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Market Update: Global Markets Plunge – Oil Continues Fall…

oil continues fall
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Market Levels

  • US: Dow Futures: 17294.00 (-1.34%), S&P 500 Futures: 1991.00 (-1.24%), NASDAQ Futures: 4118.75 (-0.94%)
  • Europe: CAC: 4225.65 (-1.51%), DAX: 9808.73 (-1.30%), FTSE: 6362.28 (-2.75%).
  • Metals: Gold: 1241.30 (0.56%), Silver: 16.95 (-1.17%), Copper: 2.52 (-4.52%)
  • Energy: Crude Oil: 45.68 (-0.56%), Natural Gas: 3.08 (4.69%)
  • Commodities: Corn: 03.79 (-1.56%), Soya Bean: 09.98 (-0.60%), Wheat: 05.42 (-1.05%)
  • Currency: EUR/USD: 1.1773 (0.01%), GBP/USD: 1.5212 (0.35%), USD/JPY: 116.59 (-1.14%)
  • 10-year US Treasury: 1.8057% (-0.084), German 10-Year Yield: 0.431% (-0.046), Japanese 10-Year Yield: 0.25% (-0.006)

Financial and Economic News Update

Global markets plunge : Stock markets were trading significantly lower on Wednesday as the drop in oil prices continue to weigh on global equities. U.S. stock index futures were also trading lower after December retail sales came in weaker than expected. Retail sales dropped 0.9 percent last month, the biggest since January 2014, Commerce Department figures showed today. Separately, investors will closely watch for U.S. oil-inventory data scheduled for release today. Analysts expect crude oil stockpiles in the world’s biggest consumer to have likely expanded last week above seasonal levels.

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Oil continues to slide : Oil prices extended their decline on Wednesday amid a sell-off in commodities. A World Bank cut in global growth forecast reinforced investor pessimism, as the market continues to grapple with oversupply. Analysts at Nomura Bank expect Brent crude to average $45 per barrel during the first quarter of 2015 after OPEC decided late last year to maintain its output despite a slowdown in Asian and European economies.

Gold hovering around 12-week high: Gold prices were steady below a 12-week high after rebounding from losses propelled by weakness in copper prices. A weak dollar supported demand for the safe-haven metal, but traders are cautious in view of the strong technical resistance at around $1,244. Spot gold was flat at $1,231.10 an ounce, below the 12-week high of $1,243.60 reached yesterday, after falling as much as 0.5 percent during early morning trade.

Bond Market Update

30-Year Treasury Yields Close to Record Lows: The U.S. 30-year yields are fast approaching record lows, as a drop in commodity prices further reduced the prospect of inflation. The 30-year yield fell 4 basis points to 2.46 percent, which is close to the July 2012 low of 2.44 percent. The 10-year yields fell 4 basis points to 1.86 percent, which is its lowest since May 2013. The U.S. will auction $13 billion of 30-year debt today.

Fed’s Kocherlakota “uneasy “with low borrowing costs in the Treasury bond market: Minneapolis Fed President Narayana Kocherlakota said the low long-term yields on Treasury bonds are a source of concern as they indicate that investors are marking down the U.S. economy’s long-term growth prospects. Rock-bottom yields leave less room for the Fed to maneuver when it plans to tighten policy. Benchmark U.S. bond yields are near their lowest in close to two years, as the global economy struggles, with little inflation expected over the medium-term.

Shanghai Money Rate Jumps Before New Share Sales: The Shanghai overnight repurchase rate jumped the most in one week as traders and investors seek cash ahead of a bout of initial public offerings. Analysts expect this week’s IPO’s to lock up around 2 trillion Yuan ($320 million), with money markets likely to bear the brunt of this sudden need for liquidity.

Tumbling Oil Prices might Force Putin to Bond Sales: The Russian government may be forced to sell short-term debt at yields as high as 20 percent if oil prices continue to stay depressed. Amid the surge in borrowing costs, the budget deficit will likely increase to 3 percent this year, and the government will be left with no other alternative but to borrow, according to Oleg Popov of Allianz Investments. In related news, the Russian Finance Ministry yesterday scrapped the first bond sale of the year citing “unfavorable market conditions.”

HCA Bond Sale Boost Signals Life for Junk Debt: Hospital chain HCA Holdings Inc (NYSE:HCA) sold $1 billion in debt in the biggest offering in one month. The deal, initially marketed at $750 million, will help repay debt due later this year. Several analysts have said that the strong demand for HCA’s securities suggest that the worst is over for junk bonds, which witnessed their smallest gains since 2008. Moody’s rates HCA three levels below investment-grade, at Ba3.

Economic Calendar for Wednesday, January 14, 2015:

07:00 A.M. ET: MBA Mortgage Applications (January 09)
08:30 A.M. ET: Retail Sales (MoM) (December)
08:30 A.M. ET: Retail Sales ex-Autos (MoM) (December)
08:30 A.M. ET: Import and Export Prices (December)
10:00 A.M. ET: Atlanta Fed Business Inflation Expectations
10:00 A.M. ET: Business Inventories (November)
10:30 A.M. ET: EIA Crude Oil Stocks change (January 09)
01:00 P.M. ET: 30-Year Bond Auction
02:00 P.M. ET: Fed’s Beige Book

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Abhijit Sen

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