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Oil headed back to bear market as Dollar down third day before Fed reports
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[WELLINGTON] Oil extended losses to a seventh day, with prices heading back into a bear market, before US government data projected to show crude stockpiles rose to a fresh record. The dollar weakened for a third day and emerging-market shares climbed before the Federal Reserve reports on policy.
West Texas Intermediate crude slid 1.9 per cent to US$42.62 a barrel by 10.55am in Tokyo.
The Bloomberg Dollar Spot Index is heading for its longest losing streak since December, with the euro and yen climbing 0.1 per cent and the currencies of China and South Korea advancing. The MSCI Emerging Markets Index rose a third day, led by Chinese shares in Hong Kong. Futures on the Standard & Poor's 500 index were little changed.
Oil's tumble back toward a bear market could exacerbate deflationary forces working against global central bank efforts to support prices, with analysts predicting data on Wednesday will show US crude supplies rose further from a more-than 30-year high.
The Fed may cut a reference to being "patient" on rate rises in its policy statement, Morgan Stanley and BNP Paribas SA say, giving it flexibility as to the timing of an interest rate increase.
China's new home prices fell in 66 cities last month as weakness in the property sector spread, while Sri Lanka's central bank held rates.
"Markets are a bit nervous ahead of the meeting" of the Fed, said Shane Oliver, Sydney-based global strategist at AMP Capital Investors Ltd. "It's possible that the market will be left none-the-wiser about whether the first rate hike will come in June or September, but we are undoubtedly getting closer."
The Fed is likely to cut the reference to patience, a move that may open the door to a US rate increase as early as June, Mr Oliver said.
Futures trading in the US showed a 54 per cent chance the Fed will raise its benchmark rate to at least 0.5 per cent by September, according to data compiled by Bloomberg. That was down from 56 per cent odds a week ago.
West Texas Intermediate crude has dropped 15 per cent over the past seven days, and is down about 20 per cent from this year's peak, meeting some investors definition of a bear market.
Figures from the industry-funded American Petroleum Institute indicated supplies rose by 10.5 million barrels last week. Brent oil futures fell 0.6 per cent to US$53.21 a barrel after rising 0.1 per cent on Tuesday.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was 0.1 per cent weaker after closing lower for a second day Tuesday. The gauge retreated 0.5 per cent from a decade high on Monday. The euro was at $1.0610 after rebounding from a 12-year low the past two days, while the yen traded at 121.30 per dollar. The won climbed to 1,125.90 per dollar.
Yields on 10-year Treasury notes were little changed at 2.05 per cent after falling for a third day in New York.
The New Zealand dollar was steady at 73.06 US cents after slipping 0.9 percent Tuesday after the price of whole milk powder at GlobalDairyTrade's fortnightly auction fell for the second time in a row. The declines damp prospects Auckland-based Fonterra Cooperative Group Ltd, the world's largest dairy exporter, will be able to raise its 2015-2016 farmer payout to NZ$6 per kg, according to ANZ Bank New Zealand Ltd.
The S&P 500 fell as much as 0.8 per cent on Tuesday, after rallying the day before by the most since Feb 3 amid data showing an unexpected drop in factory production and a retreat in confidence among US homebuilders.
A report Tuesday indicated housing starts plunged in February, while an increase in building permits indicated the drop may prove temporary.