While you were sleeping: Oil weighs on equities

Tuesday 29th December 2015

Wall Street moved lower with the price of oil amid concern about the global glut at a time of weakening worldwide economic growth.

Oil dropped, pushing both US crude West Texas Intermediate futures and Brent crude more than 3 percent lower, on a subdued outlook.

"The global supply and demand tables are still showing a heavy picture for the first half of 2016," Olivier Jakob, oil analyst at Petromatrix, told Reuters.

Other commodities also fell after a report showed profits by Chinese industrial companies slid in November, declining for a sixth straight month. Shares of Freeport-McMoRan sank, last 6.8 percent lower, as as copper dropped 2 percent in New York. Gold also weakened, last 0.6 percent lower.

Wall Street declined. In 12.12pm trading in New York, the Dow Jones Industrial Average fell 0.4 percent, while the Nasdaq Composite Index slid 0.6 percent. In 11.57am trading, the Standard & Poor’s 500 Index declined 0.5 percent.

Declines in shares of Chevron and those of Caterpillar, last 1.9 percent and 1.1 percent weaker respectively, led the Dow lower. Shares of Exxon Mobil last traded 0.9 percent lower.

Trading volume was lighter than usual. Last week, financial markets closed early on Thursday, and were closed Friday. This week markets will be closed for the New Year’s Day holiday on Friday.

Bucking the trend, shares of Walt Disney rose, last up 1.1 percent, as “Star Wars: The Force Awakens” exceeded US$1 billion in worldwide ticket sales.

Meanwhile, the US consumer did its part to bolster the economy. US retail sales increased 7.9 percent this holiday season, according to a report by MasterCard Advisors SpendingPulse.

"The double-digit growth in furniture sales ... shows that consumers are willing and able to splurge on big ticket items," Sarah Quinlan, senior vice president of Market Insights at MasterCard Advisors, said in the report.

Like equities, US Treasuries have struggled in 2015. This year demand at US Treasury auctions weakened to the lowest since 2009. Investors submitted bids for 2.8 times the almost $2 trillion of notes and bonds that the US has offered, according to data compiled by Bloomberg. That's down from 2.99 in 2014.

“It’s an early warning sign that you’re starting to see a decline in demand for Treasuries" more broadly, David Keeble, the New York-based head of fixed-income strategy at Credit Agricole, told Bloomberg. “2016 is a hand-off year to the private-sector buyer. Foreign central banks are stalwarts. Private-sector buyers can change with the wind.”

In Europe, the Stoxx 600 Index finished the day with a 0.5 percent retreat from the previous close. Germany’s DAX Index fell 0.7 percent, while France’s CAC 40 Index shed 1 percent. UK financial markets were closed for a national holiday.

BusinessDesk.co.nz

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