It must be serious for Radio New Zealand to mention it. Apparently, they mentioned the "deflation" word!
Stock prices fall as oil prices drop
Stock
prices have fallen on global markets, with nervous investors spooked
by tumbling oil prices and the possibility of Greece leaving the
eurozone if a left-wing party takes power there later this month.
6
January, 2014
The
steady decline of oil prices since mid-2014 has continued, with the
benchmark Brent crude price at a near-six-year-low.
While
United States and European stocks had risen overnight, rebounding
from heavy losses, Japanese shares posted their worst one-day drop in
10 months overnight.
New
Zealand's sharemarket had taken less of a knock, with the benchmark
top 50 index dropping about half a percent yesterday.
The
price of oil has fallen to about $US51 a barrel.
The
concern was that a supply glut would hurt the earnings of oil
companies and exacerbate disinflationary pressure world-wide.
Investors
also feared the left-wing Syriza Party could win a general election
in Greece on 25 January.
The
party had threatened to renounce the country's bailout agreement with
the European Union, raising the risk of a sovereign default.
ANZ
chief economist Cameron Bagrie said tumbling oil prices were like a
tax cut for New Zealand consumers.
Mr
Bagrie said New Zealand markets were holding up reasonably well and
the falling oil prices should flow on to help retailers.
He
said New Zealand had a few economic issues to manage but was still on
track for 3 percent growth over the next 12 months.
From RT -
Oil Slump: Prices fall past $50 for first time in 5 years
Nikkei leads downward trend
Wall
Street's sharp sell-off has spread to Asian sharemarkets as troubles
in Europe and sliding oil prices rattle investors' confidence.
6
January, 2014
The
Nikkei share average is down about 2.6 percent. Photo: AFP
Australian
stocks have also been hit hard, while New Zealand shares also fell
today.
Analysts
say tumbling oil prices sparked the sell-off, as well as worries
about political uncertainty in Europe as Greek elections loom.
Wall
Street's benchmark Standard & Poor's 500 index plunged more than
1.8 percent, and the selling continued across the Pacific to Japan
and Australia.
Japan's
Nikkei stocks index dropped 2.4 percent, and all markets in the
region were hurt, while Australia's ASX 200 has lost nearly 2 percent
so far in the day.
The
Shanghai Composite was down 1.27 percent, while in Hong Kong, the
benchmark Hang Seng was down 1.04 percent in early trade.
New
Zealand stocks fared better, but the benchmark top 50 Index still
dropped about half a percent.
A
senior strategist at Daiwa Securities in Tokyo, Hirokazu Labeya, said
the falling oil price showed few signs of slowing.
"Falls
in oil prices are going beyond many people's expectations. This will
put pressure on the earnings of U.S. energy firms."
That's the headlines. Now for some analyisis....
Worst Start To A Year Ever, Stocks Down 5 Days In A Row
6
January, 2014
How
many are feeling after the worst 3-day start to a year EVER...
Market
internals triggered a 2nd Hindenburg Omen...
The
S&P 500 is down 5 days in a row - the first time since Sept
2013... with the biggest 5-day decline since Jim Bullard saved the
world... (finding
support at its 100DMA for now)
And
broad equity indices bounced intraday off that 100DMA support (in Dow
and S&P) - with JPY ramping stocks back to VWAP...
From
the Russell 2000's peak, stocks are still down notably...
But
today had a similar feel to yesterday with some afternoon dip-buyers
vanquished... (but the S&P 500 just held 2,000)
As
Energy stocks tumbled back towards oil's weakness...
as
Energy credit risk topped 1000bps again and broad spreads widened...
As
WTI traded with a $47 handle!! After
Saudi "demand" comments...
The
biggest news of the day - apart from the worst start to the year in
stocks ever... and oil trading with a $47 handle!! - was the total
collapse in bond yields...
The
USD rose modestly in the day (rallying during the US afternoon unlike
yesterday)...
but
overall JPYwas still in charge of stocks...
Once
again - despite USD gains, Gold and silver rose with the yellow metal
testing $1220... (and silver surging)
Charts:
Bloomberg
Bonus
Chart: For The White House onlookers - NOT Europe...
