Asian stocks dropped overnight as oil prices pared some of their gains and investors braced themselves for another weekend of headlines about the spread of coronavirus.
China’s Shanghai composite index fell 0.8 per cent, Hong Kong’s Hang Seng dropped 0.7 per cent, and Japan’s Nikkei slipped 0.1 per cent.
Australia’s S&P ASX fell 1.7 per cent while Singapore’s STI dropped two per cent.
Oil prices jumped yesterday after US President Donald Trump said he had brokered a deal between Saudi Arabia and Russia to get them to reduce supply.
An oil glut – driven by Saudi Arabian overproduction aimed at waging a price war with Russia – has caused oil prices to roughly half this year.
But Trump yesterday tweeted: “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more.”
However, analysts and the markets have cast doubt on whether such an agreement will work out. Doubts were also raised about whether it could stabilise the market at such an uncertain time.
Oil prices fell today. Brent crude dropped 4.9 per cent to $28.59 per barrel. US crude fell 4.5 per cent to $24.19 per barrel.
“We remain sceptical that a deal to cut output will materialise,” said Caroline Bain, chief commodities economist at Capital Economics.
Bain said Saudi Arabia is likely to want Russia to cut its production by just as much. It could even demand the US and China cut production too, she said.
In any case, she said, with coronavirus spreading “we only expect lower supply to put a floor under prices”.
US stocks are set to open lower on Wall Street today, according to futures prices.
The number of coronavirus cases around the world has now passed 1m, with the US the worst-affected country.
Investors say that the key piece of data that could launch a sustained rally is a sharp slowing in the spread of the virus.