Global Stocks Suffer More Losses, Oil Declines After China’s PMI Drop

Kristian Rouz – Even as the Grexit question lingers, European markets have surged on the ECB's own QE, a poor indicator of growth even though their economy remains shaky on the periphery.

Global markets posted losses on Monday and early Tuesday, save for only a few bright spots in Europe and Asia.

The drop is attributable to increasing volumes of crude extraction in Saudi Arabia and  the macroeconomic statistics and related policy decisions coming from mainland China, where the benchmark measure, Purchasing Managers’ Index (PMI) tumbled to its 11-month low, far below expectations.

Additionally, fears festered onmajor turbulence in the Communist nation’s energy sector, as Beijing has announced its intent to shutdown most of its major coal power plants, citing environmental concerns.

In early-to-midday Tuesday trades, Asian stocks were mostly flat. High volatility marked trading sessions in Asia-Pacific, triggering a possible retreat in European markets. In mainland China, the preliminary (flash) reading of the PMI benchmark showed a sharp decline in the nation’s manufacturing and services in March, as the measure stands at 49.2 (readings below 50.0 indicate contraction). This is far below the previously forecasted reading of 50.6. February’s effective PMI in China stood at 50.7.

Hence, the MSCI broader APEX Index sans Japan was up 0.2% only after a rocky session, buoyantly gaining in the morning only to decline sharply after the Chinese PMI was announced. Both investors and businesses have called on Beijing for more stimulus, and today’s data will significantly embolden these voices.

The CSI 300 Index shed 0.8% as foreign investors were frantically leaving the mainland’s market due to the disappointing PMI reading. Real estate and energy sectors posted the greatest losses, led by PetroChina and Poly Real Estate.

As such, the Shanghai Composite Index was up slightly at the close on hopes ofmonetary easing.

In Japan, Nikkei 225 shed 0.2% due to a weaker dollar and a stronger yen. The index slipped just below its recently reached 15-year high.

In Hong Kong, most shares declined as well, with metals among the top losers due to a weaker demand on the mainland. The Hang Seng Index slid 1.3%.

The US dollar is still lower than its recent peak valuations as many investors have been speculating the US Fed would not hike its benchmark interest rate in the coming months as growth is slowing and inflation is far below the necessary 2%.

On Tuesday, Germany and France will post their preliminary PMI readings for March.

Crude oil is on the losing streak  as news of record volumes of  production posted by Saudi Arabia, now at almost 10 mln bpd (in comparison to 9.4 mln bpd extracted by the US). 

Brent crude futures were at $55.50/bbl, US WTI oil was at $46.88/bbl.

Oil refineries, however, are cheering across the globe and in the US, in particular as storage fees are sky-high amidst the oversupply of oil and the still-intact US Federal ban on exporting  unprocessed oil.