Greek Bonds Tumble As Report Sees "Decisive Victory" For Syriza
6
January, 2014
The
Greek 3Y-10Y yield curve is back over 400bps inverted this morning as
bond (and stock) prices re-tumble following a new reports.
As
The FT reports, forecasting
group Oxford Economics says it has carried out an "in-depth"
analysis of opinion polls ahead of Greece's snap general electionon
January 25, which shows that the radical
Syriza party is on course to win a "clear mandate" to push
through anti-austerity policies. Will
German worry now?
The
Greek yield curve has moved even more inverted...
[Oxford Economics] analysis shows that Syriza's support is sufficient to secure a workable majority in Greece.The report says:
36% of the final vote is the approximate threshold beyond which a strong anti-austerity government is plausible. Syriza's performance has been consistent with this in each of the last 20 opinion polls, and over 40% of the vote on average in the last five.
The report, written by Oxford Economics' Gabriel Sterne, points out that the ruling New Democracy party could close the gap, if a tactic pays off to portray the election as effectively a referendum on an exit from the euro.
But Mr Sterne adds:
But the binary (in or out) nature of the vote decision may also help Syriza to achieve a decisive victory by squeezing out smaller parties (eg. Independent Greeks), as voters herd to the big two.
And
as Reuters adds, Syriza's
leader Tsipras has warned Draghi that is QE is undertaken, it must
include buying Greek bonds...
Greek leftwing opposition leader Alexis Tsipras said theEuropean Central Bank (ECB) could not exclude Greece if it decides to move to a full "quantitative easing" program to stimulate the euro zone's faltering economy.
...
Tsipras said he hoped ECB President Mario Draghi would decide to go ahead with the program and said Greece could not be shut out, as some economists and politicians from countries including Germany have suggested.
"Quantitative easing by the ECB with direct purchases of government bonds must include Greece," Tsipras said.
...
In a speech laced with barbs against German Chancellor Angela Merkel and finance minister Wolfgang Schaeuble, Tsipras said his party would roll back many of the austerity policies imposed by the bailout "troika".
"Austerity is both irrational and destructive. To pay back debt, a bold restructuring is needed," he said.
*
* *
For now, bonds don't seem to care. As bond prices slide to new lows..
For now, bonds don't seem to care. As bond prices slide to new lows..
How much of this is real and how much is wishful thinking on the part of a Russophobic British media?
Russia faces 'perfect storm' as reserves vanish and derivatives flash default warnings
BNP Paribas says Russia no longer has enough reserves to cover external debt and enters this crisis 'twice as levered' as it was before the Lehman crash
Ambrose Evans Pritchard
The Telegraph,
Russia’s
foreign reserves have dropped to the lowest level since the Lehman
crisis and are vanishing at an unsustainable rate as the country
struggles to defends the rouble against capital flight.
Central
bank data show that a blitz of currency intervention depleted
reserves by $26bn in the two weeks to December 26, the fastest pace
of erosion since the crisis in Ukraine erupted early last year.
Credit
defaults swaps (CDS) measuring bankruptcy risk for Russia spiked
violently on Tuesday, surging by 100 basis points to 630, before
falling back slightly.
Markit
says this implies a 32pc expectation of a sovereign default over the
next five years, the highest since Western sanctions and crumbling
oil prices combined to cripple the Russian economy.
Total
reserves have fallen from $511bn to $388bn in a year. The Kremlin has
already committed a third of what remains to bolster the domestic
economy in 2015, greatly reducing the amount that can be used to
defend the rouble.
The
Institute for International Finance (IIF) says the danger line is
$330bn, given the dollar liabilities of Russian companies and chronic
capital flight.
Currency
intervention did stabilise the exchange rate in late December after a
spectacular crash threatened to spin out of control, but relief is
proving short-lived.
The
rouble weakened sharply to 64 against the dollar on Tuesday. It has
slumped moe than 20pc since Christmas, with increasing contagion to
Belarus, Georgia and other closely-linked economies.
