Oil prices have fallen to November 2021 lows. OPEC+ lowered demand estimates

At Tuesday’s close, the Dow Jones Index (US30) was down 0.23%, while the S&P 500 Index (US500) was up 0.45%. The NASDAQ Technology Index (US100) closed positive 0.84%. A 4.3% drop in the price of WTI crude oil to a 16-month low on Tuesday hamstrung energy stocks. However, the broad market closed in positive territory due to gains in technology companies. Tesla (TSLA) shares rose by 4.6% and were the second-best performer among Nasdaq 100 stocks after Deutsche Bank named it a top pick with a “buy” recommendation and a $295 price target. Oracle (ORCL) rose by 11.44% and led the S&P 500 higher after reporting adjusted first-quarter revenue of $13.31 billion, better than the consensus estimate of $13.26 billion.

The Dollar Index fell below 101.5 on Wednesday, trimming recent gains as investors reacted to the first and only debate between US presidential candidates Kamala Harris and Donald Trump before the November election. Analysts suggested that the chances of a Harris presidency had increased slightly, which put pressure on the dollar, supported by expectations of higher tariffs and increased fiscal spending under another Trump presidency. 

The Mexican peso fell to 20 per dollar in September, hitting a two-year low amid concerns over judicial reform and dovish expectations for the Bank of Mexico. Investor sentiment was dampened by the judicial reform bill. The reform, perceived as a threat to judicial independence and foreign investment, prompted warnings from financial institutions such as Morgan Stanley and Julius Baer of possible credit downgrades. 

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) fell by 0.96%, the French CAC 40 (FR40) closed down 0.24%, the Spanish IBEX 35 (ES35) lost 0.61%, the British FTSE 100 (UK100) closed down 0.78%. The worst-performing sector was the automotive sector, which fell 3.8% after Continental announced that it would have to lay off a significant amount of money due to warranty problems with one of its brake systems. The news also impacted BMW, which lowered its profitability estimate for 2024, citing the brake problem and other factors; BMW shares fell by 11%, and Continental shares fell more than 10%. 

WTI crude prices fell more than 4% to $65.7 a barrel on Tuesday, hitting their lowest level since November 2021, after OPEC cut demand prognoses for the second time in two months. OPEC now expects global oil demand to grow by 2 million barrels per day (bpd) in 2024, down 80,000 bpd from the previous estimate. For 2025, OPEC revised its demand growth prognosis to 1.7 million bpd, down 40,000 bpd from the previous estimate. This reduction is due to lower oil consumption in China, especially as rising sales of electric vehicles reduce demand for conventional fuels.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) was down 0.16%, China’s FTSE China A50 (CHA50) was up 0.23%, Hong Kong’s Hang Seng (HK50) added 0.22% and Australia’s ASX 200 (AU200) was positive 0.30%. The Hang Seng Index (HK50) fell to its lowest level in nearly five weeks and Chinese stocks were on the verge of falling to a seven-month low as strong mainland export data for August failed to ease growing concerns over deflation risks and ongoing trade friction with the US-led West. Meanwhile, the US House of Representatives on Monday passed a bill aimed at restricting business with some Chinese biotech companies on national security grounds.

Bank of Japan (BoJ) board spokeswoman Junko Nakagawa said the Central Bank will continue to raise interest rates if inflation moves in line with its prognosis. She added that a tight labor market and the continued rise in import prices also pose upward risks to inflation. In addition, she noted that real interest rates remain deeply negative despite the July rate hike.