Oil prices US:CLN7 LCOQ7, +0.09% returned to bear-market territory and the U.S. benchmark has fallen 20% from its last high point, with cuts by the Organization of the Petroleum Exporting Countries offset by increasing production elsewhere.
Australia’s S&P/ASX 200 XJO, +0.49% slid 1.6%, with the energy subindex more than 2%. The Nikkei Stock Average NIK, +0.01% closed 0.5% lower, edging down from a 22-month closing high in the previous session. Inpex 1605, -1.88% and Japan Petroleum 1662, -1.24% ended 1.2% and 1.8% lower, respectively, with the Topix mining subindex declining.
South Korea’s Kospi SEU, +0.33% finished lower by 0.5%, the Hang Seng Index HSI, +0.07% was 0.6% lower and the NZX index NZ50GR, +0.30% in New Zealand fell 0.8%.
“Oil is the main driver” for regional losses, said Tareck Horchani, head of Asia-Pacific sales trading at Saxo Capital Markets. “OPEC cuts are not having the expected effect as the shale production in the U.S. is actually growing.”
Meanwhile, positive sentiment due to the inclusion of Chinese stocks in the MSCI’s emerging-market index was just enough to offset outflows from the energy sector. However, gains were limited, as the MSCI decision had been priced in, analysts said.
Read: MSCI to add 222 China A shares in emerging-markets index
The Shanghai Composite Index SHCOMP, +0.34% ended 0.5% and stocks in Shenzhen 399106, +0.02% rose 0.4%.
“China’s entry into the MSCI global indices is a historic milestone,” although challenges remain, said Hao Hong, managing director and head of research at Bocom International.
Worries linger that China’s domestically traded A-shares are overvalued when compared with global levels. In addition, there are concerns about whether China’s volatile market will adapt to international best practices.
Meanwhile, financial stocks across the region also faced selling pressure, with local weakness exacerbated by dovish comments from central banks in the U.K. and U.S. Japan’s Topix bank subindex fell, while the Hang Seng finance subindex fell 8% intraday. In Australia, the ‘big four’ banks — Westpac Banking WBC, +1.88% , Commonwealth Bank of Australia CBA, +0.90% , National Australia Bank NAB, +1.07% , and Australia and New Zealand Banking ANZ, +0.56% — fell between 1.8% and 2.9%.
In currencies, the offshore yuan gave up most of the gains accrued in the wake of MSCI’s decision. The U.S. dollar-yuan USDCNY, +0.0381% traded at 6.8206, compared with 6.7164 before the MSCI news, a near nine-month high for the Chinese currency.
Speculation that demand for the yuan is coming from investors seeking to buy Chinese shares is premature, notes Stephen Innes, head trader for Asia at Oanda. Investors are “laying the groundwork,” but any actual buying of either the yuan or Chinese shares is a long way off, he said.
The Stoxx Europe 600 SXXP, -0.18% lost 0.2% to close at 388.50, marking a second straight loss.
The index tracking European oil and gas stocks SXEP, -0.24% fell 0.2% as oil prices US:CLN7 LCOQ7, +0.09% moved lower. They slid into a bear market on Tuesday driven down by continuing worries about a global oil glut as output cuts from the Organization of the Petroleum Exporting Countries were offset by production rises elsewhere. An recent increase in supply by Libya was a factor.
In the oil-producer group, Norway’s Statoil ASA STL, -0.28% fell 0.3%, Tullow Oil PLC TLW, -1.33% lost 1.3%, and France’s Total SA FP, -0.35% shed 0.4%.
U.K. oil majors BP PLC BP., -0.77% BP, -0.94% and Royal Dutch Shell PLC RDSB, -1.34% RDS.B, -1.46% gave up 0.8% and 1.3%, respectively.
A weekly supply update from the Energy Information Administration showed a second-straight weekly fall in U.S. crude supplies, briefly sending oil prices into positive territory. However, at the time of the European close they fallen back again.
France battered: France’s CAC 40 index PX1, -0.37% lost the most ground among major benchmarks as it dropped 0.4% to 5,274.26.
The market was under pressure after the country’s Justice Minister François Bayrou left government Wednesday. Bayrou was a key ally who rallied centrists to Macron’s successful election campaign.
Bayrou’s centrist party Mouvement Démocrate, or MoDem, is in a preliminary probe into allegations related to jobs at the European Parliament.
The CAC’s biggest decliners were hospitality services company Sodexo SA SW, -1.62% , down 1.6%, and Essilor International SA EI, -1.21% , 1.2% lower.
Individual indexes: Germany’s DAX 30 DAX, -0.32% shed 0.3% to 12,774.26, backing further away from Monday’s record close.
In London, the FTSE 100 UKX, -0.33% ended 0.3% lower at 7,447.79, with oil and gas and consumer-goods shares under pressure.
