Oil slides, stocks rise on hopes of deal to end Mideast war ~ EconomyLens.com

London (AFP) – Oil prices slumped and stocks mostly rose Monday after US President Donald Trump insisted preparations were made for new talks with Iran aimed at ending the war in the Middle East. Crude futures slid more than six percent, even though Iran denied that any negotiations were taking place and earlier truces have failed.

While tech stocks are still under pressure in Asia on concerns of over-investment, wider stock market indices were higher in New York and at record levels in Europe as the lower oil prices raise the prospect of lower interest rates. “Trump’s decision to restart talks with Iran has knocked a large chunk out of the oil-risk premium and given bonds room to rally,” said Patrick Munnelly, market strategist at the Tickmill Group. Oil’s sharp fall “has eased the immediate inflation scare,” he said.

Paris and Frankfurt both closed up more than one percent, with both hitting record highs. In New York, all the main indices were higher in late morning trading. But London slipped after the share price of one of its biggest constituents, pharmaceutical group AstraZeneca, slumped nine percent on a report that it could merge with US rival Bristol Myers Squibb. Oil companies, which figure prominently in London’s indices, followed oil prices lower.

Earlier in the day in Asia, technology companies again saw heavy losses as traders worried about whether massive investments in artificial intelligence will deliver long-lasting profits. Chipmakers SK hynix and Samsung dragged down South Korea’s Kospi index after a rally on Friday. The yen meanwhile gained against the dollar after US and Japanese authorities confirmed Monday that they had bought Japan’s currency on the open markets after months of weakness. The yen was recently near its weakest dollar level since 1986, hit by higher US interest rates, rising oil prices, and persistent capital outflows from Japan. While a weaker yen helps big exporters, it also inflates import costs for Japan, and the main Japanese stock index fell nearly one percent on Monday. The dollar was little changed against other major currencies.

Beyond the geopolitical risks, attention is also on the prospects for the US economy after the Federal Reserve held interest rates steady last week despite calls from some of its policymakers to raise rates to fight inflation. “The focus as we move through the week will be the US non-farm payrolls report, which will be another test of the resilience of the US labour market,” said Kathleen Brooks, research director at the trading platform XTB.

Despite falling on Monday, oil prices remain well above levels seen before the United States and Israel attacked Iran, sparking a war that has sharply curtailed Gulf exports of oil and gas and other key products. Trump said Saturday that the “perimeters” of a deal were there, with the latest negotiations covering the Strait of Hormuz, which has become a main sticking point in the conflict. After Iran on Monday denied talks were happening, Trump angrily said on social media that a US military blockade on Iranian ports will remain until there is a “Deal, or Total surrender”.

– Key figures around 1540 GMT –

West Texas Intermediate: DOWN 6.1 percent at $79.5 per barrel

Brent North Sea Crude: DOWN 4.7 percent at $83.84 per barrel

New York – DOW: UP 1.0 percent at 53,020.88 points

New York – S&P 500: UP 1.2 percent at 7,577.13

New York – Nasdaq Composite: UP 1.8 percent at 25,834.55

London – FTSE 100: DOWN 0.1 percent at 10,857.70 (close)

Paris – CAC 40: UP 1.2 percent at 8,613.82 (close)

Frankfurt – DAX: UP 1.5 percent at 26,001.31 (close)

Seoul – Kospi: DOWN 5.1 percent at 6,257.45 (close)

Tokyo – Nikkei 225: DOWN 0.9 percent at 63,754.90 (close)

Hong Kong – Hang Seng Index: UP 0.5 percent at 26,009.40 (close)