Deepening Oil Plunge Drives Global Financial Markets Selloff

Nichole Harper
12 Dec, 2014
New York City

Global markets accelerated decline after oil price loss in the year extended to 44%. The latest decline in oil price was driven by the lowered global oil demand growth in 2015. Currencies of oil producing nation including Russia, Norway, Venezuela and Middle Eastern stock markets took another hit.

[R]1:30 PM New York – Global markets accelerated decline after oil price loss in the year extended to 44%. The latest decline in oil price was driven by the lowered global oil demand growth in 2015. Currencies of oil producing nation including Russia, Norway, Venezuela and Middle Eastern stock markets took another hit.[/R]

Stocks in New York traded lower and the International Energy Agency, formed by advanced Western nations, lowered its 2015 demand outlook for oil.

Crude oil futures in New York and London declined additional 4% and extended year-to-date loss to 44%. Crude oil futures of immediate month delivery declined 12% in five-day trading this week.

IEA lowered its oil demand increase in 2015 by 90,000 barrels a day to average of 93.3 million barrels a day. The oil demand increase was cut largely on the cut in oil consumption in Russia by 195,000 a day to 3.4 million barrels.

Department of Labor reported producer price index dropped 0.2% in November on a seasonally adjusted basis followed by 0.2% increase in October and 0.1% slide in September.

On Wall Street trading, Tollbooth Index fell 0.6% or 56.77 to 9,865.91.

S&P 500 index slipped 19.25 or 0.9% to 2,016.53 and the Nasdaq Composite Index fell 24.77 or 0.5% to 4,683.99.

Crude oil futures declined 4% or $2.43 to $57.52 a barrel and Brent Crude Oil futures fell 3.05% or $1.95 to $61.73 a barrel.

Russia Hikes Interest Rates, Oil Linked Currencies Extend Losses

Russia hiked its benchmark interest rate by 1% to 10.5% from 9.5%. The central bank also defended ruble by spending $1 billion in currency market in the last three days and may have spent more than $5 billion in the last two weeks.

The ruble dropped to record low at 58.76 against one dollar as the oil price futures deepened losses in the year close to 45%.

Russian Trading System Cash Index plunged additional 2.9% and extended year-to-date loss to 42.4%. The benchmark index in Brazil, iBovespa, has plunged more than 20% from its peak in September and for the year declined 6%.

The Venezuela’s benchmark index has surged 41% as investors bid up asset prices to match rising inflation but currencies of Brazil and Mexico have lost 12% value in 2014.

Argentine Peso has plunged 22% in parallel market, Chilean peso has dropped 15% and Colombian peso has plunged 19% in 2014. Venezuelan currency in parallel market has plunged more than 70% in the year so far.

Dubai DFM General Index dropped 7.4% on Thursday followed by 8.7% plunge on Wednesday and the index is now up 4% in the year so far.

Emmar Properties, plunged 9.1% on Thursday as investors worried that the decline in stock market and the recent plunge in ruble will affect the property market.

U.S. Movers

Adobe Systems Inc ((ADBE)), the diversified software company reported revenues in the fourth-quarter ending on November 28 increased 2.9% to $1.07 billion from a year ago period.

Net income in the quarter jumped 12.2% to $73.3 million or 14 cents a diluted share compared to $65.3 million or 13 cents from a same quarter last year.

Separately, yesterday the company agreed to acquire privately-held Fotolia, a leading marketplace for royalty-free photos, images, graphics and HD video for about $800 million in cash.

Nordson Corporation ((NDSN)), the testing and inspection equipment maker reported sales in the fourth-quarter ending in October climbed 14% to $468.6 million from a year ago period.

Net income in the quarter soared 20.6% to $72.1 million or $1.13 a diluted share compared to $59.8 million or 92 cents from a same quarter last year.

For the fiscal first-quarter, sales growth is forecasted in the range of 5% to 9% and diluted earnings per share between 60 cents and 70 cents from a year ago period.

European Markets

In London trading, FTSE 100 index declined 1.4% or 89.99 to 6,371.71 and in Frankfurt the DAX index slumped 1.3% or 131.06 to 9,731.47.

In Paris, CAC 40 index dropped 1.4% or 57.37 to 4,168.49.

In European corporate news, Conwert Immobilien agreed to sell two portfolios to a Czech company for about €48.5 million. Carillion launched £170 million convertible bond offering.

Drax declined after a change in the U.K. renewable energy policy. Permira sold stake in Hugo Boss for about €500 million.

Conwert Immobilien Invest SE, the Austria-based real estate developer agreed to sell its two portfolios with assets in Slovakia to a Czech Republican company for about €48.5 million or $60 million to focus in Germany and Austria.

Hugo Boss AG, after Permira Holdings Ltd plans to sell 4.9 million shares or about 7% for €500 million or $620 million in Germany-based apparel investor.

Asian Markets

Stocks in Tokyo closed higher ahead of weekend parliamentary election. Prime Minister Shinzo Abe’s party led coalition is expected to win more than two-thirds majority.

Canon Inc soared after the company announced dividend increase of 15%. Nidec confirmed the purchase of auto parts maker in China and Germany.

The government is likely to push for aggressive monetary and fiscal stimulus and also increase sales tax to plug the rising budgetary deficit and government debt.

Japan has the largest debt among most developed nations, but most of the debt is in the local currency.

The Nikkei 225 Stock Average gained 114.18 or 0.7% to 17,371.58 and the broader Topix index rose 2.61 to 1,399.65.

For the week, Nikkei 225 declined 3%.

The yen slipped 0.5% to 118.34 against one dollar.

In Mumbai trading, Sensex Index dropped 251.33 or 0.9% to close at 27,350.68. The CNX Nifty slipped 68.80 or 0.8% to 8,224.10.

For the week, Sensex declined 3.9% and CNX Nifty tumbled 3.6%.

Alstom T&D India Limited, the power generation company won an order worth 246.20 crore from Maharashtra State Electricity Transmission Co. Ltd.

IL&FS Engineering and Construction Company Limited, the infrastructure developer said Saudi Arabia-based subsidiary received a contract worth Rs 464 crore from Saudi Binladin Group.