While you were sleeping: Oil drops on US crude buildup

Thursday 31st December 2015

Equities continued to take their cue from oil prices, which moved lower after a report showing an unexpected build in US stockpiles.

Oil prices fell 3 percent after a report by the Energy Information Administration showed inventories rose 2.63 million barrels last week. Analysts in separate polls by Reuters and Bloomberg had predicted a drop of 2.5 million barrels.

Wall Street moved lower too. In 12.40pm trading in New York, the Dow Jones Industrial Average fell 0.3 percent, while the Nasdaq Composite Index declined 0.4 percent. In 12.25pm trading, the Standard & Poor’s 500 Index shed 0.4 percent.

"The ongoing weakness in the oil price is dragging down the markets," John Plassard, senior equity sales executive at Mirabaud Securities in Geneva, told Reuters.

Declines in shares of Chevron and those of Verizon Communications, last 1.2 percent and 1.1 percent weaker respectively, led the Dow lower. Shares of Apple last traded 1 percent lower.

The latest housing data disappointed. The National Association of Realtors’ pending home sales index fell 0.9 percent to 106.9 in November. October’s gain was upwardly revised.

"Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” Lawrence Yun, NAR chief economist, said in a statement.

"While feedback from realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers,” according to Yun.

Goldman Sachs said it expects US Treasuries to fall in 2016. Goldman expects 10-year Treasury yields will rise to 3 percent by year-end 2016, up from 2.31 percent Wednesday, because of Federal Reserve interest rate increases, an acceleration in inflation and the pace of economic growth.

"US yields are below where we thought they would be a year ago," as this year’s drop in oil prices "proved to be a larger and more persistent drag" on inflation, Francesco Garzarelli, Goldman’s co-head of macro and markets research in London, wrote in a report, Bloomberg reported.

Shares of Weight Watches surged, last up 21.4 percent, amid optimism about the company’s new ad campaign featuring Oprah Winfrey.

In Europe, the Stoxx 600 Index ended the session with a 0.5 percent drop from the previous close. France’s CAC 40 Index fell 0.5 percent, the UK’s FTSE 100 Index shed 0.6 percent, while Germany’s DAX Index declined 1.1 percent.

"Traders are ready to tie a bow on 2015 very happily, because it was one of those years when most asset classes didn't work," Jeff Kravetz, regional investment director at US Bank Wealth Management in Phoenix, Arizona, told Reuters.

BusinessDesk.co.nz

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