SYDNEY, Nov 2 — Oil prices hit five-month lows and shares extended losses today on worries about global demand as many economies slid back into coronavirus-induced lockdowns while upcoming US presidential elections led to heightened caution.
Risk appetite has taken a hit in the past week on the back of rising coronavirus cases and lockdowns, fears of the prospect of a tightly contested US presidential election, absence of a pre-election US fiscal stimulus and gloomy corporate outlook.
Global coronavirus cases surpassed 500,000 last week with Europe crossing the bleak milestone of 10 million total infections. The United Kingdom is grappling with more than 20,000 new cases a day while a record surge of US cases is killing up to 1,000 people a day.
Fresh coronavirus-induced lockdowns have raised concerns over the outlook for fuel consumption, sending Brent crude to a low of US$35.74 (RM148.43) per barrel, a level not seen since late May. US crude went as low as US$33.64.
Underwhelming outlooks and results from some of Wall Street’s largest companies last week, including Apple and Facebook, further soured the mood and dragged US stocks lower last week.
Today, MSCI’s broadest index of Asia-Pacific shares outside Japan held near one-month lows at 569.86, down 0.1 per cent.
Japan’s Nikkei was up 0.6 per cent.
Australian shares were down 0.1 per cent while New Zealand’s benchmark index eased 0.6 per cent.
“It’s going to be a big week with the US election on Tuesday being the main event,” said AMP economist Shane Oliver.
“The US election has tightened further over the last week, making it harder to call,” Oliver added.
“The tightening is likely weighing on shares as it implies an increased risk of a contested election and less chance of substantial post-election fiscal stimulus to the extent that a blue wave that sees the Democrats win the presidency, control of the Senate and the House may be somewhat less likely.”
Ahead of the last campaign weekend, Republican President Donald Trump trails Democratic challenger Joe Biden in national opinion polls partly because of widespread disapproval of Trump’s handling of the coronavirus.
Opinion polls in the most competitive states that will decide the election have shown a closer race, still favouring Biden.
In currencies, the risk-sensitive Australian dollar slipped 0.4 per cent to go below 70 US cents for the first time since July. It was last at US$0.7007.
The Japanese yen strengthened a bit to 104.57 per dollar, while the British pound was last a shade weaker at US$1.2927. The euro was down 0.1 per cent at US$1.1639.
That left the dollar index, which measures the greenback against a basket of peers, up 0.08 per cent.
A risk-on revival after the US election could however see the dollar resume its slide from the March highs, analysts said.
JPMorgan analysts said the market likely views a Biden win as “short-term neutral” but “long-term negative” as his expected tax policy outweighs the benefits from a large stimulus package.
“SPX may have upside to ~3400, but it would have larger downside depending on the details of the package, potentially to ~2,500,” they added.
On Friday, the S&P 500 lost 1.21 per cent to close at 3,269.96. The Nasdaq Composite dropped 2.45 per cent while the Dow fell 0.6 per cent. — Reuters
