Stock markets diverge as Hong Kong sinks, oil prices fall ~ EconomyLens.com

New York (AFP) – Oil prices sank and global stock markets diverged on Tuesday, with Hong Kong suffering its worst day in 16 years as China held off announcing fresh measures to boost its economy. Wall Street’s main indexes were mostly higher in morning trading in New York on optimism about the health of the US economy. European stock markets closed lower, pulled down by the slide in Asia and by dashed hopes of greater Chinese demand.

Hong Kong shares slumped 9.4 percent after China’s National Development and Reform Commission (NDRC) did not announce new stimulus measures at an eagerly anticipated press conference. “Financial markets are mostly in a risk-off mood on Tuesday, as China has stopped its drip feed of stimulus (and) commodity prices fall,” said Kathleen Brooks, research director at XTB. Benchmark oil contracts were down as much as 5 percent at times in volatile trading Tuesday as doubts returned about Chinese demand and Israel came under international pressure not to strike Iranian oil installations.

It was fear about Israel’s response to Iran’s missile attack last week that sent oil prices soaring on Monday to their highest levels since August. But President Joe Biden has urged Israel not to attack Iran’s oil industry, fearing it could push up prices and hit the US economy — just ahead of the country’s presidential election. Healthy US stockpiles and expectations of ample supply both in and out of OPEC also helped dent oil’s recent rally.

Global stock markets have been lifted in recent sessions as China announced stimulus measures, boosting hopes of greater Chinese demand for oil, metals, luxury goods, and more. Share prices across all three sectors slumped Tuesday, pushing Europe’s main indices into the red. European luxury and spirits companies were further hit as Beijing announced tariffs on brandy imported from the European Union, in an apparent riposte to EU duties on Chinese electric cars.

Remy Cointreau — whose brands include Louis XIII, Remy Martin and Cointreau — tumbled more than six percent. Pernod Ricard, which owns Martell cognac, dropped nearly four percent. LVMH, which owns Hennessy cognac, shed more than three percent, and Gucci-owner Kering retreated over four percent. Burberry shares retreated 5.6 percent in London. London was also pulled lower by energy and mining companies.

But Wall Street’s main indices logged gains on Tuesday, with gains in tech shares helping market sentiment, noted Peter Cardillo of Spartan Capital. A better-than-expected jobs report last Friday showed the US economy is in strong shape, even if it watered down expectations for deep interest rate cuts in coming months. US consumer and producer prices data towards the end of the week should provide further clues on the interest rate outlook, while third-quarter earnings season kicks off on Friday.

However, S&P Global Ratings put aviation giant Boeing’s rating on credit watch “with negative implications” Tuesday, reflecting its heightened chance of a downgrade if a union strike persists towards year-end. In Asia, Shanghai closed up 4.6 percent despite the disappointment over the lack of new stimulus measures. Analysts cautioned that the sizeable gain reflected the index catching up with other markets following a week-long national holiday in China.

“Market hopes of even more fiscal stimulus that reaches the ‘big bang bazooka’ level look dashed with few details on specific measures,” said Heron Lim of Moody’s Analytics.