent measures to contain the outbreak,” she told Agence France-Presse.

Key figures around 9 pm GMT

• New York – Dow: UP 0.5% at 26,659.11 (close)
• New York – S&P 500: UP 1.2% at 3,310.11 (close)
• New York – Nasdaq: UP 1.6% at 11,185.59 (close)
• London – FTSE 100: DOWN less than 0.1% at 5,581.75 (close)
• Frankfurt – DAX 30: UP 0.3% at 11,598.07 (close)
• Paris – CAC 40: DOWN less than 0.1% at 4,569.67 (close)
• EURO STOXX 50: DOWN 0.1% at 2,960.03 (close)
• Tokyo – Nikkei 225: DOWN 0.4% at 23,331.94 (close)
• Hong Kong – Hang Seng: DOWN 0.5% at 24,586.60 (close)
• Shanghai – Composite: UP 0.1% at 3,272.73 (close)
• Euro/dollar: DOWN at $1.1672 from $1.1796 at 9 pm GMT
• Dollar/yen: UP 104.60 yen from 104.42  
• Pound/dollar: DOWN at $1.2926 from $1.3044
• Euro/pound: DOWN at 90.34 pence from 90.43 pence
• West Texas Intermediate: DOWN 3.3% at $36.17 per barrel
• Brent North Sea crude: DOWN 3.8% at $37.65 per barrel

– Rappler.com