Markets move higher despite oil price slide
Thanks to China making strong efforts to support the yuan, European markets have moved higher, albeit off their best levels. The continuing slide in oil prices has tempered some of the earlier enthusiasm, while Chinese trade data early on Wednesday is likely to cause further volatility.
Meanwhile the pound hit a five and a half year low against the dollar following disappointing manufacturing data which seemed to push a UK rate rise further into the distance. The closing scores for European markets showed:
- The FTSE 100 finished up 0.98% or 57.41 points at 5929.24
- Germany’s Dax added 1.63% to 9985.43
- France’s Cac climbed 1.53% to 4378.75
- Italy’s FTSE MIB rose 1.08% to 19,970.10
- Spain’s Ibex ended up 0.33% at 8915.4
- In Greece, the Athens market was 2.16% better at 594.26
On Wall Street, the Dow Jones Industrial Average is currently virtually unchanged, up just 3 points while Brent crude is down 3% at $30.56.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
Global oil demand is expected to grow more strongly than previously expected, according to the US Energy Information Administration. But so is US production.
The EIA has raised its forecast for oil demand in 2016 by 20,000 barrels per day, and it expects 2017 world oil demand to reach 96.61m barrels, up 1.42m from the 2016 figure.
It also expects US crude production to have risen by 720,000 barrels a day in 2015, from a previous forecast of 630,000.
Brent crude is currently down just over 2% at $30.86 a barrel, while WTI has been close to falling below $30 a barrel. The US measure has fallen as low as $30.1 a barrel and is currently down 1% at $30.32.
Bloomberg Commodity Index falls to lowest since at least 1991 pic.twitter.com/wnU6Yglo4p
— Jonathan Ferro (@FerroTV) January 12, 2016
Despite the oil price volatility, stock markets are holding up. Jasper Lawler, market analyst at CMC Markets, said:
UK and European shares advanced...as global markets attempt to undo some of the damage wreaked by the tumultuous first week’s trading. A higher Chinese yuan was the main source of comfort behind the rise in stocks. The price of oil was less supportive as it jumped back and forth between gains and losses near 12-year lows after a series of investment banks lowered forecasts to as low as $10 per barrel.
After staging a tentative recovery earlier, the oil price has fallen into negative territory again.
Brent crude, which touched $32.38 a barrel at one point has drifted back to $31.01, a 1.7% decline on the day as the dollar continues to strengthen.
OIL today @nictrades pic.twitter.com/u61LOAkdZp
— Estebiza (@Estebiza) January 12, 2016
Updated
Nicola Sturgeon denies North Sea is in crisis
That’s enough from Paris.
Let’s get back to the UK, where Scotland’s first minister Nicola Sturgeon has commented on the news that BP is cutting one in five jobs in the North Sea.
Our Scotland editor Severin Carrell has the story:
The first minister said the BP cuts and falling oil price were “difficult” and admitted the price could yet fall further, as predicted by Morgan Stanley.
“This is a very difficult time indeed for people working in the North Sea,” Nicola Sturgeon said.
The Scottish government’s North Sea jobs task force, set up a year ago after the first wave of industry cuts, would offer support the workers affected, she said.
But pressed on the scale of the latest job cuts by one of the North Sea’s largest operators, BP, and the plunging oil price – now at a third of the $100 a barrel price forecast by her government in the Scottish independence reference, she refused to agree that the sector was in crisis.
She said BP and Oil & Gas UK, the industry body, had both stressed North Sea oil had a bright future and were planning continued investment.
However, Sturgeon conceded that while lower oil prices helped consumers and the wider economy through cheaper fuel costs, the job losses and cuts in oil industry spending was having a direct, negative impact on economic output.
“It is undoubtedly the case that there will be a wider impact. We will look carefully at unemployment figures and at GDP figures. [Again] while I’m trying to underplay the significance of the North Sea but a lower oil price has other impacts on the wider economy in terms of lower fuel costs.”
