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By Rodrigo Campos
NEW YORK (Reuters) – Oil futures prices sank to a six-month low on Monday, weighed by oversupply and weaker demand expectations, while equity markets in Asia and on Wall Street fell as factory data from China and the United States disappointed.
Brent slumped to its lowest since late January on worries about oversupply as OPEC pumped at record levels in July, adding to demand concern after weak data from China, the world’s second largest oil consumer. U.S. crude hit its lowest since March.
The resource-linked Canadian dollar was at its weakest in more than a decade against its U.S. peer as crude prices sank.
The pace of growth in the U.S. manufacturing sector slowed in July and missed expectations, while factory activity in China, the world’s second-biggest economy, shrank more than initially estimated last month.
The U.S. Federal Reserve is widely expected to raise interest rates for the first time in nearly a decade before the end of the year. If Chinese weakness seeps into the U.S. economy, the Fed could reassess its plan to hike rates and markets would have to balance between more support from the central bank and the expectation for slower growth.
“The slowdown in China [is] feeding into a slowdown in Asia, and the question becomes how much of that is feeding into the U.S.?” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
However, she added: “We’ve started to see more positive data out of Europe despite the Greek situation.”
STOCKS DROP IN U.S., ASIA
Euro zone factories largely shrugged off Greece’s brush with bankruptcy. The Netherlands, Spain and Italy all reported healthy growth, and Italy’s expansion was its best in more than four years.
At 1:41 p.m. EDT, the Dow Jones industrial average (.DJI) fell 171.59 points, or 0.97 percent, to 17,518.27, the S&P 500 (.SPX) lost 13.83 points, or 0.66 percent, to 2,090.01 and the Nasdaq Composite (.IXIC) dropped 33.76 points, or 0.66 percent, to 5,094.53.
MSCI’s measure of stocks across major markets globally fell 0.6 percent, but the pan-European FTSEurofirst 300 (.FTEU3) closed up 0.7 percent.
In Athens, stocks (.ATG) plunged 16.2 percent on the first day of trading after a five-week shutdown. The trading suspension was part of capital controls imposed to prevent a collapse in Greece’s banks that would have likely pushed the country out of the euro zone.
COMMODITIES SLUMP
Brent (LCOc1) fell 4.7 percent to $ 49.74 a barrel after touching an intraday low of $ 49.52, the lowest since Jan. 30. U.S. crude (CLc1) fell 3.8 percent to $ 45.34 a barrel after hitting the lowest in more than four months at $ 45.11.
Copper (CMCU3) dropped 0.8 percent and hit its weakest in six years.
The commodity-linked Canadian dollar (CAD=) was at its lowest in 11 years versus the greenback and the Australian dollar (AUD=) was near a more-than-six-year low it hit last week against the U.S. currency.
The euro (EUR=) slipped 0.2 percent to $ 1.0961 after flattening out earlier following the U.S. data miss.
“The drop in the Greek stock market has put the euro under slight pressure,” said Yujiro Goto, currency strategist at Nomura.
U.S. long-dated and benchmark Treasuries yields hit their lowest levels in two months on the weaker-than-expected U.S. data.
“The market now is taking score of every single data print between now and September, and if the balance continues to shift more toward weaker data than stronger data, it may make September a coin flip,” said George Goncalves, head of U.S. rates strategy at Nomura Securities International in New York, referring to some expectations that the Fed may hike rates in September.
Benchmark 10-year Treasury notes
(THis story corrects second paragraph to show China is the world’s second largest oil consumer, not energy consumer)
(Additional reporting by Sam Forgione and Karen Brettell; Editing by Dan Grebler and Bernadette Baum)