There
are signs that Russia’s crisis may undermine President Vladimir’s
Putin’s Eurasian Economic Union before it has got off the ground.
Belarus’s Alexander Lukashenko is already insisting that trade be
carried out in US dollars, while Kazakhstan’s Nursultan Nazarbayev
warned that the Russian crash poses a “major risk” to the new
venture.
The
rouble is trading in lockstep with Brent crude, which has continued
its relentless slide this week, falling to a five-year low of $51.50
a barrel. “If oil drops to $45 or lower and stays there, Russia is
going to face a big problem,” said Mikhail Liluashvili, from Oxford
Economics. “The central bank will try to smooth volatility but they
will have to let the rouble fall and this could push inflation to 20c.”
Under
the Russian central bank’s “emergency scenario”, GDP may
contract by as much as 4.7pc this year if oil settles at $60. The
damage could be worse following the bank’s contentious decision to
raise rates from 9.5pc to 17pc in December. BNP Paribas says that
each 1pc rise in rates cuts 0.8pc off GDP a year later.
BNP’s
Tatiana Tchembarova said the situation is more serious than in 2008,
when Russia had to spend $170bn to rescue its banks. This time it no
longer has enough reserves to cover external debt, and it enters the
crisis “twice as levered”.
Mr
Putin has imposed partial capital controls by forcing companies to
repatriate foreign currency. This has bought time and shored up the
rouble for a few days, but it is a disguised form of reserve
depletion since many of these companies will need dollars to repay
debt.
Many
of these companies are pillars of the Russian economy or energy
champions. Their dollar debts are implicitly liabilities of the
Russian state since these firms cannot be left to default. The oil
giant Rosneft has requested $46bn in state aid to help meet
repayments and cover investment.
Igor
Sechin, Rosneft’s chairman, expects oil to recover in the second
half of 2015 and fluctuate between $70 and $75 but warned that the
group would have to retrench. “Some high-cost projects will be
postponed,” he said. Analysts at Sberbank said the group faces a
“very difficult year”.
The
total foreign debt of Russian companies and state entities is $654bn.
They have to repay roughly $10bn a month since they are shut out of
international capital markets and cannot roll over loans.
The
IIF’s Lubomir Mitov said the oil crash could leave Russia with a
current account deficit of 3.5pc of GDP. Each $10 fall in crude cuts
export revenue by 2pc of GDP. This comes on top chronic capital
flight and the collapse of inward flows due to sanctions. The overall
“financing gap” could soon reach 10pc of GDP, putting enormous
strain on the rouble. “It’s a perfect storm,” he said.
The
interest costs on hard-currency debt have suddenly doubled in rouble
terms. While commodity exporters earn matching dollars, Russian
property developers and domestic companies with dollar-debt have no
such buffйr.
Russia’s
RTS index of stocks has fallen by 62pc since early 2011 but smaller
companies have been hit far harder. Kingsmill Bond, Sberbank’s
chief strategist, said Russian equities are among the cheapest in the
world and are trading on fear, ignoring the country’s strategic
depth. “People have been selling
indiscriminately. Once the oil
price stabilises, it will be a perfect time to buy illiquid domestic
stocks, like the homebuilder ISR,” he said.
Mr
Bond said brave investors who bought Russian stocks at the nadir of
the crisis in 2008-2009 were rewarded with gains of up 1,000pc.
“First we have to wait for oil to hit bottom,” he said.
Euro hits 9-year low on Grexit rumours
The German government has insisted it wants Greece to stay in the eurozone and will not be ‘blackmailed’ into changing the terms of the country’s bailout
- Oil prices have continued to slide on Monday. Benchmark Brent crude is hovering above $54 a barrel and expected to fall further.
- The FTSE100 has extended its losses, down 1.35% to 6,457 points.
- Germany’s DAX is down 1.43%, after data showed weaker-than-expected inflation in December, raising expectations that the European Central Bank will be forced to act to curb deflationary pressures in the eurozone.
- A spokesman for Angela Merkel has rebutted reports that Germany expects Greece to leave the eurozone. But a report that German officials are relaxed about a Grexit has opened up new rifts in Germany’s political class
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