Tuesday 03:15 BST. Some stabilisation in the price of oil supported a solid rebound for most Asian markets.
Early gains were whittled back, leaving Brent crude, the international benchmark, down 0.4 per cent at $ 42.74 a barrel, while West Texas Intermediate, the US marker, slipped 0.3 per cent to $ 39.68.
Expectations for a major sell-off were raised following the breakdown of talks for an output freeze by major producers. Oil prices dropped nearly 7 per cent in Asia on Monday but recovered to finish slightly lower in New York.
The talks over the weekend in Doha collapsed after Saudi Arabia insisted that Iran, which had refused to participate as it rebuilds exports after years of sanctions, should be part of any agreement.
“The failure in Doha of the Opec/non-Opec meeting to result in a collective freeze has shown that the sovereign producers are willing to go their own way, especially Saudi Arabia. With eyes turning to the next meeting, we struggle to see how the outcome will be any different unless Saudi Arabia or Iran has a change of heart,” said analysts at Royal Bank of Canada.
But investors are still taking some comfort from comments last week by the International Energy Agency that if demand holds steady it could help move the oil market “close to balance” in the second half of this year.
“At some point in the next year, oil prices will be supported as slowly increasing demand catches up with slowly decreasing supply and stock-building comes to an end. The fact that global oil demand has continued to increase is what separates this commodity from many others but for now, the oil market is plagued by the presence of the rest of us — oil tourists — who drive the price up and down on sentiment about things such as the Doha meeting,” said Kit Juckes at Société Générale.
Energy stocks in Australia and Japan were rebounding from Monday’s decline.
Japan’s Nikkei 225 was up 3.4 per cent and on track for its biggest one-day gain since March 2, while the broader Topix index was ahead 2.9 per cent. Stocks fell back more than 3 per cent on Monday on a combination of the drop in oil prices, a stronger yen and concerns about the impact of the recent earthquakes on the island of Kyushu.
“With big carmakers forced to suspend production nationally by the disruption of supply chains caused by the quake, industrial production is likely to contract in April, increasing the probability that the economy could succumb to negative growth in the second quarter,” said economists at BNP Paribas. They forecast a 0.2 per cent contraction in gross domestic product during the second quarter.
The yen was 0.2 per cent softer at ¥109.06, having reapproached a 17-month high on Monday. The yield on the Japanese government 10-year bond (which moves inversely to price) pulled back from Monday’s record low, but was flat at -0.109 per cent.
South Korea’s won was the best-performing Asian currency, up two-thirds of a percentage point after the Bank of Korea kept interest rates on hold. Korea’s Kospi Composite was up 0.1 per cent.
The Malaysian ringgit, which has been sensitive to moves in the oil price, edged up 0.6 per cent.
Hong Kong’s Hang Seng strengthened 0.7 per cent, while on the Chinese mainland the Shanghai Composite was 0.2 per cent lower and the technology-focused Shenzhen Composite slipped one-third of a percentage point.
In Australia the S&P ASX 200 rose 1.1 per cent, with the energy sector advancing 3.2 per cent.
On Monday, the S&P 500 ended 0.6 per cent higher in New York, while European stocks gained about 0.3 per cent as a major sell-off in oil failed to materialise. The improved sentiment saw investors shun haven assets, such as gold, which was 0.1 per cent lower on Tuesday at $ 1,231.48 an ounce.
For market updates and comment, follow us on Twitter @FTMarkets
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.