Updated
Carney: This isn't a debt-fuelled recovery
Britain’s recovery has not been been built on rising debt within the economy, Mark Carney insists.
He acknowledges that household debt levels are still relatively high, but points out that the private sector has been reducing its borrowing.
However, there are now signs that consumers are borrowing more.
As Carney puts it, we have moved from a post-crisis risk aversion environment to a more normal one.
The challenge for central bankers such as himself, and the others huddled in Paris today, is to spot when animal spirits are getting out of hand - as a hike in borrowing costs would still hurt reckless borrowers:
There’s an “ugly rumour” that global regulators are planning Basel 4 - a new set of regulations to keep banks in check - says Carney. And it’s not true.
Mark Carney is now speaking at the “Christian Noyer” symposium in Paris.
But the current Bank of England governor may not say much to move the markets - he’s ‘in blackout’ ahead of Thursday’s interest rate decision.
Instead, he’s outlining how UK banks’ profitability has fallen since the financial crisis:
That is partly because they’re taking on less leverage, due to tougher regulation post-crisis, and partly because they’ve stumping up such hefty penalties to cover bad behaviour in the past.
That misconduct charge should fall in the future, as banks clean up their game, Carney suggests, adding that retail banking is still very profitable in an environment of ultra-low interest rates.
Updated
The UK thinktank NIESR has just issued its latest forecast for UK growth.
And it predicts that the economy slightly picked up speed in the last three months of 2015, growing by 0.6%. That would be an increased on the 0.4% recorded between July and September.
Is that too optimistic, given the weakness of the manufacturing sector?
*U.K. ECONOMY GREW 2.2% IN 2015 VS 2.9% IN 2014, NIESR SAYS
— World First (@World_First) January 12, 2016
U.K. Growth Accelerated to 0.6% in Fourth Quarter, Niesr Says - looks rich to me
— World First (@World_First) January 12, 2016
We get the official first estimate of GDP for the last quarter of 2015 in a couple of weeks, on the 28th of January.
Updated
There’s a chilly mood in the City this afternoon.
No, not the weather (although it is a little brisk). It’s because Albert Edwards, the notoriously pessimistic analyst at Société Générale, is starting to deliver his annual assessment of the markets.
You can probably set your dial to ‘gloom’
Ready for SocGen's 2016 outlook with uber-bear Albert Edwards pic.twitter.com/sGAlnVxxMy
— Sara Sjölin (@sarasjolin) January 12, 2016
Albert can certainly pull in the crowds....
Standing room only in the Marriott ballroom to see uber-bear Albert Edwards today. pic.twitter.com/Y0dv18wWe3
— Ben Moshinsky (@BenMoshinsky) January 12, 2016
Back in Paris, Sheila Bair - head of the Systemic Risk Council - is warning of potential trouble ahead.
She points out that governments typically pay down debt during recoveries - this time, borrowing is going up and up.
Sheila Bair: "Government debt had exploded. I'm worried we're gonna be out of bullets the next time round."
— Frederik Ducrozet (@fwred) January 12, 2016
Wall Street clearly didn’t get the memo to sell everything.
Shares are up in early New York trading, following Europe’s lead.
Dow jumps 100 in open as oil, yuan stabilize https://t.co/0Adt8j8wwa pic.twitter.com/J9wni7Zy4e
— CNBC (@CNBC) January 12, 2016
And the oil price has now turned positive today, up 2% at $32.16, on hopes that the situation in Chinese is calming down.
The IMF have uploaded Christine Lagarde’s speech here.
Lagarde: The economic health of the emerging world is vital for advanced economies. The 85 percent matter! https://t.co/7bC5vw6elu
— IMF (@IMFNews) January 12, 2016
It ends with a call to arms to help emerging economies:
According to some estimates, a successful convergence process in the emerging world could triple the size of the global economy in the next 25 or 30 years.
The global community cannot afford the costs of stalled convergence. The 85 percent matter!
Lagarde concludes her speech by wishing Christian Noyer a happy retirement following his time at the Bank of France.
