Doha talks breakdown

European and US stocks traded modestly lower last Friday, as investors bit their nails ahead of the Doha oil-freeze talks.

Oil refinery
Source: Bloomberg

With the apparent failure of the meeting to forge a consensus to freeze oil production at January levels, as Saudi Arabia and Iran ‘torpedo-ed’ the discussion even before the meeting, oil futures slumped over 5% in retaliation.

Saudi Arabia deputy Crown Prince Mohamed bin Salman reiterated that the country would only be a party to any oil freeze pact if all major producers including Iran are in agreement. Meanwhile, Iranian deputy oil minister said the nation saw no reason to participate in the talks because it is committed to raise production to pre-sanction levels.

Expectations for the talks to end with an agreement were high. Furthermore, the lack of one damaged the credibility of future meetings to support the oil market. Russian energy minister, Alexander Novak, told Bloomberg although he believed there was a possibility of a future accord, Russia ‘would not be as optimistic as before’.

This suggested that the rally in oil prices since January could be running out of steam really soon, as much of this resurgence was due to expectations that global oil producers will undertake supply-side measures to boost flagging oil prices.

Asia is set for a negative start to the week, given this development. Commodities are expected to be beaten back today, and this would have consequences for equities, especially energy and material counters. On the data front, Singapore’s March non-oil domestic exports (NODX) missed expectations, falling 15.6% y/y against -9.1% consensus, and rose +0.2% m/m versus +0.3% expected. Electronic exports shrank 9.1% y/y.

Last week, the Monetary Authority of Singapore (MAS) eased its policy stance by moving to a zero percent appreciation in the SGD, citing a more modest pace of economic expansion this year, as well as a more gradual pick up in core inflation. The weak export data corroborated with the monetary policy action.

 

Friday: S&P 500 -0.1%; DJIA -0.2%; DAX -0.4%; FTSE –0.3%

 

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