Oil prices fell to their lowest in five years today, hit by slowing factory activity in China and Europe and hammering emerging market stocks and commodity-linked currencies.
Plunging prices for oil and other commodities raised fears of deflation, especially in the euro zone and Japan, and the prospect of looser monetary policy pushed the yen to a seven-year low against the dollar in Asian trade.
In a further blow to Japan, the Moody’s ratings firm cut its credit rating to A1 with a stable outlook from A3, briefly pushing the yen even lower.
Russia’s rouble dropped more than 4 percent against the dollar while Malaysia’s ringgit, also oil-dependent, was on course for its biggest two-day fall since the 1997-8 Asian financial crisis.
«Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices,» said Neil Williams, chief economist at fund manager Hermes in London.
Chinese purchase manager data showed manufacturing slowed in November, suggesting the world’s second biggest economy was still losing momentum. Factory activity also slowed in France and Germany in November.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2 percent, hitting six-week lows. However, Tokyo’s Nikkei stocks index hit its highest close for more than seven years as cheap oil lifted airlines.
Emerging market shares tracked by MSCI fell 1.5 percent. The Russian rouble was last down 4.5 percent at 52.65 to the dollar.
Oil prices have been falling for five months as abundant supply outstrips demand. OPEC last week declined to curb output to lift prices. Brent crude LCOc1 fell 2.4 percent today alone, to $68.54 a barrel.
buenosairesherald.com