She suggests he takes a tip from Mervyn King - who left the Bank of England vowing to learn to cook and dance.
Lagarde telling Noyer he should now do like Mervyn King when he retired and learn "cuisine and how to dance with his wife" #BDFSymposium
— Maxime Sbaihi (@MxSba) January 12, 2016
Good idea, but Noyer should avoid emulating Lord King’s other hobby -- supporting Aston Villa.
Updated
Lagarde: The Case for a Global Policy Upgrade
Christine Lagarde is now explaining how the IMF is pushing for a new global approach to financial stability, to help emerging markets.
She says we need two things:
1) a stronger financial safety net.
2) a better framework for safer capital flows.
On the safety net, the IMF chief says the current situation is simply unfair. Emerging markets are locked out of the “swap lines” between central banks that provide essential support in times of crisis.
This makes the global safety net stronger for advanced countries than it is for emerging economies. Yet emerging economies critically depend on advanced-country currencies in their trade and finance.
The size of the current safety nets also need to be reviewed, she adds.
And on capital flows, Lagarde says emerging markets suffer from the “short-term nature and inherent volatility” of global capital flows (as investors in advanced economies look for a decent rate of return).
Maybe hot money is too hot, Lagarde suggests. More long-term, equity based, financial flows would help - meaning financial buffers could be smaller.
Updated
You can watch Christine Lagarde’s speech here.
Lagarde: Oil and commodity prices will remain low
Over in Paris, Christine Lagarde is speaking at the symposium to mark the retirement of former French central bank chief Christian Noyer.
The head of the International Monetary Fund starts by touching on China, saying its economic rebalancing is a positive long-term move, but one that brings short-term spillover effects.
And she warns that commodity prices are unlikely to rally strongly anytime soon.
Christine Lagarde on China: "Long-term transformation goal should benefit everyone despite short-term negative spillovers".
— Frederik Ducrozet (@fwred) January 12, 2016
#Lagarde: oil, metals prices likely to be low for sustained time
— Francine Lacqua (@flacqua) January 12, 2016
She says last month’s US interest rate rise has been successful. It was “clearly communicated and priced in by markets”, but the key point is how the future normalisation of monetary policy is handled by the Federal Reserve.
And on emerging markets, Lagarde warns that the appreciation of the US dollar comes at a tricky time - with developing markets already facing slower growth and falling commodity prices.
If emerging market growth falls by 1%, that knocks 0.2% off advanced economy’s GDP.
That’s significant, she insists, given the current growth rates of advanced countries.
Although shares are picking up today, there’s still plenty of nervousness about the future.
And analysts at Royal Bank of Scotland have added to the nerves, by telling clients they should sell up before markets really hit trouble.
Our markets reporter Nick Fletcher explains:
Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 (£11) a barrel, economists at the Royal Bank of Scotland have warned.
In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.
Here’s the full story:
Over in the Telegraph, Ambrose Evans-Pritchard’s mood has also darkened. He warns:
The risk is that this market storm drags on long enough to hit investment, regardless of what the economic data should imply. At the end of the day, market psychology can itself become an economic “fundamental”.
Pessimists warn that unless there is a batch of irrefutably good data from China over the next two or three months, the sell-off could become self-fulfilling and quickly metamorphose into the next global crisis.
Top marks to RBS for not sitting on the fence. "Sell Everything" Oil to $16, mkts to fall as much as 20% https://t.co/98tvO0jU4V
— David Jones (@JonesTheMarkets) January 12, 2016
Updated
Markets rally
Shares are rallying across Europe as investors shrug off their worries about China, and Britain’s manufacturing malaise.
They are taking heart from Beijing’s strong stance on the yuan earlier today, when it aggressively supported its currency in the international markets.
That is seen as a sign that China isn’t planning to spark a full-blown currency war by allowing the yuan to devalue wildly.
So, the German DAX has jumped by almost 2.5%, with other indices close behind. German manufacturers are leading the way, such as Volkswagen (+4%), BMW (+3.3%) and BASF (+2.9%).
