Oil prices struggled for traction on Wednesday after sinking on worries about weakening world demand and oversupply, while global shares sagged with slowing growth concerns overshadowing potential positives such as progress in the Brexit saga.
U.S. crude futures dived 7 per cent the previous day, suffering their biggest one-day loss in more than three years. The contracts last stood at $55.38 per barrel for a loss of 0.55 per cent, following a descent to a one-year low of $54.75 overnight.
Brent crude was down 0.2 per cent at $65.33 per barrel after tanking 6.8 per cent on Tuesday and set an eight-month trough of $64.61.
Brent had soared to a four-year high of $86.74 early in October as the market braced for U.S. sanctions on Iran, but prices have sunk nearly 25 per cent since then.
Concerns about global growth pushed MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.4 per cent.
Hong Kong’s Hang Seng dropped 0.4 per cent and the Shanghai Composite Index retreated 0.3 per cent.
Australian stocks fell 1.3 per cent, South Korea’s KOSPI lost 0.4 per cent and Japan’s Nikkei dipped 0.1 per cent.
The Dow and S&P 500 ended slightly lower on Tuesday as lower oil prices took a toll on energy shares, offsetting a small gain in technology stocks and renewed hopes for progress in U.S.-China trade talks.
Riskier assets have felt bouts of strong selling pressure over the past two months as worries about a peak in earnings growth added to international trade tensions and signs of slowing in global investment and growth.
“The markets would have reacted more positively to U.S.-China trade and Brexit-related headlines a few months ago,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities in Tokyo.
“But currently there is more focus on the possibility of both the U.S. and Chinese leaders maintaining their tough stance, with a compromise eluding them, and Brexit bogging down. Market sentiment is clearly cooling down.”
The United Kingdom and European Union agreed on the text for a Brexit divorce deal on Tuesday. Prime Minister Theresa May will present the draft withdrawal agreement to her senior ministers on Wednesday for discussion and then decide on the next steps.
Lifted by the latest hopes for a Brexit deal, the pound extended overnight gains and was last 0.3 per cent higher at $1.3012.
Brexit hopes also supported the euro. The single currency was up 0.15 per cent at $1.1302, pulling back from a 17-month trough of $1.1216 brushed on Monday.
The euro’s gains, however, were tempered by concerns over Italy’s budget proposals. The European Commission rejected Italy’s plan last month and has threatened to impose penalties if it is not revised to conform with EU regulations – something Rome has indicated it is unwilling to do.
The dollar index, which measures the greenback’s strength against six major currencies, lost 0.25 per cent to 97.051.
The index had steadily climbed to a 16-month peak of 97.693 on Monday amid the ongoing U.S.-China trade dispute and the Federal Reserve’s commitment to keep gradually raising interest rates.
Also weighing on the dollar, U.S. Treasury yields slid to more than one-week lows overnight as the sharp drop in oil prices suggested a more subdued inflation outlook.
The Organization of the Petroleum Exporting Countries (OPEC) warned on Tuesday that a supply glut could emerge in 2019 as the world economy slows and rivals increase production more quickly than expected.
OPEC member states rely on high oil prices to finance government budgets and they have been watching the increase in supply and the corresponding price slump with concern.
Led by top exporter Saudi Arabia, OPEC has been making increasingly frequent public statements that it would start withholding crude in 2019 to tighten supply and prop up prices.
“OPEC and Russia are under pressure to reduce current production levels, which is a decision that we expect to be taken at the next OPEC meeting on Dec. 6,” said Jon Anderson, head of commodities at Vontobel Asset Management.
Such a stance, however, has caused friction with U.S. President Donald Trump, who supports low oil prices and has called on OPEC not to cut production.