Meanwhile, the pound GBPUSD, -0.0710% jumped to $1.2664, erasing losses following hawkish comments made by the Bank of England’s chief economist. Andrew Haldane said the “process of withdrawing” some of the monetary stimulus would be prudent in the second half of the year.
Sterling had earlier dropped below $1.26 before the formal opening of parliament, when Queen Elizabeth II laid out the government’s agenda in a speech.
Read: Queen outlines U.K.’s Brexit goals in speech to hung parliament
Meanwhile, Prime Minister Theresa May was still having talks with Northern Ireland’s Democratic Unionist Party about forming a coalition.
Stock movers: Whitbread PLC shares WTB, +3.40% climbed 3.4%. The parent company of the Costa Coffee and Premier Inn hotels chain posted a rise of 2.9% in fiscal first-quarter comparable sales. Total sales rose 7.6%.
Provident Financial PLC PFG, -17.59% sank 18% after a warning about adjusted profit from the credit company.
But the Nasdaq Composite posted moderate gains thanks to a surge in biotechnology shares.
The S&P 500 index SPX, -0.06% closed with a loss of 1.42 points, or less than 0.1%, at 2,435.61, with eight of the 11 main sectors in negative territory. A drop in oil prices put pressure on energy shares, which fell 1.6%. Heath-care and technology shares were top gainers, up 1.2% and 0.7%, respectively.
Crude-oil futures CLQ7, +0.24% which entered bear-market territory—pullback of 20% from a recent peak—on Tuesday, extended losses on Wednesday, settling down more than 2%, at $42.39 a barrel as traders looked past a decline in crude inventories to focus on a rise in domestic production.
Some analysts expect oil to trade in a $30-$60 a barrel range for the rest of the year, as U.S. producers increase production.
“Oil is not in short supply with U.S. producers drilling and pumping as soon as oil prices rise over $50. Meanwhile demand for oil and gas continues to decline as we get more efficient with our fuel consumption,” said Maris Ogg, principal at Tower Bridge Advisors.
Ogg is not worried about the volatility in oil prices, however.
“The energy sector is now one of the smallest sectors comprising 6% of the S&P 500, and as such its impact on overall earnings is rather limited,” Ogg said.
The Dow Jones Industrial Average DJIA, -0.27% lost 57.11 points, or 0.3%, to 21,410.03, with more than half of the blue-chip stocks finishing with losses. Caterpillar Inc CAT, -3.34% du Pont Co DD, -2.65% and Chevron Corp CVX, -1.87% were the top decliners, down 3.8%, 2.7% and 1.9%, respectively.
The tech-heavy Nasdaq Composite Index COMP, +0.74% bucked the trend, closing 45.92 points, or 0.7%, higher at 6,233.95, thanks to a jump in biotechnology shares. The iShares Nasdaq Biotechnology ETF surged 4.1% after the New York Times reported that President Donald Trump has drafted an executive order that would ease industry regulations.
Read: This ‘irrational exuberance’ indicator could spell trouble for the stock market
Stocks to watch: Shares of Red Hat Inc. RHT, +9.58% jumped nearly 10% after the open-source software company late Tuesday posted earnings ahead of forecasts.
Shares of Twitter Inc. TWTR, +5.14% jumped 5.1%, lifting the stock above both its widely watched 50-day and 200-day moving averages in one fell swoop. Based on current trajectories, the 50-day average is on course to cross above the 200-day average in about a week, a bullish technical event known as a “golden cross.”
Adobe Systems Inc. ADBE, +2.36% climbed 2.4% after the software company late Tuesday announced earnings that beat Wall Street forecasts with record quarterly revenue.
La-Z-Boy Inc. LZB, +22.14% surged 22% following better-than-expected earnings on Tuesday after market close.
Shares of Advanced Micro Devices Inc. AMD, +10.60% rallied 11% after the chip maker on Tuesday launched a new generation of chips for the servers that drive computing in data centers, seen as a direct challenge to Intel Corp. INTC, -0.80% Intel shares lost 0.8%.
Economic news: Sales of previously owned homes rebounded in May despite leaner supply and higher prices.
Other markets: Stocks in Asia closed mostly lower, but with the Shanghai Composite Index SHCOMP, +0.31% bucking the negative trend and rising 0.5%. The positive close in China came after MSCI Inc. late Tuesday said it would include some Chinese stocks in its emerging-markets index.
European stocks ended lower as energy shares fell in sympathy with oil’s slide. The pound GBPUSD, -0.0710% dropped to a two-month low in early trade, but jumped to $1.2667 after a Bank of England policy maker talked about withdrawal monetary stimulus.
Gold GCQ7, +0.72% was up 0.3% at $1,247.20 an ounce, while the ICE Dollar Index DXY, -0.06% was flat at 97.708.