Global Stocks, Bonds Slide; China Tumbles As Oil Surges To 17 Month High
By Tyler Durden
In a quiet start to the week, European, and Asian stocks fell with S&P futures fractionally in the red, as Chinese markets tumbled the most since June and crude oil surged, even as the Nikkei erased all losses for 2016 on continued weakness in the Yen.
The big story continues to be crude oil which surged 5% to the highest in 17 months, with WTI and Brent trading near $54 and $57 respectively, following Saturday’s agreement by NOPEC (mostly Russia and Oman) nations to cut as much as 600kbpd in production as described in Saudi “Shock And Awe” Sparks Buying Panic In Crude – WTI At 17-Month Highs.
Oil jumped after after Saudi Arabia, whose output just hit a new all time high when it told OPEC it pumped 10.72 million barrels per day last month, up from 10.625 million bpd in October, signaled it will cut output by more than previously agreed amid a weekend deal to tackle oversupply with competitors such as Russia. Longer-dated securities led declines as government bonds around the world tumbled, while climbing energy shares bucked a drop in Europe’s wider benchmark stock gauge.
The jump in oil continues to push up the outlook for global inflation, sending 10-year Treasury yields above 2.5% for the first time since October 2014, as longer-dated government bonds around the world tumbled. The prospect of increased price pressures is filtering through into the market’s outlook for central-bank policy, with traders seeing 100 percent odds of a rate hike at this week’s Federal Reserve meeting, and a two-in-three chance of additional tightening by June, according to Bloomberg calculations based on fed fund futures.
“The spike in oil is behind the further cheapening in global bonds,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “It’s a foregone conclusion that we’re going to have a 25 basis-point rate hike.”
China stocks suffered their biggest fall in six months as blue chips were knocked by fresh regulatory curbs to rein in insurers’ aggressive stock investments and rising bond yields prompted profit-taking in equities. China’s insurance regulator, which recently warned it would curb “barbaric” acquisitions by insurers, said late on Friday it had suspended the insurance arm of China’s Evergrande Group from conducting stock market investment.
The Shanghai Composite Index sank the most since June as a gauge of smaller companies in Shenzhen plunged more than 5%, and the ChiNext index slumped 5.5% amid concerns about the outlook for the property market, while intermarket liquidity tightened, with various funding indicators once again showing funding stress and rising tightness as regulators continued their crack down on insurers’s stock investments and Donald Trump raises concern about a possible trade war, said Ken Peng, Asia investment strategist at Citigroup Global Markets Asia. Hong Kong’s Hang Seng Index slipped 1.5%.
“The decline in stocks was the result of amplified impact on market sentiment after the cumulative events of higher government bond yields, a weaker yuan against the dollar and regulatory …read more
Source: Global Stocks, Bonds Slide; China Tumbles As Oil Surges To 17 Month High
