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Oil prices fall over supply fears, stocks slip before French election

LiveMint logoLiveMint 22-04-2017 Rodrigo Campos

New York: Oil prices fell on Friday as oversupply concerns resurfaced, while the euro and stocks slipped ahead of the first round of the French presidential election on Sunday.

US crude futures fell below $50 a barrel for the first time in more than two weeks on renewed fears that increasing US production will thwart the Oil and Petroleum Exporting Countries’ (Opec) attempts to reduce the global oil glut.

Geopolitical worries remain an issue for investors also with all four leading candidates in the first round of the French presidential election on Sunday seen with a chance of making the run-off vote on 7 May. Centrist candidate Emmanuel Macron maintained a narrow lead in opinion polls, though a terrorism incident in Paris on Thursday pushed national security to the top of the political agenda.

“After Brexit everyone has to be concerned,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, speaking of the surprise vote last June that resulted in the UK move to leave the European Union.

“People are not going to trade if they are nervous nowadays — there is a little nervousness, a lot of uncertainty, so let’s wait and see.”

The euro ended without much change on Friday around $1.0720 but French blue-chip stocks fell 0.4%. The pan-European STOXX 600 index slipped 0.65% to 378.12% and MSCI’s gauge of stocks across the globe shed 0.18% to 446.54.

“So far, markets have been pretty sanguine in the face of the (French) presidential election, which was flagged as one of the potential banana skins for markets in this year,” said Hargreaves Lansdown, senior analyst at Laith Khalaf.

Investors were heartened by good Eurozone economic news showing businesses activity increased at the fastest rate in six years as new orders stayed robust.

The IHS Markit’s flash composite purchasing managers’ index, seen as a good guide to economic growth, climbed to 56.7 from March’s 56.4, its highest since April 2011.

On Wall Street, the Dow Jones Industrial Average fell 0.15% to 20,547.76, the S&P 500 index lost 0.30% to 2,348.69 and the Nasdaq Composite slipped 0.11% to 5,910.52. For the week, the Dow rose 0.5%, the S&P 500 gained 0.8% and the Nasdaq advanced 1.8% in what was the first weekly gain for the top indices over the last three weeks.

A steady stream of strong US corporate earnings through the week helped to buoy market sentiment. Of the 95 companies in the S&P 500 index that have reported earnings through Friday morning, about 75% had topped expectations, according to Thomson Reuters data, above the average for the past four quarters.

Overall, profits of S&P 500 index companies are estimated to have risen 11.2% in the quarter, the most since 2011. The week ahead has investors concerned not only about the French elections, but also a possible North Korean nuclear test and the deadline next Friday for the US to avoid a federal government shutdown.

“We have got overall de-risking happening. You have people keeping the powder dry ahead of Sunday,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto. “Traders are looking for liquidity and countries with a strong net international position,” he said.

The US dollar index was also steady at 99.75 while the yen.

US treasury prices were little changed with eyes on France. 10-year note yields have held in a tight range since falling to five-month lows on Tuesday, as investors await a catalyst to determine if bonds will resume their rally.

Benchmark 10-year notes last fell 2/32 in price to yield 2.2463%, from 2.241% late on Thursday. Spot gold added 0.2% to $1,284.00 an ounce. Reuters

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