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Oil slumps to seven-month low; European stocks slip

  • Oil prices near seven-month lows
  • European stocks track dip on Wall Street
  • Government bond yields nudge higher
  • Gold up 0.2 per cent to $1,246 an ounce

Hot topic
Chinese stocks have been granted direct entry to MSCI’s global benchmark index, representing a milestone in Beijing’s efforts to attract international funds to the world’s second-largest market.

Mainland Chinese equities, known as A-shares, will be included in MSCI’s flagship emerging markets index from next year, obliging the estimated $1.6tn of investment funds that track the gauge to buy the 222 chosen stocks.

Shares in China were not particularly excited by the move, however, suggesting many in the market had expected MSCI’s decision or were not convinced it would cause any great immediate inflow of funds. The Shanghai Composite index rose 0.3 per cent and the more technology-focused Shenzhen Composite added 0.2 per cent.

The Hang Seng China enterprises index, which tracks mainland companies listed in Hong Kong, fell 0.5 per cent, while the main Hang Seng index lost 0.5 per cent.

Commodities
Oil prices remain under pressure, amid continued doubts that supply cuts by major producers will be enough to reduce the global crude glut.

Brent crude, the international benchmark, is down 0.1 per cent to $45.98 a barrel, near its lowest level since November, while West Texas Intermediate is off 0.1 per cent to $43.47.

The latest leg lower in prices comes as output from Libya and Nigeria rises and the US rig count has increased for 22 weeks in a row to a two-year high of 933. US inventory data are due for publication at 15:30 BST.

Equities
Falling oil prices are weighing on shares in energy groups and pressuring stock benchmarks.

On Wall Street, the S&P Oil & Gas Production sector index lost 1.2 per cent on Tuesday and this helped push the wider S&P 500 down 0.7 per cent from its record high.

US futures suggest the S&P 500 will dip a further 3 points to 2,434 when trading gets under way later in New York, and the cumulative retreat is damping sentiment across global bourses.

The pan-European Stoxx 600 is down 0.6 per cent as the region’s oil and gas sector follows up Tuesday’s 2.6 per cent drop with another 1.1 per cent dip.

In Japan the broad Topix fell 0.35 per cent, while Australia’s S&P/ASX 200 dropped 1.6 per cent led by energy and materials stocks.

Forex
The Japanese stock market was not helped by strength in the yen, which is up 0.2 per cent to ¥‎111.16 per dollar, amid signs of a mild bout of broader-market risk aversion.

The UK pound is down 0.2 per cent to $1.2606 following a 0.9 per cent drop on Tuesday when Bank of England governor Mark Carney took a more dovish stance in commentary about interest rates.

The US dollar index, which tracks the buck against a basket of its peers, is flat at 97.75 as the euro sits becalmed at $1.1131.

Fixed income
Government bond yields, which have an inverse relation to prices, are fractionally softer after falling in the previous session in response to Wall Street’s dip.

The 10-year US Treasury is a fraction of a basis point lower at 2.15 per cent, while equivalent maturity German Bunds are down 1bp to 0.26 per cent.

UK benchmark gilt yields are off 1bp to 0.99 per cent as traders await the Queen’s Speech, which will set out the government’s agenda.