Asia report: Markets close lower as oil prices crash through floor
Markets in Asia finished in the red on Tuesday, as investors reacted to a crash in oil prices, which saw the May contract for West Texas Intermediate fall well into negative territory to settle at -$37.63 per barrel.
In Japan, the Nikkei 225 was down 1.97% at 19,280.78, as the yen strengthened 0.19% against the dollar to last trade at JPY 107.42.
Of the major components on the benchmark index, automation specialist Fanuc was down 1.32%, Uniqlo owner Fast Retailing lost 3.74%, and technology giant SoftBank Group was 4.11% lower.
The broader Topix index ended the session 1.15% weaker at 1,415.89.
On the mainland, the Shanghai Composite was off 0.9% at 2,827.01, and the smaller, technology-centric Shenzhen Composite lost 0.82% to 1,753.42.
South Korea’s Kospi settled 1% lower at 1,879.38, while the Hang Seng Index in Hong Kong slid 2.2% to 23,793.55.
Both of the blue-chip technology stocks were in the red in Seoul, with Samsung Electronics down 1.7% and chipmaker SK Hynix off 0.85%.
On the geopolitical front, reports overnight suggested Kim Jong Un was in “grave danger” following a surgery, with CNN citing an unnamed source as claiming that Washington was “monitoring intelligence”.
But there was little clarity provided by intelligence in Seoul, with South Korea’s office of the president telling NBC News that Kim was currently touring provincial areas with his close aides.
“We do not detect evidence to support speculation about his ill health,” they said.
“Even North Korea’s Workers Party, military or cabinet are showing any special movements such as emergency decree.”
The office said it believed Kim was active as per usual, with Reuters also citing two government sources as saying he was not seriously unwell.
Oil prices were a hot topic as well, as the May contract for West Texas Intermediate fell more than 100% to -$37.63 per barrel before expiring on Tuesday.
The very unusual price situation was a direct result of both the significantly weakened demand arising from the Covid-19 crisis, as well as the lack of an OPEC+ production deal before the expiry of the May contract, and storage capacity problems.
Brent crude was last down 25.71% at $20.34 per barrel, while West Texas Intermediate front month futures were 23.52% weaker at $16.54.
Spreadex analyst Cononor Campbell said that the oil price collapse was yet another reminder of the economic abyss the world was facing, and was made even worse when combined with the “increasingly erratic” political situation in the US.
“Trump tweeted that he is suspending all immigration to the United States, while certain states, like the Republican-led Georgia, terrifyingly plan to open back up as soon as this Friday.”
In Australia, the S&P/ASX 200 was 2.46% lower at 5,221.30, as investors in the sunburnt country digested the minutes from the Reserve Bank’s April meeting.
“The Board remained committed to supporting jobs, incomes and businesses,” the minutes read, referring to the economic fallout from the Covid-19 coronavirus pandemic.
“The Australian banks were in a strong position to withstand the large economic shock,” they added.
In corporate news out of Sydney, the country’s second-largest airline Virgin Australia entered voluntary administration during the session, as the airline sector continued to take a pounding from the coronavirus pandemic.
“[We plan to] recapitalise the business and help ensure it emerges in a stronger financial position on the other side of the Covid-19 crisis,” it said.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 2.11% to close at 10,535.87, led lower by Tourism Holdings, which was 11.6% lower by the close.
Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.86% at AUD 1.5919, and the Kiwi retreating 1.23% to NZD 1.6769.