Markets decline as oil plunge continues
Markets continued retreating on Tuesday as oil prices slumped. The sell-off of US stocks continued for the second consecutive day. The S&P 500 benchmark index fell for the fifth session in a row, with only two sectors – utilities and telecoms, remaining in the green.
Reports released on Tuesday indicated orders for goods produced in US factories fell 0.7% in November, and companies in services sector grew at a slower rate in December. Intercontinental Exchange Inc.’s US Dollar Index, which measures the currency’s performance against the basket of six major currencies, rose 0.3 percent to 91.741 after climbing to 91.818, the highest level since December 2005. Today at 14:15 CET December Non-Farm Employment Change by ADP will be released in US. The tentative outlook is positive for US dollar as the economy is expected to add 227,000 jobs in December, more than the 207,000 jobs gained in the previous month.
At 20:00 CET Federal Open Market Committee December Meeting Minutes will be published. After the December FOMC meeting the Fed modified its statement about keeping interest rates low for “considerable time” saying instead it will be patient about future interest rate hikes but plans to raise interest rates in 2015. The Fed stance was interpreted as more hawkish as Chairwoman Janet Yellen sounded optimistic about US economy and unconcerned about the impact of falling oil prices. The details of the meeting minutes may reveal whether bullish or dovish considerations prevailed in the internal debate, which may accordingly boost or weaken the bullish dollar sentiment.
European stocks fell on Tuesday for third consecutive day in a row. Markit reported on Tuesday euro-zone activity in the manufacturing and services sectors rose marginally in December with the PMI growing to 51.4 against 51.1 in November.
Euro fell for a fourth day. Today at 11:00 CET euro-zone December Consumer Price Index will be released. The inflation in November reached 0.3%, much lower than the ECB inflation target of just below 2% over the medium term. With falling oil prices the disinflationary pressures have increased, and a further decrease in CPI is expected in December. In case the CPI comes out negative indicating an annual decline in prices, it will be a critical factor that may provide the justification for the start of a large-scale sovereign-bond purchases for coming ECB meeting on January 22, thus contributing to further euro weakening.
Nikkei fell 3% on Tuesday posting its biggest one-day loss in nearly 10 months. As investors sought safe havens after stocks slumped around the world this year the yen advanced against the dollar. Japanese stocks and East Asian markets are trading mostly higher today, and the yen fell versus all 16 major currencies as Asian stocks snapped a two-day rout, decreasing the demand for safer assets.
Oil continued falling on the backdrop of a global supply glut, rising US dollar and increased uncertainty over euro-zone economy prospects. WTI traded near $48 a barrel. There are no indications the global demand will increase significantly in the first half of 2015, which means bearish factors will determine the market dynamics in the near term.
Gold fell for the first time in four days before the Federal Reserve releases minutes for its December meeting that may give clues to the timing of higher interest rates, curbing demand for the metal.
Source: ifcmarkets – Markets decline as oil plunge continues
