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While you were sleeping: Wall Street slips with oil

Tuesday 28th October 2014

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Wall Street slipped as oil prices continued their slide, while the latest US economic data also lacked lustre though failed to alter the view that the economy is on firm footing. 

Goldman Sachs downgraded its oil price outlook, predicting West Texas Intermediate crude will slide to US$75 a barrel and Brent to US$85 a barrel in the first quarter of 2015, down from previous forecasts for US$90 and US$100 respectively.

West Texas Intermediate oil for December delivery was down 0.4 percent at US$80.68 a barrel, while Brent for December settlement was 0.5 percent weaker at US$85.69 a barrel

“Oil is the major thing on people’s minds right now,” Skip Aylesworth, a portfolio manager at Hennessy Funds in Boston, told Bloomberg News.

In afternoon trading in New York, the Dow Jones Industrial Average slipped 0.05 percent, the Standard & Poor’s 500 Index fell 0.21 percent, while the Nasdaq Composite Index declined 0.07 percent. 

The Dow inched lower in afternoon trading as slides in shares of Merck and those of DuPont, down 2.7 percent and 1.4 percent respectively outweighed gains in shares of Procter & Gamble and those of Verizon each up 1.2 percent.

Shares of Merck fell after the company downgraded the top end of its sales outlook.

The National Association of Realtors said its pending home sales index rose 0.3 percent in September, following a 1.0 percent decline in August. 

Separately, Markit said its preliminary services sector purchasing managers’ index fell to 57.3 in October, the lowest reading since April, down from 58.9 in September. Markit’s preliminary manufacturing purchasing managers’ index declined to 56.2 this month, down from 57.5 in September.

“The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in coming months,” Chris Williamson, chief economist at Markit, said in a statement.

“Having signalled an annualised rate of GDP growth of approximately 3.5 percent in the third quarter, the October readings indicate that the pace of economic growth looks set to moderate in the fourth quarter, down to perhaps 2.5 percent or less if the PMI falls further in coming months,” Williamson said. Even so, “we should not lose sight of the fact that the pace of growth nevertheless remains robust, having merely eased from very strong rates in prior months.”

The Federal Reserve Bank of Dallas said its production index fell to 13.7 this month, down from 17.6 in September. 

"Home sales are probably not going to do much but business activity in general is still pointing to a solid underpinning for the US economy," Jacob Oubina, senior US economist at RBC Capital Markets in New York, told Reuters.

Shares of Micron gained, last up 3.2 percent, after the company its board had authorised up to US$1 billion in share buybacks.

In Europe, the Stoxx 600 finished the day with a 0.6 percent drop rom the previous close. The UK’s FTSE 100 Index fell 0.4 percent, while France’s CAC 40 retreated 0.8 percent.

Germany’s DAX shed 1 percent after a report showed the country’s business confidence dropped for a sixth month in October, pushing the Ifo institute’s business climate index to the lowest level since December 2012. 

As concern mounts about Germany, the euro-zone’s largest economy, the European Central Bank said it settled 1.704 billion euros (US$2.2 billion) of covered-bond purchases last week, starting purchases on October 20.

“This is bigger than we expected,” Agustin Martin, head of European credit research at Banco Bilbao Vizcaya Argentaria in London, told Bloomberg News. “These figures tell us that the ECB is being aggressive about expanding its balance sheet.”


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