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Drop in US crude oil weighs on Asia energy stocks

Monday 07:15 GMT

What you need to know

US West Texas Intermediate crude is at $48.33 a barrel, having fallen under $48 for the first time in more than three months.

The pound is holding above $1.22 as speculation mounts that the UK government is poised to trigger Article 50 of the Lisbon treaty, the process that begins two years of formal talks on the country’s exit from the EU.

European stocks are expected to be mixed in opening trade, but their moves are not set to be large. According to calls from IG, the FTSE 100 will rise 7 points to 7,350. Germany’s Xetra Dax is set to slip 6 points and the CAC 40 in France is expected to rise 5 points.

Hot topic

West Texas Intermediate crude briefly dropped below $48 per barrel in Asia, pointing to further pressure on the US oil benchmark. The price fell as much as 1.2 per cent to $47.90 — its lowest since November 30.

Brent crude, the international benchmark, fell as much as 1 per cent to $50.85 a barrel.

The US oil price suffered its sharpest one-day sell-off in 13 months on Wednesday, and fell 7 per cent last week.

Equities

Shares in HSBC Holdings rose as much as 2.3 per cent in Hong Kong after the bank formally announced the appointment of Mark Tucker to succeed Douglas Flint as the group’s new chairman. Mr Tucker’s departure from AIA hit stock in the Asian insurer, which fell as much as 3.3 per cent.

Hong Kong’s Hang Seng Index climbed 0.9 per cent as energy stocks broke ranks with the rest of the region, gaining 0.7 per cent.

The dip in US crude pressured energy shares elsewhere in Asia. In Tokyo the Topix index was up 0.2 per cent, buoyed by a 1.3 per cent rally in telecoms stocks, while energy shares slid 0.5 per cent with Nippon Gas down 1.5 per cent. The Nikkei 225 index added 0.1 per cent.

Sydney’s S&P/ASX 200 index was down 0.4 per cent as the energy sector dropped 1.3 per cent. Among the worst performers were Santos Limited, off 2.1 per cent, and Oil Search, down 2.7 per cent.

In Seoul the Kospi Composite was up 1.2 per cent as investors appeared to welcome the departure of Park Geun-hye from the presidential Blue House on Sunday, two days after a constitutional court unanimously upheld her impeachment.

Forex

That optimism extended to the South Korean won, which firmed 1 per cent to Won1,145.95 against the US dollar.

The dollar index, which tracks the greenback against a basket of peers, was off 0.1 per cent at 101.2.

The Japanese yen was flat at ¥114.7 per dollar, while the Australian dollar climbed 0.3 per cent on its US counterpart to $0.7563.

The UK pound was up 0.5 per cent against the dollar at $1.2231 amid expectations that Theresa May, prime minister, could trigger Article 50, the mechanism for Brexit, as soon as Tuesday.

Fixed income

Movement was minimal in sovereign bond markets ahead of Wednesday’s interest rate decision from the US Federal Reserve.

Friday’s US jobs report bolstered expectations of a rate rise, with non-farm payrolls growing by 235,000 in February — beating a consensus forecast for a 190,000 increase.

The yield, which moves inversely to price, on 10-year US Treasuries was flat at 2.578 per cent. The only notable shift in the region came from Australian 10-year government bonds, the yield on which dropped 4 bps to 2.934 per cent.

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