Asia shares rebound after sharp losses, oil prices rise more than $1/barrel

SINGAPORE (ICIS)–Asian shares rebounded on Tuesday, staging a relief rally after historic losses the previous day, as fresh US economic data for July alleviated recession fears.

Meanwhile, oil prices surged by over $1/barrel in early Asian trade, fueled by escalating concerns about the spreading conflict in the Middle East.

• Japanese Nikkei 225 index jumps 9.55% in early Asian trade
• Asian petrochemical shares follow regional market rebound, Asahi Kasei gains
• China’s petrochemical futures continue decline

In Europe the main stock markets stabilized, opening slightly up before falling back. The UK’s FTSE 100 was down 0.08% at 11:20 London time, while Germany’s DAX and France’s CAC 40 were 0.17% and 0.46% lower respectively.

The stronger-than-expected US Institute for Supply Management (ISM) Services Survey for July helped ease growth worries.

The overall services purchasing managers’ index (PMI) improved to 51.4 in July, swinging into expansion and beating the consensus for a rise to 51.0 from 48.8 in June. A PMI reading above 50 indicates growth in the services sector.

By 02:30 GMT, Japan’s benchmark Nikkei 225 was up 9.55%, South Korea’s KOSPI was 3.07% higher and Hong Kong’s Hang Seng Index rose by 0.06%.

Singapore’s Straits Times Index (STI) was down by 0.96% while China’s benchmark Shanghai Composite Index inched 0.20% higher after shedding 1.54% on Monday.

Asian petrochemical shares tracked the rebound in regional bourses, with Japanese major Asahi Kasei jumping nearly 14% and South Korean producer LG Chem up by 4.59%.

China’s petrochemical futures, however, continued lower in early trade on Tuesday.

At 10:30 local time (02:30 GMT), futures of petrochemical commodities, including plastics, methanol and glycols, were trading lower, after losing 0.4-2.1% in the previous session.

Product	Yuan (CNY)/tonne	Change
Linear low density polyethylene (LLDPE)	8,231	-0.3%
Polyvinyl chloride (PVC)	5,650	-0.5%
Ethylene glycol (EG)	4,590	-0.5%
Polypropylene (PP)	7,570	-0.4%
Styrene monomer (SM)	9,183	-0.2%
Paraxylene *	8,120	-0.9%
Purified terephthalic acid (PTA)*	5,644	-0.8%
Methanol*	2,468	-0.5%

Sources: Dalian Commodity Exchange, *Zhengzhou Commodity Exchange

The global equity market sell-off intensified on Monday, with a wave of declines sweeping across major bourses worldwide.

The rout began in Asia, where the Nikkei 225 index plummeted 12.4% day on day, marking its worst performance since 1987 while the KOSPI posted its steepest decline in its closing price to date.

In Europe, the Stoxx Europe 600 index fell 2.2%, with all sectors and major indexes closing in negative territory.

Utilities and oil and gas stocks suffered the steepest losses, leading the downturn in European markets.

In the US, the Dow Jones Industrial Average plunged by about 1,000 points or down 2.6%, the Nasdaq dived 3.4% and the S&P 500 slid 3.0%.

This marked the largest losses since September 2022 for the Dow and S&P, following a downturn late last week due to poor US jobs data and weak manufacturing PMI, which sparked recession fears.

The unwinding of the yen “carry trade” after the Bank of Japan raised interest rates last week also added fuel to the retreat in global markets.

For now, the US Federal Reserve has no intention of delivering an emergency rate cut before the Federal Open Market Committee (FOMC) meeting on 18 September, Singapore-based DBS Group Research said in a note on Tuesday.

“The Fed wants markets to view the coming rate cuts as preserving the soft landing and supporting jobs, not as a delayed response to a weakening economy,” it said.

GEOPOLITICAL TENSIONS BOOSTING OIL
Oil prices rose by more than $1/barrel in early Asian trade on Tuesday after dipping in the previous session, driven by supply concerns amid escalating tensions in the Middle East.

“Markets are still waiting to see how Iran responds to Israel after it vowed retaliation for the assassination of Hamas’ political leader on Iranian soil,” Dutch banking and financial information services firm ING said in a note.

“Oil has been unable to escape the broader risk-off move seen across assets, as concerns grow over the potential for a US recession following some weaker macro data in recent weeks. This only adds to worries over Chinese demand.”

Reports that the Sharara oilfield in Libya has completely stopped production due to protests at the site also supported oil prices.

This oilfield has a production capacity of 300,000 barrels/day but was producing around 270,000 barrels/day prior to the disruption.

Focus article by Nurluqman Suratman

Additional reporting by Fanny Zhang

Thumbnail photo shows a stock market indicator board (Source: BIANCA DE MARCHI/EPA-EFE/Shutterstock)

Updates, adding Europe detail in fourth paragraph