Markets Recoil As Saudi Arabia Extinguishes Output Cut Hopes

Markets Recoil As Saudi Arabia Extinguishes Output Cut Hopes

Major stock indices across Asia and Europe fell after oil made a U-turn to the red zone. Saudi Arabia can be held responsible for the trouble in crude that was also reflected in the stock markets. According to Reuters, Saudi Arabia has bluntly turned down the possibility of output cuts by major oil producing nations.

Saudi Arabia dampens outlook

The statement from one of the key members of OPEC (Organisation of Petroleum Exporting Countries) has restored the bearish outlook over oil as investors clearly see a lack of concrete steps to curb oil glut. Resultantly, they are forced to shift to less risky assets such as gold and yen to battle the economic volatility.

Besides for the Shanghai SE Composite Index, other major indices travelled down with Australia ASX All Ordinaries falling the most by 1.90% to 4,943.30. It was followed by Hang Seng, which finished at 19,192, down by 1.15%. Japan’s Nikkei 225 lost 0.85% to 15,915.79 while Taiwan TSEC 50 closed the data 0.62% down at 8,282.86. China’s Shanghai managed to finish 0.88% higher at 2,928.90.

Europe is full of concerns

The trajectory of markets in Europe was similar to Asian indices as most of the indices opened lower. The Brexit fears ahead of the June referendum continued to take a toll on the Sterling, which fell below $1.40 level today, lowest since March 2009. According to Rabobank analyst, the preference for the yen will remain stronger despite weakness in the euro as EU concerns weigh over the currency.

During the early hours, FTSE 100 traded 1.30% down to 5,884.78 while Euronext 100 inched down 12.98 points to 820.54. CAC 40 and DAX registered a loss of 1.66% and 1.94% to 4,168.22 and 9,234.50 respectively. Swiss Market Index opened 1.84% lower at 7,663.01. The weakness in oil hints that any reversal in the momentum of these indices is highly unlikely.

Elsewhere, the U.S. markets had closed sharply lower during the previous day after oil tool a plunge below $32 per barrel. Dow Jones Industrial Average closed 1.14% down at 16,431.78 while S&P 500 Index dipped 1.25% to 1,921.27.