Oversupply Keeps Downward Pressure on Oil

Profit-taking by investors in China sent the Shanghai Composite lower by more than 5% in Tuesday trade.

The benchmark index gave up 163.9 points or 5.4% at the close, to end at 2,856.27 points.

That is the biggest one-day percentage fall since August 2009.

Investors went on a profit-taking spree one day after the benchmark index broke past the 3,000 mark for the first time in more than three years.

Shares of Chinese financial and property firms were caught in the selloff.

The profit-taking filtered into neighbouring Hong Kong, where the benchmark Hang Seng index closed lower by 2.3% to 23,485.83 points.

The further falls in the oil price put more pressure on both the rouble and Russian stock markets, with the currency losing 2.2% against the dollar at 53.66 and down 1.8% against the euro at 65.80 in afternoon trading.

Some analysts believe that Russia will increase interest rates to as much as 12% this week in a bid to prevent a full-blown financial crisis.

Last week, the Russian government warned that the economy would fall into recession next year as the falling oil price and Western sanctions, in response to its role in eastern Ukraine, take their toll.

Russia’s economic development ministry estimates the economy will contract by 0.8% next year after previously estimating growth of 1.2% for 2015.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza