Oil prices slump but stock markets largely steady

Oil prices slumped Monday on oversupply concerns while stock markets held largely steady despite dampened hopes of an early cut to US interest rates.

US and European oil futures fell around four percent after top producer Saudi Arabia cut the price of its crude, analysts said, weighing also on shares of energy majors.

"This all adds to concerns that the global market is drowning in oil that it can't use up quickly enough, even at attractive prices for consumers," said market analyst David Morrison at Trade Nation.

"No doubt the ongoing geopolitical tensions across the Middle East are preventing an even steeper sell-off," he added.

On Wall Street, both the S&P 500 and Nasdaq edged higher at the start of trading.

But the Dow dipped 0.4 percent, pulled down by shares in Boeing, which slumped almost nine percent after a mid-air emergency Friday in which a piece of fuselage came off a 737 MAX 9 jetliner as it flew over the US west coast.

Shares in Alaska Airlines, whose airliner suffered the blowout of the door panel, lost 5.9 percent.

European stocks were mixed in afternoon trading, with Frankfurt and Paris higher.

London dipped as energy shares were hit, with Shell down 2.4 percent as investors reacted to a mixed trading update ahead of the British oil major's annual earnings due next month.

A selloff in tech giants hammered Hong Kong, while Shanghai was also deep in retreat. Tokyo was closed for a holiday.

Keenly awaited non-farm payrolls data released on Friday showed the US economy remained resilient despite interest rates sitting at a two-decade high and inflation still well above the Federal Reserve's target.

The figures dealt another blow to expectations the central bank would start to cut borrowing costs in the next few months.

"Friday's US jobs report brought fresh concerns over the likeliness of the Fed to cut rates in March as markets have been widely anticipating, with a hot payrolls figure coming alongside a higher wage growth reading," said Joshua Mahony, chief market analyst at Scope Markets.

Attention now turns to the release this week of US consumer price figures.

"This report is destined to be a driving factor of the market's rate-cut expectations," said Patrick O'Hare at Briefing.com.

Equities ended 2023 with a surge as traders bet on a string of rate reductions this year thanks to falling inflation and a softening of the labour market.

But the release of minutes last week from the Fed's December meeting showed decision-makers were happy to keep rates elevated for some time to make sure they have prices under control.

Policymakers have signalled 75 basis points of cuts this year, but markets have priced in as much as 150 points, leaving investors open to disappointment.

"The first week of 2024 brought contradictory data signals," Barclays economists wrote in a client note.

"Solid US jobs growth, cautious Fed minutes and a still robust US economy raise doubts about markets' aggressive Fed rate-cut expectations," it added.

Key figures around 1430 GMT

West Texas Intermediate: DOWN 4.2 percent at $70.74 per barrel

Brent North Sea Crude: DOWN 3.7 percent at $75.82 per barrel

New York – Dow: DOWN 0.4 percent at 37,309.46 points

New York – S&P 500: UP less than 0.1 percent at 4,700.76

New York – Nasdaq: UP 0.3 percent at 14,567.45

London – FTSE 100: DOWN 0.1 percent at 7,680.90

Paris – CAC 40: UP 0.2 percent at 7,433.03

Frankfurt – DAX: UP 0.5 percent at 16,669.51

EURO STOXX 50: UP 0.3 percent at 4,475.07

Hong Kong – Hang Seng Index: DOWN 1.9 percent at 16,224.45 (close)

Shanghai – Composite: DOWN 1.4 percent at 2,887.54 (close)

Tokyo – Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.0957 from $1.0942 on Friday

Dollar/yen: DOWN at 144.43 yen from 144.69 yen

Pound/dollar: UP at $1.2720 from $1.2718

Euro/pound: UP at 86.13 pence from 86.01 pence