Oil Price Drop Fuels Global Stock Rally

Global stock markets sharply rallied yesterday on news of falling international prices of oil, raw materials and grain. Another positive was the freeze of the benchmark interest rate by the U.S. Federal Reserve Board.

The benchmark Korean stock index KOSPI rose 43.17 points (2.81 percent) to close at 1,578.71. The tech-heavy KOSDAQ closed at 525.75, up 6.65 points or 1.28 percent.

Other major Asian stock markets also saw rises. Japan’s Nikkei grew 340.23 points to 13,254.89 and China’s Shanghai Composite Index rose 28.62 points (1.06 percent) to 2,719.37.

The continued fall of oil prices and the U.S. interest rate freeze instilled bullish sentiment in Asian markets.

In New York, the Dow shot up 331.62 points (2.94 percent) Tuesday, closing at 11,615.77. The Dow’s biggest rise since April 1 was mainly due to the Fed’s freeze of the benchmark interest rate at two percent.

The futures price of West Texas intermediate was 119.17 dollars Tuesday, a drop of $2.24 from Monday and the lowest price since May 2 (116.32 dollars).

The price of Brent crude also dropped 2.98 dollars to 117.70 dollars, and that of Dubai crude fell 5.19 dollars to 117.32 dollars. Thus, the prices of all three fuels dropped below the 120-dollar level.

Reuters quoted an oil industry expert as saying prices could fall under 100 dollars a barrel within two months if the Middle East remains calm and the United States dodges major hurricanes.

Prices, however, are expected to rise over the long run, the expert said.

cha@donga.com jarrett@donga.com