Oil’s losses drag Ruble, Loonie lower; Stocks pare their drop

BLOOMBERG

Crude oil’s fourth-straight decline weighed on energy companies and currencies of commodity-exporting nations after talks between major producers ended in Doha without any agreement on limiting output.
While the drop in energy prices was moderated by a labor strike in Kuwait that curbed production, it dragged down the ruble, which posted the biggest loss among major currencies. The Stoxx Europe 600 Index and U.S. equity-index futures remained lower even as they recovered most of their losses. Japan’s yen climbed toward a 17-month high after Group-of-20 finance ministers signaled opposition to curbing its strength. An exchange-traded fund tracking Brazil’s equities rose as President Dilma Rousseff lost a key impeachment vote.
Global equities have moved largely in tandem with crude this year and both rebounded from multi-year lows over the past two months amid prospects oil-producing nations including Saudi Arabia and Russia would agree output caps in Doha to address a glut. Renewed instability in energy prices poses a risk to financial markets at a time when China’s economy is showing signs of improvement and central banks are loosening monetary policies across much of Asia and Europe.
“Oil is the most dominant theme today,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt. “It is a relatively clear pattern of commodity currencies being under pressure. On the other hand there is general risk aversion on the rise, which is supporting safe-haven currencies like the yen.”
WTI was 3.6 percent lower at $38.92 a barrel as of 8:39 a.m. New York time, having declined as much as 6.8 percent intraday. The ruble dropped 1.5
percent.
Opposition lawmakers in Brazil’s lower house of Congress reached the threshold of 342 votes needed to advance the motion to impeach Rousseff to the Senate on Sunday. Morgan Stanley rose in early New York trading after earnings beat analyst estimates. Financial firms led stocks higher last week, with JPMorgan Chase & Co. and Bank of America Corp. climbing after announcing reductions in first-quarter expenses that beat analysts’ estimates. International Business Machines Corp. and Netflix Inc. are also due to release results.

Commodities
Brent crude dropped 4.2 percent to $41.29 a barrel after the discussions to freeze output stumbled in Doha as Saudi Arabia and other Gulf nations refused to agree to any deal unless all OPEC members joined — including Iran, which wasn’t present at the meeting. The European benchmark has rebounded from as low as $27.10 in January, which was the lowest since 2003.
Members of the Organization of Petroleum Exporting Countries will consult among themselves and with other oil producers until June, Qatar’s Energy Minister Mohammed Al Sada said at a news conference after the meeting.
Kuwait’s crude production tumbled by 60 percent to 1.1 million barrels a day and its refineries scaled back operations as the state oil company took emergency measures on Sunday to cope with the first day of an open-ended labor strike. Kuwait produced 2.81 million barrels a day last month, making it OPEC’s fourth-largest member.
Copper dropped 0.3 percent in London as cheaper energy prices reduce the costs for producing industrial metals.
Cotton rebounded after tumbling the most in six weeks on Friday after China said it would seek to reduce its inventory of the material, adding to global supply. Cotton for delivery in July gained 2.6 percent to 61.58 cents a pound in New York, its biggest advance since October. The contract has fallen about 5 percent this year.
International Monetary Fund Managing Director Christine Lagarde said over the weekend that declines in commodity prices are likely to be long lasting.

Stocks
The lower crude prices pulled a measure of oil-related shares to the worst performance of the 19 industry groups on the index, with Total SA and Royal Dutch Shell Plc leading the selloff.
Thomas Cook Group Plc added 1.1 percent after Berenberg Bank raised its rating on the company to hold from sell, saying that the recent underperformance of tour operators is overdone.
Standard & Poor’s 500 Index futures retreated 0.3 percent, indicating U.S. equities will fall for a second day.
The Next Funds Ibovespa Linked ETF surged 4.5 percent in Tokyo after the impeachment vote. “It will keep Brazilian assets supported but the market had already been expecting the impeachment for a while,” said Rajeev De Mello, who oversees about $10 billion as the head of Asian fixed income at Schroder Investment Management Ltd. in Singapore. “This is one positive for emerging markets coming from Latin America.”

Bonds
Australian notes due in a decade climbed for the first time in six days, pushing their yield down six basis points to 2.49 percent. Yields on 20- and 30-year Japanese debt declined to record lows of 0.275 percent and 0.355 percent, respectively. U.S. Treasuries were little changed, with the yield on 10-year notes at 1.77 percent, after earlier falling as much as three basis points.

Currencies
The ruble had its steepest drop in two weeks, and the Canadian dollar — known as the loonie — sank 0.6 percent. Crude is Russia’s No. 1 export earner and the second-biggest for Canada. The ringgit weakened 0.7 percent as lower oil prices dimmed prospects for Malaysia, Asia’s only major net oil exporter.
The yen rose 0.1 percent to 108.69 per dollar, near the 17-month high of 107.63 reached a week ago. U.S. Treasury Secretary Jack Lew on Friday called foreign-exchange market moves “orderly” — a signal that the U.S. doesn’t view yen-selling intervention as warranted. The rebuff came after Japanese officials warned about one-sided foreign-exchange moves and speculators built record bets for the yen to extend this year’s 11 percent advance. Brazil’s real weakened 1.3 percent, erasing a gain of as much as 1.5 percent.
Hungary’s forint climbed 0.3 percent against the euro, the biggest gain among 31 major peers. The currency has gained 1.2 percent this month, the best performance in emerging Europe, after a surprise rate cut in March sent forint to a two-month low.