Asia, Europe stocks drop with futures; oil in focus after rout

Bloomberg

Stocks in Europe and Asia retreated while US equity-index futures edged lower on Tuesday as concern about the health of North Korea’s dictator introduced more uncertainty into markets roiled by an unprecedented oil collapse and the coronavirus epidemic.
The Stoxx Europe 600 index fell for the first time in four days, with energy companies leading the decline. Contracts on the S&P 500 surrendered gains after reports that North Korea’s Kim Jong Un was in critical condition. Benchmarks in Seoul, Tokyo, Hong Kong and Shanghai were down more than 1%, while shares in Australia slumped more than 2% as the central bank warned of an economic contraction. The dollar climbed against most major currencies, with the won tumbling and the yen edging up. Treasuries were little changed.
West Texas oil remained in focus after contracts expiring on Tuesday plunged at the start of the week, taking crude below zero for the first time in history amid rapidly filling American storage tanks. Those futures in New York fluctuated after sinking to as low as minus $40.32 in the previous session. The June contract was above $20. The spread between the two reflects the growing fear that those who take physical delivery of crude in the near future may not find any outlet or storage for those barrels.
The US has information that Kim Jong Un was in critical condition after undergoing cardiovascular surgery last week, Bloomberg reported. CNN said America has intelligence that he’s in grave danger, though South Korea’s Yonhap News denied the reports. A leadership crisis in North Korea, which has been ruled by one family since it was constituted after WWII, could potentially have serious ramifications for regional stability, as well as for talks with the US over the country’s nuclear arsenal.
“The uncertainty about who succeeds him in North Korea is the great unknown,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific, conjecturing about a potential worst-case scenario for Kim. “That’s what is making markets nervous.”
Elsewhere, the kiwi tumbled after Reserve Bank of New Zealand Governor Adrian Orr said he was open-minded on the idea of directly monetising sovereign debt. President Donald Trump said he’ll sign an executive order temporarily suspending immigration into America as the country tries to contain the spread of the coronavirus. The news came even amid more signs that the outbreak is slowing in hard-hit areas.
Earnings season is another focus, with almost one-fifth of S&P 500 companies reporting this week.
The Stoxx Europe 600 Index dropped 1.1% by 8:08 am In London and futures on the S&P 500 slipped 0.1%.
While the Bloomberg Dollar Spot Index gained 0.2%, the euro declined 0.3% to $1.0837 and the Japanese yen advanced 0.2% to 107.43 per dollar.
The yield on 10-year US Treasuries was little changed at 0.61% and Germany’s 10-year yield rose 2 basis points to as much as 0.47%.
While West Texas Intermediate crude May contract was at minus $4.29 a barrel. The June contract was at $20.50, gold was little changed at $1,696.28 an ounce.