Market Update: Oil Sinks to Six-Week Low; European Stocks Decline on Italy Outlook
Oil prices continued lower Monday in the longest string of losses in about four months after Saudi Arabia and Russia signaled their readiness to begin raising output. On the equities front, European stocks finished firmly in the red as Italy headed for fresh elections.
Crude Oil in the Red
Oil extended last week’s slide, as prices fell to their lowest levels since mid-April.
U.S. West Texas Intermediate (WTI) futures plunged $1.41, or 2.1%, to $66.47 a barrel on the New York Mercantile Exchange. Brent crude, the international futures benchmark, declined $1.14, or 1.5%, to $75.30 a barrel.
Energy prices peaked at more than three-year highs last week but have since declined for five straight sessions. Losses deepened on Friday after a group of influential energy ministers led by Saudi Arabia and Russia expressed their intent to begin normalizing output levels.
The Organization of the Petroleum Exporting Countries (OPEC) could announce its new production plan as early as next month when it convenes in Vienna for its biannual meeting.
A stronger dollar also weighed on commodity markets at the start of the week. The U.S. dollar index (DXY), which trades against a basket of six currencies, rose to its highest level of the year.
Italy’s Political Chaos
Italy was the source of volatility Monday after the country’s populist leaders abandoned efforts to form a new government, setting the stage for a new election as early as the fall.
While Italy is no stranger to political gridlock, the latest breakdown comes on the heels of major electoral gains for the country’s populist parties. A caretaker government will attempt to hold the reigns until the impasse is over.
Carlo Cottarelli will serve as Italy’s prime minister-designate. The pro-austerity candidate is a strong backer of the euro but likely won’t survive the August confidence vote, thus paving the way for an early election.
As the Eurozone’s third largest economy, Italy is in the midst of a multi-year recovery, with GDP growth accelerating since 2017.
European Stocks Falter
All of Europe’s major indexes booked losses Monday, with the exception of the U.K.’s FTSE Index, which was closed for holiday. Italian stocks were among the hardest hit, leading to a domino effect across the region.
The pan-European Stoxx 50 Pr fell 0.9%. In terms of individual bourses, Germany’s DAX, France’s CAC 40 and Spain’s IBEX 35 each fell 0.6%.
U.S. stocks were closed for Memorial Day, but futures trading was mostly positive. Dow Jones mini futures were up 46 points by the 1:00 p.m. ET close.
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