While you were sleeping: Oil, Alcoa pace equities lower

While you were sleeping: Oil, Alcoa pace equities lower

(BusinessDesk) April 13 - A slump in the price of oil has knocked equities in Europe and on Wall Street lower amid renewed concerns about Japan’s nuclear crisis. Alcoa Inc’s missed sales results also has dented optimism about the global growth outlook.

Alcoa was among the biggest losers on the market, dropping more than 6% after posting revenue yesterday that fell short of expectations.

"Everyone is looking at revenue this quarter since that will show the strength or fragility of the recovery," Randy Bateman, who helps oversee US$14.5 billion as chief investment officer of Huntington Asset Management in Columbus, Ohio, told Reuters. "People were looking for stronger revenue growth."

In early afternoon trading on Wall Street, the Dow Jones Industrial Average dropped 0.83%, the Standard & Poor’s 500 Index shed 0.69% and the Nasdaq Composite Index decline 0.86%.

Oil dropped, as did gold, sending the Reuters-Jefferies CRB commodities index to its biggest one-day decline in a month.

"There's growing recognition that the recovery is fragile in a lot of ways, and that we can't totally rely on demand from China, India or Brazil to keep us rising," Bateman told Reuters.

Investors boosted their exposure to stocks in early April even as they were concerned global growth would moderate, a Bank of America-Merrill Lynch poll showed on Tuesday.

In the investment bank's monthly survey of 282 fund managers, a net 50% were overweight in equities compared with a net 45% in March.

Separately, options investors were still betting on a decline in the euro against the U.S. dollar. Risk reversals for one-month options showed a solid bias for "puts" despite an 8.3% surge in the single currency this year, according to Reuters.

"We're looking at euro/dollar crawl higher, but at the same time risk reversals have not narrowed to reflect the direction of spot," Simon Smollett, senior currency options strategist at Credit Agricole in London, told Reuters.

New data showed more radiation leaked from the crippled Fukushima Daiichi nuclear power plant in the early days of the crisis than first thought, putting it in the same category as the world's worst nuclear disaster, Chernobyl.

Oil dropped from the 32-month high reached yesterday, with Brent crude for May declining US$3.10 to US$120.88 a barrel by 12.47pm EDT.

U.S. crude shed US$3.85 to US$106.07.

The Organisation of the Petroleum Exporting Countries said it expected oil demand to grow by 1.4 million barrels per day this year, similar to its previous forecast and in line with Energy Information Administration figures. It did note that the rise in oil prices could have "a slightly negative impact" on global transport fuel use.

OPEC reiterated comments by oil ministers that the market was still adequately supplied and said inventories remained above the historical trend. Volatile oil markets therefore did not reflect fundamentals of supply and demand, the group said.

"The market can be assured that in the months ahead, [OPEC] will continue its long-standing role of supporting oil market stability," it said.

Meanwhile, Goldman Sachs said in a note emailed to clients on Tuesday that it expected Brent to fall toward US$105 in coming months.

Spot gold last traded 1.1% lower at US$1,449.66 an ounce by 1419 GMT. On Monday, gold rose to a record US$1,476.21.

(BusinessDesk)

© Scoop Media