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Global Shares Flat as Falling Energy Prices Signal Economic Slowdown

by Anna

In a day of muted trading, global shares remained flat as the extended decline in energy prices hinted at a potential decrease in demand amid a slowing global economy. Futures for the S&P 500 inched up by 0.01% to 4,396.25, while Dow futures saw a slight increase of 0.04% to 34,230.

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Crude oil prices hit a three-month low, with U.S. benchmark crude prices falling in seven out of the past 10 days. On Wednesday, prices continued to decline, reaching $76.66 per barrel. The price of oil has dropped nearly 5% this week and over 7% in the past 30 days.

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The retreat in crude prices brings them back to levels last seen in July before concerns about potential supply disruptions arose during the Israel-Hamas conflict. Natural gas has also slumped, experiencing a nearly 10% decline this week. Both crude oil and natural gas are in negative territory for the year.

The international standard, Brent crude, shed 95 cents to reach $80.66 per barrel.

Federal Reserve Chief Jerome Powell is set to open a conference in Washington, D.C., where several colleagues from the Federal Reserve, including Gustavo Suarez, Steve Sharpe, Michael Gibson, and Andreas Lehnert, will make presentations. The keynote speech will be delivered by John C. Williams, the president of the Federal Reserve Bank of New York.

Investors in Asia are also focusing on the prospects of improved China-U.S. relations during meetings scheduled for the following week on the sidelines of a Pacific Rim summit. The Asia-Pacific Economic Cooperation (APEC) forum meetings in San Francisco present an opportunity for top leaders from the U.S. and China to address trade and political issues.

Presidents Joe Biden and Xi Jinping are expected to meet during the summit, and while the White House anticipates modest announcements, fundamental differences in the relationship are unlikely to change.

U.S. Treasury Secretary Janet Yellen is scheduled to meet with Chinese Vice Premier He Lifeng in San Francisco before the finance ministers of APEC member nations officially kick off the summit on Saturday.

In European markets, France’s CAC 40 edged up by 0.14% to 6,995.98, Germany’s DAX lost 0.07% to 15,141.98, and Britain’s FTSE 100 inched up by less than 0.1% to 7,413.84. The futures for the S&P 500 were down by less than 0.1%, while the Dow industrials futures remained unchanged.

Asian markets saw Hong Kong’s Hang Seng decline by 0.5% to 17,588.46, and the Shanghai Composite dropped by 0.2% to 3,052.37. China’s worse-than-expected export data overshadowed any positive momentum from an upgrade to its growth forecast by the International Monetary Fund, which raised its GDP growth forecast for 2023 to 5.4% from 5% but predicted a slowdown in growth next year.

Japan’s benchmark Nikkei 225 fell by 0.3% to close at 32,166.48, South Korea’s Kospi lost 0.9% to 2,421.62, and Australia’s S&P/ASX 200 gained 0.3% to 6,995.40.

Moody’s Investors Service affirmed Japan’s A1 long-term foreign currency and local currency issuer and local currency senior unsecured ratings, maintaining a stable outlook. Moody’s stated that Japan’s capacity to manage its significant debt burden remains intact due to strong credit strengths, such as robust domestic liquidity fueled by private sector savings. However, the agency highlighted Japan’s structural weaknesses, such as its aging population, as ongoing concerns.

Stephen Innes, managing partner at SPI Asset Management, noted that weak trade data highlights the persistent external challenges for Asian economic growth. He mentioned that despite the robust economic momentum observed in the U.S. during the third quarter, cyclical stocks are struggling to attract sustained interest from investors who anticipate an eventual deceleration in economic growth.

In currency trading, the U.S. dollar slightly strengthened against the Japanese yen, rising to 150.77 yen from 150.37 yen. The euro declined to $1.0662 from $1.0702.

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