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| Defence against the economic
elements? The street outside a share prices display in Tokyo on
Thursday. Photograph: Kazuhiro Nogi/AFP/Getty Images |
December 12, 2014 - GLOBAL ECONOMY - Global stock markets continued to tumble on Friday, pushing the
FTSE 100 to its worst weekly fall in more than three years. Since Monday,
£112bn has been wiped off the value of Britain’s leading companies.
Investors
headed for the exits amid growing fears about the Chinese economy, the
tumbling price of oil, and the prospect of another eurozone crisis
prompted by political uncertainty in Greece.
The FTSE 100
finished at 6300.63 on Friday, its lowest level since 20 October. The
index was down 161 points on the day and 442 points, or 6.6%, on the
week.
It was the biggest weekly decline in percentage terms since
August 2011, when recession fears and worries about America’s debts
stalked the markets.
In Europe, Germany’s Dax fell 5% and the
Eurofirst 300 lost 5.9% over the week. Wall Street was down more than
200 points, or 1.1% on the day, by the time the London market closed on
Friday, despite better than expected US consumer confidence figures for
December.
The UK has been affected more than other markets because
of its bias towards commodity companies, which have been hit hard by
the fall in oil. Brent crude dropped 3% to just over $61 on Friday, a
five-and-a-half-year low. As recently as June, the oil price had climbed
as high as $155, but fears of a global slowdown hitting demand has seen
a slump in the price. In its latest monthly report, published on
Friday, the International Energy Authority, the world energy watchdog,
cut its forecast for demand growth in 2015 by 230,000 barrels per day to
900,000. This was the fourth time in five months it had lowered its
expectations and followed a similar prediction from oil cartel Opec
earlier in the week.
This latest market rout followed a decision on Monday by
Greece’s prime minister, Antonis Samaras,
to call a snap presidential election for next week. If three rounds of
voting in the Greek parliament, the last on 29 December, fail to back
the ruling coalition’s candidate, Stavros Dimas, this could trigger a
general election. Investors fear that the far-left Syriza party, already
ahead in the polls, could win that vote and attempt to negotiate a new
debt write-off with European lenders. If key players such as Germany
fail to agree, the prospect of a breakup of the eurozone is again on the
horizon.
On Thursday, Samaras said: “Syriza has once again
brought the word Grexit [Greek exit] to the mouths of foreigners. What
Syriza says provokes fear and doubt everywhere … the markets are
reacting because the possibility of elections occurring, and Syriza
winning, is interpreted as assured catastrophe for the country.”
On
Friday, Syriza’s parliamentary spokesman, Panaghiotis Lafazanis, said
if it assumed office, the party would not only cancel the bailout
memorandum signed by Athens and its creditors, but ensure that the
troika of lenders leaves Greece.
The Athens stock market, which fell almost 13% on Tuesday after the poll announcement, lost 20% over the course of the week.
A
host of poor economic news from around the globe added to the gloomy
mood. After weak Chinese import numbers earlier in the week, China
reported a worse than expected 7.2% rise in industrial production in
November, down from 7.7% the previous month, which fuelled fears of a
slowdown in one of the world’s fastest-growing economies.
In the
UK, there was an unexpected 2.2% drop in construction output in October,
compared with forecasts of a 0.7% increase and a rise of 1.8% in
September.
Russia was also in the spotlight, for the wrong
reasons. The rouble hit new lows – down 1.7% at almost 58 to the dollar –
as the twin effects of western sanctions over Ukraine and the falling
oil price raised fears about the outlook for Russia’s economy, with a 1%
hike in interest rates to 10.5% and central bank intervention failing
to halt the slide.
Markets have been supported for many months by
the extraordinary stimulus measures introduced by central banks aimed at
stimulating the flagging global economy. But the
US has now finished its bond-buying programme
and at next week’s Federal Reserve meeting, analysts will be seeking
clues as to when the US central bank plans to raise interest rates.
European Central Bank president Mario Draghi wants to introduce quantitative easing but faces resistance from within the bank’s board, notably from Germany.
But
Thursday’s low takeup by European banks of the ECB’s cheap loan
programme puts more pressure on Draghi to come up with an acceptable
solution. -
The Guardian.
Another day of huge losses caps Dow's worst week in three years
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| Traders work on the floor of the New York Stock Exchange on December 12, 2014. Photograph by Brendan McDermid — Reuters |
The U.S. market was denied its eighth-straight week of gains.
A
seven-week streak of stock market gains abruptly ended this week amid
investor concerns about the continued decline of oil prices and sluggish
European and Asian economies.
A sell-off Friday cemented the loss
with the Dow Jones Industrial Average tumbling 316 points, or 1.8%, to
close at 17,281. For the week, the blue clip index slid 3.7%, the worst
showing since November 2011.