Joshua Mahony, market analyst at IG, says some stability appears to have returned to the markets:
There is a feeling that perhaps the selling pressure that has characterised stock markets last week may ease somewhat, as profit-taking among shorts and bargain hunting takes hold. However, with earnings season now underway, the selloff seen in 2016 so far could provide great buying opportunities for those expecting to see positive updates.
The City is also cheered by this morning’s financial results, which saw retailers Morrisons and Debenhams both beat forecasts.
Updated
Martin Beck, senior economic advisor to the EY ITEM Club, points out that the fall in the pound should help UK manufacturers.
But November’s weak performance may show the sector dragged the economy back at the end of 2015.
Beck says:
“Industrial production fell by 0.7% between October and November, with all four of the sub-sectors seeing output decline. This was the largest monthly fall in output since January 2013.
“The biggest cause for concern is the manufacturing sector, where output declined by 0.4% for a second successive month in November. This may have followed a very strong September, but the business surveys continue to point to – at best – stagnation. Although the recent fall in the pound should provide some support to exporters, it is difficult to find many other reasons for optimism around the manufacturing sector.
“With manufacturing on course for only modest output growth in Q4 and the other components of industrial production likely to have contracted, the economy is going to be almost wholly reliant on services to drive growth once again. Our short-term model continues to point to GDP growth of 0.6% in Q4, up from 0.5% in Q3. But there is now a risk that the preliminary estimate – due in just over two weeks’ time – shows another below-par outturn of 0.5%.”
Looks like China will be in focus tomorrow too, when we discover how well (or badly) it traded with the rest of the world...
China Trade Data out tonight; both Export and Import contraction seen worsening in Dec
— Mike van Dulken (@Accendo_Mike) January 12, 2016
Britain’s unions know who to blame for Britain’s manufacturing decline - finance minister George Osborne.
The chancellor warned last week that a ‘cocktail of risks’ threaten the UK, including China’s slowing economy.
But TUC general secretary Frances O’Grady reckons the blame lies closer to home:
“George Osborne’s cocktail of threats has been spiked with his own failures. Not least of these is manufacturing, which is still far behind its pre-crisis peak and has fallen by 1.2 per cent over the last year.
“If the government had made the right choices with strong investment in skills, infrastructure and innovation, we could be in a much stronger position.”
O’Grady also points out that UK steel production has shrunk by a third from its recent peak, as UK factories struggle to cope with falling prices and competition from abroad.
“Steel production has seen its sharpest fall since the financial crisis. This is the inevitable result of the government’s failure to step in and give UK steel the support it needs. Unless the government puts in place a genuine industrial strategy, we risk further serious consequences for steel and many other manufacturers down the supply chain.”
Thousands of oil workers at BP face the axe, as the company adjusts to the new era of cheaper oil.
Reuters has the story:
Oil major BP plans to cut at least 4,000 jobs globally in its oil production division this year to reduce costs amid a steep decline in oil prices.
“We want to simplify structure and reduce costs without compromising safety. Globally, we expect the headcount in upstream to be below 20,000 by the end of the year,” a company spokesman said.
He said BP was planning to reduce headcount by 600 people in the North Sea over the next two years with most cuts to happen in 2016.
Back to oil.,.. and Nigeria’s suggestion today that OPEC could hold an emergency meeting soon has been slapped down by the United Arab Emirates.
UAE energy minister Suhail bin Mohammed al-Mazroui argued that the cartel’s current strategy (not cutting production) should be given more time.
Mazroui said:
“I’m not convinced OPEC alone can change or can solely unilaterally change this strategy just because we have seen a low in the market.”
UAE moves to quash talk of Opec emergency meeting as #oil slumps amid Opec production record https://t.co/v5nB9CQUAX pic.twitter.com/E2XAMZg2OW
— Holger Zschaepitz (@Schuldensuehner) January 12, 2016
After November’s weak performance, Britain’s industrial production sector is still around 9% smaller than before the crisis.
