Monitoring Desk
LONDON: Oil prices rallied Thursday on fresh tensions between the US and Iran, but equities struggled to build on strong gains as data revealed a dire economic fallout from the coronavirus pandemic.
Traders were also looking ahead to a meeting of EU leaders Thursday, where they will try to hammer out a plan to help their withered economies recover from the crisis.
Chancellor Angela Merkel has said Germany was ready to pay into a “significantly higher” EU budget to help the bloc cope with the fallout.
Overall, the eurozone economy headed by Germany is suffering an “unprecedented” collapse according to a PMI index released Thursday by analysis firm IHS Markit.
The company’s purchasing manager’s index (PMI) dived to a record-low of 13.5 in April, from the previous all-time low of 29.7 in March, confirming private sector gloom that is savaging the 19-nation eurozone. A reading below 50 signals a contraction.
UK data were also at unprecedented low levels.
With devastation wrought on economies around the world, some governments are turning their attention to easing tough restrictions that have been imposed on billions of people for the past weeks.
But observers say the route out of the crisis remains uncertain, while the head of the World Health Organization warned the end was still a long way off. “Make no mistake: we have a long way to go. This virus will be with us for a long time,” Tedros Adhanom Ghebreyesus told a virtual press conference. As for oil prices, which plunged below zero earlier this week, a recovery was in full swing.
Phillip Futures said crude rallied Thursday on “heightened risk in the Middle East” after US President Donald Trump tweeted he had “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea”.
Iran, meanwhile, said it put its first military satellite into orbit. Washington alleges the space programme is a cover to develop ballistic missiles.
The tensions offset news of another surge in US crude stockpiles as the pandemic crushes demand for energy. Global stock markets meanwhile continue to win support thanks to trillions of dollars of central bank stimulus and an easing to government lockdowns.
In a further sign of the battle ahead for governments, a gauge of Japan’s services sector on Thursday came in at a record low for April and pointed to a deep contraction, while a measure of factory activity dropped to its lowest since the financial crisis 11 years ago.
Data showed South Korea’s economy contracted 1.4% in January-February, its worst number since 2008, and in Germany a closely watched forward-looking index of consumer confidence came in at a record low for May.
“COVID-19 has decimated the global economy, and oil’s travails this week should have sapped the delusion confidence of even the most ardent V-shaped recovery desperado,” said OANDA’s Jeffrey Halley. (AFP/APP)
