Plunge in Oil Prices Big Drag on Global Stock Indexes

Asian stock indexes are trading mixed on Wednesday, mirroring the price action on Wall Street on Tuesday. While many of the major players are on the sidelines ahead of the U.S. Federal Reserve’s interest rate and monetary policy decisions, some are responding to the steep drop in crude oil prices by driving energy stocks sharply lower.

At 0508 GMT, Japan’s Nikkei 225 Index is trading 20954.74, down 160.71 or -0.76%. Hong Kong’s Hang Seng Index is at 25855.34, up 41.09 or +-.16%. China’s Shanghai Index is trading 2570.18, down 6.47 or -0.25% and Australia’s S&P/ASX 200 is at 5570.20, down 19.30 or -0.China’s Shanghai Index is trading 2570.18, down 6.47 or -0.25% and Australia’s S&P/ASX 200 is at 5570.20, down 19.30 or -0.35%.

Steep Drop in Oil Prices Big Drag on Asian Indexes

Concerns over a global supply glut drove U.S. West Texas Intermediate and international-benchmark Brent crude oil futures down over 7% on Tuesday. This news triggered a plunge in shares of top Chinese oil firms. Petrochina shares fell by 2.89 percent in Hong Kong and 1.57 percent in Shanghai. Shares of China Petroleum and Chemical Corp slipped 3.6 percent in Hong Kong and 1.89 percent in Shanghai.

The weakness in the energy sector also spread to Australia where energy stocks were mostly lower. Origin Energy tumbled by 5.84 percent, while Woodside Petroleum fell by 1.84 percent. The ASX 200 slipped by 0.34 percent.

U.S. Stock Markets

The major U.S. equity indexes closed higher on Tuesday in another volatile trading session. The price action was primarily driven by growing fears of a government shutdown, a steep slide in oil prices and worries that the Federal Reserve is going too far with its aggressive tightening monetary policy.

In the cash market, the benchmark S&P 500 Index settled at 2546.16, up 0.22 or +0.01%. The blue chip Dow Jones Industrial Average finished at 23675.64, up 82.66. The tech-based NASDAQ Composite closed at 6783.91, up 30.18 or +0.41%.

The S&P 500 Index flat-lined most of the session before closing just above its low for 2018. The energy sector was the biggest drag on the benchmark index.

Contributing to the weakness in the energy sector were shares of oil companies which fell across the board as oil prices sank more than 7 percent to a 15-month low on Tuesday. Shares of major oil companies like Exxon Mobil fell 2.7 percent, Chevron dropped 2.4 percent and ConocoPhillips lost 1.9 percent. Traders said oil production at record levels by the United States and Russia ahead of planned cuts by OPEC and its allies was the catalyst behind renewed fears of a global supply glut.