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While you were sleeping: Stocks slide as oil hits lowest this year

UPDATED The UK pound declines after Bank of England governor's comments on Brexit.

Margreet Dietz
Wed, 21 Jun 2017

Wall Street declined from record highs as oil prices slid to the lowest level in seven months amid unabated concern about the global glut.

At the close of trading in New York, the Dow Jones Industrial Average fell 61.85  points, or 0.3%, to 21,467.14. The Nasdaq Composite Index retreated 0.85 to 6188.03 and the Standard & Poor's 500 Index dropped 0.7% to 2437.03.

The Dow fell as slides in shares of General Electric and those of Nike, down 2.1% and 1.4% respectively, outweighed gains in shares of Merck and those of Pfizer, up 1.5% and 1.2% respectively.

Shares of Chevron and those of Exxon Mobil also fell, down 1.0% and 0.6%, as oil prices declined, touching the lowest level this year.

Light, sweet crude for July delivery settled down 97USc, or 2.2%, at $US43.23 a barrel in New York, more than 20% below this year’s high of $US54.45 on February 23. Brent, the global benchmark, settled down 89USc, or 1.9%, to $US46.02 a barrel.

"People are getting a little fatigued waiting for the production cuts to have effect," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, told Bloomberg. Traders are "very nervous about the near-term prospects."

OPEC and non-OPEC oil producers' compliance with a deal to cut global output has reached its highest in May since they agreed on the curbs last year, reaching 106% last month, Reuters reported, citing a source familiar with the matter.

OPEC compliance with the output curbs in May was 108%, while non-OPEC compliance was 100%, the source said. Another source confirmed compliance by all producers in May was 106%, according to Reuters.

"Given the expectation that you'll see higher production levels in several areas of the world, it's going to offset all they're taking off the market," Gene McGillian, manager of market research at Tradition Energy, told Reuters.

Margins squeezed at Chipotle
Shares of Chipotle Mexican Grill sank 7.3% amid concern about the burrito chain's margins.

It warned marketing and promotion costs would rise in the second quarter from the first quarter and that "as a result, we expect other operating costs as a percentage of sales for the second quarter to be at or slightly higher than reported for the first quarter."

"We remain neutral on shares of Chipotle as we believe the sales and unit economic recovery ought to be further along 18 months after the initial food safety incidents," Peter Saleh, an analyst at BTIG, wrote in a research note Monday, CNBC reported.

In Europe, the Stoxx 600 Index ended the session with a 0.7% decline from the previous close. France's CAC40 Index shed 0.3%, Germany's DAX Index decreased 0.6% and the UK's FTSE 100 Index fell 0.7%.

The UK pound declined as Bank of England Governor Mark Carney said he remained concerned about the impact of Brexit on the nation's economy.

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment" to higher interest rates," he said in prepared remarks for a speech in London.

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations."

(BusinessDesk)

Margreet Dietz
Wed, 21 Jun 2017
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While you were sleeping: Stocks slide as oil hits lowest this year
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