Asian stocks fall, oil prices rise as US moves spook markets

Published 29.01.2019 11:21
Updated 29.01.2019 19:10
A man walks past an electronic board showing Hong Kong share index outside a local bank in Hong Kong, Tuesday, Jan. 29, 2019. (AP Photo)
A man walks past an electronic board showing Hong Kong share index outside a local bank in Hong Kong, Tuesday, Jan. 29, 2019. (AP Photo)

Asian markets fell Tuesday as the charging of Chinese giant Huawei in the U.S. cast a shadow over upcoming trade talks, while oil prices edged up after U.S. hit Venezuela's state-run oil company with sanctions.

A busy week across the globe got off to a nervous start Monday after industrial giant Caterpillar and chip company Nvidia projected worse-than-expected results for 2019, citing ongoing weakness in China.

The announcements from two of Wall Street's big-hitters follow similar warnings from Apple and Samsung and sent shudders through trading floors.

"Caterpillar and Nvidia are not the first companies to blame China for their afflictions, but both companies are seen as industry bellwethers and their disappointing results provide further evidence that this time China's slowdown is for real," said Rodrigo Catril, senior markets strategist at Australia National Bank.

The warnings come as Beijing struggles to kickstart the world's number two economy, which expanded last year at its slowest pace for almost three decades, with a mammoth debt mountain and the US trade war hampering efforts.

In early trade, Hong Kong was down 0.6 percent and Shanghai shed more than one percent while Tokyo dropped one percent by the break.

Sydney dropped 0.6 percent and Singapore was 0.4 percent lower with Seoul dropping 0.5 percent. Wellington and Taipei were also well down but manila and Jakarta rose.

The main focus of attention this week is on the two-day meeting between China and U.S. officials aimed at resolving the long-running trade war that has been a drag on equities.

Donald Trump will meet China's top economy envoy Liu He during the talks, which start Wednesday, while U.S. Treasury Secretary Steven Mnuchin said he expected "significant progress at these meetings."

Oil prices crept up on Tuesday after Washington imposed sanctions on Venezuelan state-owned oil firm PDVSA in a step set to severely curb the Organization of the Petroleum Exporting Countries (OPEC) member's crude exports to the United States.

Despite the move, which comes as the U.S government looks to pile pressure on elected President Nicolas Maduro to step down, traders said ample global oil supply and an economic slowdown especially in China were keeping crude prices in check, for now.

International benchmark Brent crude was trading at $60.27 per barrel at 0630 GMT with a 0.5 percent gain, after closing Monday at $59.95 a barrel.

American benchmark West Texas Intermediate was at $52.39 a barrel at the same time, posting a 0.6 percent increase, after ending the previous session at $52.06 per barrel.

The United States has remained a major destination for Venezuelan oil despite their political differences, although volumes have declined over the past years amid Venezuela's economic crisis and as the U.S. government has started targeting the South American nation with sanctions.

The U.S. government is backing Venezuelan opposition leader Juan Guaido, who proclaimed himself interim president last week and is demanding the resignation of Maduro.

"As a result of today's action, all property and interests in property of PDVSA subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them," the U.S. Treasury said late Monday.

Venezuela has the world's biggest proven oil reserves and is a member of OPEC.

While news of the sanctions against Venezuela grabbed headlines, analysts said the fundamental issue for global oil trade remained plentiful supply.

"The more significant issue is (global) supply, and despite OPEC's best efforts (to reduce output) there seems to be plenty of it," said Jeffrey Halley of futures brokerage OANDA in Singapore.

Global oil supply remains high largely due to a more than 2 million bpd increase in U.S. crude oil production last year, to a record 11.9 million bpd.

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