Low oil prices punish global stocks
January 20, 2016, 7:49 pm

The New York Stock Exchange has had its worst new year opening … ever – analysts say – on fears of a China slowdown, and more importantly, plummeting oil prices [Xinhua]

In the US, the Dow Jones Industrial average slumped by 550 points or 3.5 per cent in the red at noon EST before picking up slightly.

At 1pm, it was down 438 points, or 2.69 per cent.

The Nasdaq Composite was down 2.5 per cent to 4,360.

At press time, the S&P 500 was down 2.9 per cent to 1,827.

The continuing tumble in global stocks comes a day after concerns about Chinese markets eased as benchmark indices in Shanghai closed higher.

But on Wednesday, the benchmark Shanghai composite closed down one per cent.

Market analysts say that investors are now more concerned about falling oil prices than China’s slowing growth. There is also considerable concern that despite a positive year, the US economy may not be able to weather what is happening around the world and it could suffer as a result.

By 2pm Wednesday, the US benchmark West Texas Intermediate had fallen two dollars, or more than seven percent, from Tuesday’s close. This marks around a 25 per cent drop since the beginning of 2016.

International benchmark Brent Crude closed down 3.9 per cent in London trading, coming in at $27.64.

The fact that oil prices continue to drastically fall can be taken as an indicator that the global economic health is weak and will likely spell trouble – read: recession – for most of 2016.

Global stocks have had the worst new year opening in history.

But global investment firm Goldman Sachs sees the turmoil will likely grow throughout the remainder of the year; it warns that with supply far outpacing demand storage facilities are at near saturation points.

“Distillate storage utilization in the U.S. and Europe is nearing historically high levels, following near record refinery utilization, only modest demand growth (especially relative to gasoline), and increased imports from the East on refinery expansion and Chinese exports,” the report said.

Markets are also rattled by news that Iran will quickly flood the markets with up to an additional one million barrels a day now that US and European economic sanctions have been lifted.

In other markets, both London’s FTSE and France’s CAC 40 fell 3.46 per cent; in Germany, Frankfurt’s DAX was down 2.82 per cent.

Japan’s Nikkei had fallen by 3.71 per cent at the end of Asian trade, while South Korea’s Kossi, which had fared better than its Asian counterparts in recent weeks, fell 2.341 per cent on Wednesday.

The BRICS Post with inputs from Agencies