West Texas Intermediate crude dropped 1.8 percent to $53.15 a barrel at 11:33 a.m. in London and the Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, decreased 0.7 percent. Saudi Arabia’s Tadawul All Share Index lost 3 percent, after King Abdullah was admitted to hospital for medical checks. The Stoxx Europe 600 Index advanced 0.3 percent and futures on the Standard & Poor’s 500 Index were little changed. Yields on 10-year Treasury notes fell two basis points to 2.17 percent.
Crude’s 45 percent tumble this year, spurred by the largest U.S. output in three decades and OPEC’s refusal to cut production, has roiled global markets and hurt energy-producing nations including Russia, whose ruble had its steepest annual retreat since 1998. Initial jobless claims in the U.S. increased in the week ended Dec. 27 and pending home sales climbed in November, economists forecast before reports today.
“The drop in oil added much more volatility to markets,” said Louis de
Fels, a Paris-based fund manager at Raymond James Financial Inc., which oversees about $53 billion. “We’re confident in European equities in 2015. We expect there’ll be fewer geopolitical problems next year. Also, lower oil will help consumption in Europe, the U.S. and China. This is quite good news for 2015 global growth.”
Unleaded fuel is delivered to a bulk tank on a farm in Walnut, Illinois. U.S. oil... Read More
Oil’s Slump
Oil’s slump has squeezed government budgets in producing nations including Venezuela and Ecuador, while boosting China’s emergency crude reserves and helping shrink fuel subsidies in India and Indonesia. OPEC has signaled it won’t cut supply to influence prices, instead preferring to defend market share amid an unprecedented U.S. shale boom.Crude slipped for the fourth time in five days to trade near a five-year low. U.S. crude inventories are forecast to rise to the highest level for this time of the year in three decades.
Commodities headed for the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year. A slowdown in China has hurt demand for raw materials and data today showed a factory gauge at a seven-month low in December.
“What we’re seeing is that supplies from North America have really outpaced worldwide demand and as a result, we have a supply glut,” Andy Lipow, the president of Lipow Oil Associates LLC in Houston, said by phone. “That of course has put pressure on prices over the last several months and as a result, has dragged down commodities indexes as well.”
Global Shares
More than $1.8 trillion was added to the value of global shares this year as the S&P 500 (SPX), Dow Jones Industrial Average (INDU) and Russell 2000 Index of smaller companies climbed to records. The Nasdaq Composite Index (CCMP) reached its highest level since March 2000 this week.The S&P 500 is up 13 percent for the year in its third annual gain. The Stoxx 600 climbed 4.2 percent in 2014 and the MSCI All-Country World Index (SASEIDX) added 2.8 percent.
The volume of Stoxx 600 shares changing hands was 82 percent below the 30-day average today, data compiled by Bloomberg show. The benchmark is down 1.5 percent this month, heading for its first December decline since 2008.
Markets Closed
Trading on the London Stock Exchange will end at 12:30 p.m. local time, and NYSE Euronext’s European cash markets will close 35 minutes later. The Madrid bourse will stop trading at 2 p.m. local time. Exchanges in Germany, Switzerland, Italy and the Nordic countries are closed.The yen is set for a third annual loss as the Bank of Japan expands currency-depreciating stimulus, while the dollar is up against all its major counterparts as the Federal Reserve moves closer to raising interest rates.
The yen slumped 12 percent against the dollar this year after dropping 18 percent last year and 11 percent in 2012. It was little changed today at 119.40 per dollar. The euro was little changed at $1.2150, set for a 12 percent annual decline.
U.K. government bonds rose, pushing the 10-year yield down two basis points, or 0.02 percentage point, to 1.77 percent.
Bonds returned 7.7 percent in 2014, the most since 2002 when they gained 8.9 percent, according to the Bank of America Merrill Lynch Global Broad Market Index.
Treasury Yields
Yields on 10-year Treasury notes are down from 3.03 percent at the end of 2013.The MSCI Emerging Markets Index rose 0.3 percent, trimming the first back-to-back annual loss in 12 years. Equities in China, the second-best performing stock market globally this year after Argentina’s Merval Index, increased 2.2 percent, taking the 2014 rally to 53 percent.
The Hang Seng China Enterprises Index (HSCEI) rose for a second time in three days to extend this year’s gain to 11 percent. The S&P BSE Sensex Index, which soared 30 percent this year on Prime Minister Narendra Modi’s landslide election victory, jumped 0.3 percent.
The MSCI developing-country gauge fell 4.5 percent in 2014. Global investors pulled the most funds out of emerging markets this month since June 2013, the International Institute of Finance said.
Russian markets were closed today. The ruble depreciated 44 percent against the dollar this year, the second-worst performing currency in the region after Ukraine’s hryvnia. The benchmark Micex Index lost 7.2 percent in 2014.
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