The Dow Jones average has now fallen
more than 700 points since it came tantalizingly close to hitting the
18,000-point milestone just last week. The index crossed the
17,000-point mark for the first time ever in July.
Meanwhile,
the S&P 500 fell 1.6% on Friday and finished the week down by 3.5%
while the Nasdaq composite fared slightly better by dropping 1.2% for
the day and 2.7% for the week.
Yesterday, a strong November retail
report kicked off a temporary rebound that helped offset at least some
of the week’s losses. For the most part, though, the major indices were
in full treat with the Dow Jones and S&P 500 falling four out of
five days while the Nasdaq dropped three times.
Thursday also saw the price of crude oil
drop below $60
for the first time since 2009, which added to investors’ concerns about
plummeting price oil and a global supply glut. Oil prices dropped again
on Friday, with both Brent crude oil and West Texas Intermediate (WTI)
crude prices falling by more than 2%. WTI finished well below $60, at
$57.70, while Brent finished the week at $61.68.
Prices have dropped
more than 40% over the past six months, in part, because increased
production in the U.S. and other countries is contributing to an
oversupply. Predictions by the Organization of Petroleum Exporting
Countries (OPEC) that supplies will continue to outpace demand next year
has helped to depress prices even further. Also, on Friday, the
International Energy Agency
cut forecasts for growth in global oil demand for the coming year.
Global stocks also took a hit this week due to sinking oil prices while
massive sell-offs in China and Greece
also put a drag on foreign markets. London’s FTSE index slogged through
its worst week in three years, dropping 6.6%. Germany’s DAX fell nearly
5% for the week while the Nikkei dropped 3% despite recording gains on
Friday.
It has been a turbulent second-half of 2014 for the U.S.
market, which entered this week on a seven-week winning streak that
included a number of
record finishes for the Dow Jones and S&P 500 while the Nasdaq hovered near its highest point since 2000. That followed a
broad sell-off in early October that briefly erased all of the year’s gains. -
Fortune.
Egypt Stock Market Loses $3B Amid Oil Plunge
Egypt's stock market shares plunged by 22 billion Egyptian pounds (just over $3 billion) in Sunday trading as low
oil prices dragged down regional economies.
The benchmark EGX30 index closed 5.23 percent down, with 170 stocks declining and just five showing gains.
Stock
broker Yasser Rashad said there was an immediate dip at the start of
Sunday's session over fears that share prices would continue to drop for
the rest of the week.
Wael Ziada, head of research at regional
investment giant EFG Hermes, said the drop is a knock-on effect caused
by the steep decline in oil prices. The markets in Egypt and Gulf Arab
countries "are correlated in terms of their performance because the
investor base intersects."
Oil prices have shed nearly half their
value since late June, including a 4 percent tumble Friday that left
benchmark U.S. oil prices at $57.81 a barrel, their lowest level since
May 2009, when the U.S. was still in recession.
Egypt is a net importer of oil products, therefore "we should benefit from the decline in oil prices," Ziada said.
However,
Egypt relies heavily on aid from Gulf countries to keep its economy
afloat. Any net benefit for Egypt from the decline in oil prices hinges
on the willingness of the nation's main Gulf benefactors ?
Saudi Arabia, the
United Arab Emirates
and Kuwait ? to continue to help Egypt despite their declining oil
revenues.
The three have pledged to continue to help Egypt's ailing
economy.
The three oil-rich nations have pumped billions of
dollars into Egypt's emptying coffers since the overthrow last year of
Islamist President Mohammed Morsi. The three view Morsi's Muslim
Brotherhood, an Islamist group, as a threat to their security.
A
Bank of America Merrill Lynch Global Research report published last week
said that "although GCC support may be somewhat less forthcoming at
current oil prices, enough is likely to be provided to muddle through
for now."
Besides Saudi Arabia, Kuwait and the Emirates, the Gulf Cooperation Council also includes Bahrain, Qatar and Oman.
In the Gulf region, markets continued to decline on Sunday.
Dubai's
stock index dropped 7.6 percent by closing Sunday, the first day of
trading for the week. Qatar lost nearly 5.9 percent at closing.
Meanwhile, Saudi Arabia and Abu Dhabi's indexes fell more than 3 percent
each. Investors are concerned that the drop in the price of oil, which
is the backbone of Gulf economies, could lead to less government
spending and reduced economic growth.
The Dubai stock exchange has
lost 65 billion dirhams, or roughly $17.7 billion, in market value over
the past week due to the plummeting crude prices, according to
the United Arab Emirates-based The National newspaper.
Last month,
an International Monetary Fund official said that Egypt's economy had
begun to recover after nearly four years of political turmoil. The EGX30
index has shown overall gains of 28.49 percent so far this year.
The
government aims to attract investment by hosting a three-day
international economic conference in March. It recently partially lifted
fuel subsidies and is pursuing revenue-enhancing measures aimed at
deficit reduction. -
ABC News.
