Markets: Oil slide rattles nerves; US jobs data ahead

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● Markets rattled as oil price slide leads declines in commodities
● Falls for shares in energy groups weigh on bourses as Brent dips below $47
● Dollar and Treasury yields relatively steady ahead of jobs data
● Commodity currencies like Aussie and Canadian dollars under the cosh
● Gold rebounds after four-day losing streak

A sharp fall in the price of oil is rippling through markets, hitting other commodities, pressuring currencies and rattling equity gauges.

Brent crude, the international energy benchmark, is down 1.4 per cent to $47.68 a barrel and West Texas Intermediate, the main US contract is losing 1.7 per cent to $44.76 per cent.

At one point in Asia trading Brent touched $46.64, its lowest since the end of November.
The latest retreat means Brent has lost 7.8 per cent this week as a resurgence in the US shale industry and concerns about Opec’s ability to curb output have cast doubt on the sustainability of a recovery in the oil market.

Executives at a number of energy companies that have reported solid results over the past week have also flagged doubts about the outlook, saying they still expected volatility and uncertainty in commodity markets.

The weak energy sector is dovetailing with notable declines in other raw materials, amid worries about waning demand from China as Beijing’s attempts to damp speculation leads to squeezed liquidity amid a rise in short-term borrowing costs to two-year highs.

Iron ore futures on China’s Dalian Commodity Exchange are sliding 7.6 per cent to Rmb447 a tonne, their lowest level in six months having dropped 15 per cent in just the last three sessions.

Gold, in contrast, is feeding off the funk, gaining 0.4 per cent to $1,232 an ounce. The precious metal had fallen for the first four days of the week, shedding $40 in the process, as easing political tensions and raising bond yields rendered it less attractive.

What to watch
The US non-farm payrolls report will be published on Friday at 13:30 BST, and investors will be keen to see if it supports expectations that US interest rates are set to rise again next month.

Economists are forecasting that a net 185,000 jobs were created in April and that the unemployment rate rose from 4.5 per cent to 4.6 per cent as more people entered the workforce. Average earnings are expected to grow by 0.3 per cent month-on-month.

Most traders think the labour data will show that the US economy is emerging from its first quarter soft patch, and the market is currently pricing in a 74 per cent chance that the Federal Reserve will hike borrowing costs by 25 basis points in June, according to the CME FedWatch tool.

Ahead of the jobs report the dollar index, a measure of the US currency against a basket of global peers, is down 0.1 per cent at 98.75.

Two-year US bond yields, which are particularly sensitive to monetary policy moves, are a fraction of a basis point softer at 1.31 per cent, while 10-year Treasury yields are down 1bp to 2.35 per cent.

Equities
Falls in commodity prices are weighing on stock markets.

US index futures suggest the S&P 500 will slip 3.5 points to 2,386 when trading gets under way later in New York, while across the Atlantic the pan-European Stoxx 600 is down 0.4 as the oil sector sheds 1.3 per cent and miners lose 1.2 per cent.

Forex
So-called commodity currencies are feeling the heat. The Norwegian krone, Australian and Canadian dollars are off session lows but still down around 0.3 per cent apiece. Indeed, the Aussie has hit a four-month trough as it tracks the decline in iron ore, a major Australian export.

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