SYDNEY (Reuters) – Asian stocks made a soft start to the week on Monday while oil and the euro were under pressure, as the return of COVID-19 restrictions in Europe and talk about hastened tapering from the US Federal Reserve put investors on guard.
Oil futures skidded about 1% at the open, sending Brent crude and US crude to seven-week lows of $78.05 and $74.76 respectively amid oversupply concerns.
Australian shares fell 0.4%, led by bank stock losses. Japan’s Nikkei was down 0.3% and MSCI’s broadest index of Asia-Pacific shares was flat.
“There are question marks over the resilience of Europe and the European economy, exacerbated by protests and infection rates seen over the weekend,” said Rodrigo Catril, a strategist at National Australia Bank in Sydney.
Over time, the importance of oil prices in economic analysis has changed for both financial markets and central banks. Oil is now viewed as more than simply a raw material for production; it is also a financial asset and a gauge of the state of the world economy. Therefore, information on the condition of the global business cycle and the sentiment of the global financial markets can be obtained from a high frequency structural decomposition of the oil price. In this work, we create a technique to pinpoint the structural causes of daily and real-time changes in oil prices.
The identification strategy combines techniques related to instrumental variables, narrative limitations, and signs. We take into consideration that oil has two distinct identities: it is a financial asset and a physical commodity. We achieve this by utilizing data on asset pricing, oil production, and worldwide economic activity. The model provides fresh perspectives on how the price of assets and the price of oil are related.
Also Read: The price of Brent crude oil rose above $80 per barrel
