Markets fall as oil slump continues - 21.1.2016

US stock markets fell in a choppy session on Wednesday as oil slump continued amid worries about global economic slowdown. The dollar ended little changed against the basket of six currencies with live dollar index showing the ICE US Dollar index closed at 99.063. The Dow Jones Industrial Average fell 1.6% to 15766.74, posting a 9.5% loss so far this year. The S&P 500 closed down 1.2% at 1,859. The energy sector led the decliners, down 2.9% on the day and 13.3% since the beginning of the year. Shares of Chevron Corporation fell 3%, Exxon Mobil lost 4.2%. Shares of Goldman Sachs lost 1.9%, falling to the lowest level in nearly three years as the bank reported a sharp slide in fourth-quarter profit due to agreement to pay a large penalty over the sale of mortgage bonds. In economic news the headline inflation came in lower than expected, dropping 0.1% in December. But the core CPI, which excludes food and energy, rose 0.1%. At the same time housing starts and building permits fell 2.5% and 3.9% respectively last month, indicating that home builders cut back slightly on new construction in December. Today at 14:30 CET initial jobless claims and unemployment claims will be released in US. The tentative outlook is positive. At the same time Philadelphia Fed Manufacturing Index for January will be published, it is expected to slip to negative 3.1 after hitting negative 5.9 in December.

European stocks ended sharply lower on Wednesday as the decline in oil prices continued. The euro weakened slightly against the dollar, falling to $1.0886 late Wednesday from $1.092 late Tuesday in New York. The Stoxx Europe 600 index slumped 3.2%, Germany’s DAX 30 closed down 2.8% at 9391.64 and France’s CAC 40 dropped 3.5% to 4124.95. Shares of Royal Dutch Shell dropped 6.7% after the British oil giant forecast fourth-quarter profit fell as much as 50% from the year-earlier period. Investors will be watching closely today for comments from European Central Bank President Mario Draghi at a press conference at 14:30 CET, 45 minutes after announcement of the ECB interest rate decision. The central bank isn’t expected to make any changes in policy. At 11:00 CET today Consumer Price Index final reading for December will be released in euro-zone. And at 16:00 CET January Consumer Confidence Index will be published in euro-zone, the outlook is neutral.

Nikkei closed 2.4% lower today erasing modest gains early in the session. Yen strengthened against US dollar on rising haven demand. As continued global rout in equities spurred expectations of further monetary easing Bank of Japan Governor Haruhiko Kuroda said at a parliamentary testimony that the central bank isn’t currently considering using a policy of negative interest rates.

The Russian ruble fell to an all-time low of 82.4 to the dollar on Wednesday on continued contraction of oil revenues as oil slide persisted. Russia’s central bank is under pressure to intervene though central bank chief Elvira Nabiullina said yesterday the regulator has no plans to step in yet.

Oil futures prices reversed earlier gains today, resuming the slump after WTI settled below $27 a barrel on Wednesday, its lowest settlement in nearly 13 years. February WTI crude, which expired on Wednesday, fell 6.7% to $26.55 a barrel. Brent crude for March delivery closed down 3.1% to $27.88 a barrel on London’s ICE Futures exchange. Today at 17:00 CET US Crude Oil Inventories will be released by Energy Information Administration. Investors expect data will show an increase from the previous week as industry group American Petroleum Institute said the US crude stock likely climbed by 4.6 million barrels with seasonal refinery maintenance now underway.