May 28, 2022

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The stock market follows the fall in the price of oil - it drops sharply

The stock market follows the fall in the price of oil – it drops sharply

Oslo Boers got off to a good start to the week with one down 0.4 percent on MondayBut Tuesday looks worse.

The main index opened lower by one percent, before increasing falls. At 9:50 the fall is 2%.

At the same time, the price of oil fell by about five percent, and last week it fell from $129 to about $101 a barrel.

The price of oil rose a lot due to the risk premium of heavy sanctions to stop oil deliveries from Russia. Now it may not seem like there will be a major official energy boycott from Europe, and that is the only explanation I can find that the price of oil has fallen so much, says Eric Bruce, chief strategist at Nordea Markets.

Eric Bruce, chief strategist at Nordea, believes that the Oslo Stock Exchange will weaken due to lower oil prices.

Eric Bruce, chief strategist at Nordea, believes that the Oslo Stock Exchange will weaken due to lower oil prices. (Photo: Per Ståle Bugjerde)

However, he believes that we should expect large fluctuations in oil prices in the future as well, and the weak growth prospects for China due to the recent outbreak of Corona also contribute negatively.

Specifically due to higher prices for oil, gas and other raw materials, the Oslo Stock Exchange has done much better than most other stock markets this year so far. With several exchanges dropping 10-15 percent from the top, the benchmark is just three percent below an “all-time high”.

So Bruce believes that if the price of oil now appears to be finding a slightly lower rent, one should expect the Oslo Stock Exchange to develop weaker than other stock exchanges.

– But this does not mean that the Oslo Stock Exchange should fall by as much as 10 percent, and oil companies are not priced on the basis of record high oil prices. A stability of more than $100 per barrel over time will be beneficial to many, in addition to the fact that gas prices have gone further and are no less important than some energy companies.

US interest rate meeting

The chief strategist adds that the mood in international markets is also important for Norway and, as usual, what happens in the US and China is of great importance to the rest of the world.

In the US, the Federal Reserve’s (Fed) interest rate meeting on Wednesday is the most important event of the week.

Monday finished down 0.74 and 2.04 percent for the S&P 500 and Nasdaq Technology Index, respectively. On the other hand, the Dow Jones Industrial Average remained completely unchanged.

The three main indicators have developed negatively since the start of the Ukraine war, and are well below their previous highs.

The Fed rate meeting could have a lot to say. It seems obvious that there will be an increase of 0.25, but one will follow what he has to say about the way forward and a reduction in the stock balance. There will likely be more hints than a detailed plan, Bruce says.

The fall continues in Hong Kong

In Asia, market development was mixed on Tuesday, with the Hang Seng Index emerging on the Hong Kong Stock Exchange. It fell five percent on Monday And fell another six percent Tuesday.

Stock prices have fallen due to the increasing spread of the Corona virus in Hong Kong and other Chinese cities, and technology companies have been hit especially hard, which are threatened with fines for money laundering. US bank JPMorgan Chase says many Chinese internet companies are “uninvestable” due to uncertainty about what the authorities in Beijing might find.

Bruce believes that the turmoil in China could weigh on the market if it turns out that there will be major shutdowns, and that there is significant uncertainty about how often and for how often the country chooses to close.

– We have always known that China was not well prepared for the omicron variant, and I think they will eventually adopt a slightly less strict policy than the previous variants. But at the moment there are widespread shutdowns in major cities, and perhaps the most significant consequence of this is the strengthening of supply problems. In addition, both the Chinese market and the global economy will be affected by the decrease in consumption in the country.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.

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