The Hindu Business Line : Asian markets stare down the oil barrel

Chances are that most of us would have never heard of the Nigerian Stock Exchange All Shares Index, Venezuela Stock Market Index or even the Teheran Stock Exchange Price Index.

But equity investors across the world certainly felt the impact of developments in these countries this week, whenever news about oil trickled in.

The unrelenting rise in oil prices was blamed on geopolitical tensions in Nigeria, Venezuela, and Iran. Increased oil consumption by emerging economies such as India and China also figured in this list, along with a weakening greenback.

Most of the global and Asian stock markets extended their poor run and ended lower on Friday as oil prices soared into uncharted territory. A record at $126 a barrel was made. The credit crisis, whose end doesn’t seem anywhere in sight, liquidity problems and now, crude oil prices seem to have conspired to spoil the party in the stock markets.

Fifteen out of 21 major indices in Asia and Europe ended in red this week, as did 5 out of 11 in the Americas. Amongst BRIC nations, Russia remained the only big gainer (up 8 per cent for the week), while Pakistan, unaffected till last week, finally capitulated.

Inflation worries nagged traders in Shanghai and Mumbai as oil prices have more than doubled in just twelve months. Speculative bets could have found their way into commodities especially rare metals such as platinum (up 10 per cent) and palladium (+7 per cent), while the dollar’s weakening may have prompted investors to put money into gold (3.3 per cent) and silver (2.4 per cent). However, metals pack also included losers such as copper, nickel, aluminium - with lead (down 13 per cent) falling the most as concerns linked to lower demand could have sparked off a sell-off.

That said, prices of most food articles did not show any signs of weakness as corn, sugar, soyabean rose. The big question that is doing rounds in the stock markets is when will the indices again rise on a sustained basis? We’ve seen several events where stocks rise swiftly, only to fall prey to a wave of profit-taking. Cautious investors seem to see very few macroeconomic indicators that strengthen the case for stocks. Plus, with inflation keeping Central Banks on the tenterhooks about whether to raise interest rates, a tighter monetary situation may only add to woes of the stock markets.

More Stories on : Petroleum | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page