Global equities markets extended losses from last week on concerns
about China's economic slowdown and expectations that the U.S.
Federal Reserve will scale back its bond buying by another $10
billion a month.
The U.S. government also announced weaker-than-expected new home
sales data, causing U.S. equities to give back early gains and
triggering a dip in Brent and U.S. crude oil futures prices.
"There were a lot of warning signs from China and the emerging
markets late last year, and now we're in a new year and not quite as
optimistic," said Phil Flynn, an analyst at the Price Futures Group
in Chicago, Illinois.
Brent crude shed $1.19 to settle at $106.69 a barrel.
Brent's premium to U.S. oil was mostly flat on Monday, hovering near
Friday's settlement of $11.24. The spread had traded as tightly as
$9.47, its lowest price in more than two months, on Friday.
U.S. crude oil futures fell 92 cents to settle at $95.72. The U.S.
benchmark showed some resistance in the $97 to $98 range, where
prices ended last week.
"The 200-day moving average in WTI was breached, and shorts were
covered," said Bill Baruch, senior market strategist at iitrader.com
in Chicago. "If the Fed gives a vote of confidence (on Wednesday), I
think that could give the equity and crude markets support ... but I
think you're going to see people quick to the trigger in selling
before the $100 mark."
The Fed will conclude its regular two-day meeting on Wednesday.
Analysts said the central bank was intent on cutting the stimulus
again in spite of the sharp selloff of emerging market assets in
Turkey, Argentina and elsewhere.
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EMERGING MARKET CONCERNS
Low interest rates in the United States and other developed
countries had made emerging markets more attractive to investors.
Now that the Fed is changing course, investors are exiting emerging
markets with large current account deficits, raising fears over
their future economic health.
Analysts also said concerns over Chinese growth following
weaker-than-expected data last week were weighing on Brent. A
Reuters poll showed economists expected Chinese gross domestic
product growth to slow to 7.4 percent in 2014 from 7.7 percent in
Forecasts of two weeks of cold weather in the U.S. Midwest and
heavily populated Northeast supported domestic crude. Last week's
opening of the southern leg of TransCanada Corp's Keystone pipeline,
which will help alleviate the supply bottleneck at the contract's
delivery point in Cushing, Oklahoma, had boosted U.S. crude in four
out of the past five sessions.
"We're kind of getting over the excitement of the reversal of the
pipeline," said Flynn.
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