European markets are trading lower as a result of the blow out that happened in oil markets yesterday and the dismal UK’s unemployment number. Crude Oil’s May contract closed in negative territory for the first time in oil price history. Investors are worried about the consequence of this in emerging markets. Traders are also unsure about the impact of this on the US shale oil industry and there is fear that this could lead to lines of bankruptcies.
Equities over in Asia closed lower and it was the South Korean market that has been hit the hardest because North Korea’s Kim Jin’s situation looks critical after his heart surgery. No one knows the exact condition of the supreme leader and there is a lot of speculation in the markets about his health. There is uncertainty about the successor, and this is the greatest unknown that is keeping the market players on edge. The Kospi index closed with a loss of -1.42%, the Shanghai index -1.09%, the Nikkei index with a loss of -1.97%.
Over in the UK, the unemployment data has hit the Sterling-dollar exchange rate. The unemployment rate has jumped to 4.0% and the average earning index dropped by 2.8%. Sterling took a hit on the back of this number and it moved lower on the back of this. The coronavirus pandemic has had a major influence on the UK’s economy and it is highly likely that the unemployment rate may jump up to 10%.
Oil And Silver Lining
Back to the oil price, the oil volatility is likely to remain exceptionally high in the coming weeks. Oil volatility jumped more than 270% and touched the highest level in its trading history yesterday. Prices in the June contract are still somewhat stable, but the fear is that the June contract is likely to face the same fate because storage remains full and retail investors have panicked as a result of this.
The silver lining in the whole of this situation is that the oil production is likely to fall rapidly and it is highly likely that we will see this news hitting the headlines in the coming days. This will set the stage for higher oil prices. Moreover, during May, we are likely to see some demand coming back and this should help to balance the demand and supply equation.