Asian Stocks Trim Early Losses, Oil Rally Cools: Markets Wrap

Stocks fall as oil spikes. Photo by Michael Nagle /Photographer: Michael Nagle/Bloo

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(Bloomberg) — Asian stocks pared early declines while S&P 500 futures rose as the US issued a second temporary waiver allowing purchases of Russian oil to help curb surging energy prices.

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A gauge of Asian shares was down 0.7% after dropping 1% earlier. S&P 500 futures advanced 0.4%, suggesting some relief for US markets after the underlying benchmark slid 1.5% to its lowest since November. Brent was little changed, trading slightly over $100 a barrel after rallying 9.2% on Thursday.

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The latest US measure, which is for crude that was loaded onto vessels before March 12, is broader than a directive earlier this month that only cleared India to boost buying of Russian oil. Separately, the US administration plans to waive a century-old maritime law that requires American ships be used to transport goods between US ports.

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“It’s not a game changer but the timing is good as it alleviates concerns around near-term tightness ahead of the weekend,” said Tony Sycamore, an analyst at IG Australia, referring to the US waiver on Russian oil purchases.

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Investors remained concerned that the Iran war will further crimp energy supplies and stoke inflation. US President Donald Trump and Iran’s new supreme leader have both struck defiant tones, with the latter saying the Strait of Hormuz should remain shut. Preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil, Trump said in a social media post. 

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Goldman Sachs Group Inc. warned that prices could exceed the 2008 peak if flows via the Strait of Hormuz remain depressed through March. Brent rallied to a high of $147.50 that year. The Iran war is causing unprecedented turmoil in oil markets, hitting 7.5% of global supply and an even bigger swath of exports, the International Energy Agency said.

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What Bloomberg Strategists say:

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“With Brent crude holding above $100 a barrel, investors will be wary of fresh developments in the Iran war over the weekend as markets take a rest. It is understandable if the appetite to take on fresh risk exposure is very low, which helps to explain relatively modest losses for Asian stocks.”

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— Mark Cranfield, Markets Live strategist. Click here for the full analysis.

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As energy costs have surged, a gauge of global equities has fallen more than 5% from a record high on Feb. 25. The MSCI Asia Pacific Index is on course for a second straight week of declines.

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“It feels as though the market has taken its timeline for the duration of the closure of the Strait of Hormuz and the conflict more broadly, and pushed it further out, suggesting this could have a more damaging effect on inflation and potentially consumption patterns,” Chris Weston, head of research at Pepperstone Group, wrote in a note.

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Treasuries were steady on Friday after falling across the curve in the previous session as inflation worries grew. The policy-sensitive US two-year yield climbed nine basis points to 3.74% Thursday and the 10-year rose three basis points to 4.26%.