Asian shares weaker after spike in crude oil rattles market

BANGKOK – Shares were mostly lower in Asia on Tuesday after an attack on Saudi Arabia’s biggest oil processing plant caused crude prices to soar, prompting selling of airlines and other fuel-dependent industries.

Gordon Charlop, center, and Christian Bader work at the New York Stock Exchange, Monday, Sept. 16, 2019. Global stock markets sank Monday after crude prices surged following an attack on Saudi Arabia’s biggest oil processing facility. (AP Photo/Mark Lennihan)

The U.S. and international benchmarks for crude fell back slightly after vaulting more than 14% overnight, that’s comparable to the 14.5% spike in oil on Aug. 6, 1990, following Iraq’s invasion of Kuwait.

Japan’s Nikkei 225 index lost 0.4% to 22,007.01 and the Shanghai Composite index skidded 1.0% to 2,999.84. South Korea’s Kospi edged 0.1% higher to 2,064.51, while the S&P ASX/200 in Sydney also added 0.1% to 6,679.00.

Hong Kong’s Hang Seng slipped 1.0% after the credit ratings agency Moody’s downgraded the city. Fitch Rating did so earlier. Hong Kong’s chief executive, Carrie Lam, said the downgrade was “disappointing.”

Moody’s said in a statement that the change in its outlook to “negative reflects the rising risk that the ongoing protests reveal an erosion in the strength of Hong Kong’s institutions, with lower government and policy effectiveness than Moody’s had previously assessed.”

The turmoil was “damaging its attractiveness as a trade and financial hub,” it said.

Elsewhere in Asia, shares fell in India, Taiwan and Singapore but rose in Indonesia and Thailand.

On Wall Street, the Dow Jones Industrial Average fell 0.5% to 27,076.82, breaking a streak of eight consecutive gains. The S&P 500 lost 0.3%, to 2,997.96, its biggest decline in two weeks. American Airlines was the biggest decliner in the index.

The Nasdaq lost 0.3% to 8,153.54, while the Russell 2000 picked up 0.4%, to 1,584.60.

Shares of oil producers jumped, while prices for Treasurys, gold and other investments seen as less risky rose.

The weekend attack on the Saudi Aramco plant halted production of 5.7 million barrels of crude a day, more than half of Saudi Arabia’s global daily exports and more than 5% of the world’s daily crude oil production.

The attack raised worries about the risk of more disruptions in the supply of oil at a time when the global economic outlook is clouded by uncertainty.

Still, analysts expressed doubts that the disruption in Saudi Arabia’s oil production would have much of an impact on the U.S. economy, at least in the short term.

The bigger concern is over whether there might be more attacks.

“At a time when oil markets have been in the shadows of a weak global macroeconomic backdrop, the attack on critical Saudi oil infrastructure calls into question the reliability of supplies from not just one of the largest net exporters of crude oil and petroleum products but also the country that holds most of the world’s spare production capacity,” Barclays analyst Amarpreet Singh wrote in a report.

Benchmark U.S. crude oil shed 90 cents to $62.00 per barrel in electronic trading on the New York Mercantile Exchange. On Monday, it soared $8.05 to settle at $62.90 a barrel. Brent crude oil, the international standard, declined 77 cents to $68.25 per barrel. It jumped $8.80 to close at $69.02 a barrel in London.

That helped energy stocks in the S&P 500 surge 3.3%. Marathon Oil gained 11.6%, Devon Energy jumped 12.2% and oilfield services provider Halliburton climbed 11%.

The spike in oil prices weighed on shares in airlines, whose operations can be hurt by any rise in the price of fuel.

American Airlines Group, which spent $3.7 billion on fuel and taxes in the first half of the year, dropped 7.3%. United Airlines slid 2.8%, and Delta Air Lines dropped 1.6%.

Cruise ships also burn lots of fuel, making them vulnerable to oil price swings. Carnival fell 3.2%.

Prices for U.S. government bonds rose as investors moved into safer investments. Yields for bonds fall when their prices rise, and the yield on the 10-year Treasury dropped to 1.85% from 1.90% late Friday.

Gold, another investment seen as a safe haven, rose $12.20 to $1,503.10 per ounce.

Meanwhile, General Motors slumped 4.3% after more than 49,000 members of the United Auto Workers went on strike. It wasn’t clear how long the walkout would last.

The week’s headline event is the Federal Reserve’s meeting on interest rates. Investors are confident the central bank will cut short-term rates by a quarter of a percentage point to a range of 1.75% to 2%. It would be the second such cut in two months, as the Fed tries to protect the economy from a global slowdown and the effects of the U.S.-China trade war.

In currency trading, the dollar rose to 108.20 Japanese yen from 108.15 yen on Monday. The euro gained to $1.1011 from $1.1001. /gsg