Britain’s failure/inability (take your pick) to expand its manufacturing sector in the last 15 years has meant we’ve run a persistent current account deficit, with imports consistently outpacing exports.
But does it matter, when the services sector fills some (but not all) of the gap?
An economist who blogs as Polemic Paine argues that Britain should embrace the fact that other countries can manufacturer goods much cheaper than us:
The UK is the second largest exporter of services in the world and the US economy is currently 88% services. In a competitive world it is better to export high value goods rather than low value goods unless you can make those low value goods at such low prices that (price x volume) = big.
Whilst there are countries with populations willing to accept lower wages than us for their day’s work we have to sell goods they can’t. And that is now mostly services.....
He concludes:
Once upon a time the UK’s agricultural industry accounted for 90% of the country’s economy. It is now about 3%. Should we readjust back to that too for nostalgias sake?
As long as we are exporting services that pay for the lower valued manufacturing stuff we buy in then that’s fine. Yet services are lost in the data. The historic way of measuring trade data demotes many services into the invisibles part of the equation leaving attention resting on the more obvious manufacturing figures. <end>
Here’s the full piece: Weak week. Waiting.
I guess people would worry less if services was able to cover *all* the shortfall from the trade in goods:
There’s also the worry that financial services can turn around and bite the economy when a crisis erupts (plus the ‘implicit subsidy’ that taxpayers cough up to protect them from failure)
Updated
JP Morgan reckons that first UK rate rise is now 10 months away.
Economist Malcolm Barr explains:
Recent disappointments in the pay data and the drop in oil prices had already put our call for the Monetary Policy Committee (MPC) to raise rates in May at risk. The weakness in this IP report is the straw that breaks the camel’s back. We hence push our forecast for the first hike back by 6 months to November 2016. The forecast shows rates rising by 25bp a quarter thereafter. In our minds, the MPC are very much in “data dependent” mode, rather than feeling at all constrained to adhere to any path suggested by their commentary.
There’s certainly little chance that the Bank of England will raise interest rates this week:
Our best guess is that the MPC vote will remain at 8-1 at this week’s meeting, although these data raise the risk that McCafferty will choose to withdraw his vote for higher rates for now. “
JP Morgan pushes back forecast for first BoE rate hike to November 2016 from May 2016 after today's weak industrial production data.
— Jamie McGeever (@ReutersJamie) January 12, 2016
Updated
Pound hits 5.5 year low after manufacturing gloom
Sterling has fallen to its lowest level against the US dollar since early June 2010, following the disappointing UK industrial production data.
The pound has shed half a cent, touching $1.4484, as traders calculate that there’s no prospect of interest rates rising soon.
Jake Trask, currency analyst at UKForex, explains:
“Both industrial and manufacturing production have posted lower-than-expected readings for November.
Combined with soft growth figures and Brexit fears, these results will likely dampen any expectations of a UK interest rate rise in the near future”.
The FT points out that UK manufacturing has been weakening for several months:
UK manufacturing got whacked in November, contracting for the 5th straight month https://t.co/z2Vu2cw4hB pic.twitter.com/1zN6z21HlI
— Joel Lewin (@JoelLewin) January 12, 2016
UK manufacturing output falls again
Just in: Britain’s industrial sector suffered its biggest fall in output in almost three years, as manufacturing shrank again.
Industrial production shank by 0.7% month-on-month, according to the Office for National Statistics. That’s the biggest drop since January 2013, and much worse than expected.
It says:
There were decreases in all of the main sectors, with manufacturing, mining & quarrying and electricity & gas having the largest contributions to the decrease.
UK industrial output -0.7% in November, worse than all 30 forecasts in a Reuters poll of economists and the biggest fall in almost 3 years.
— Jamie McGeever (@ReutersJamie) January 12, 2016
This can partly be blamed on the unusually warm winter, which has meant less demand for energy to heat homes and businesses.
But manufacturing struggled too; its output fell by 0.4% in November compared with October, and was 1.2% lower than a year ago.
It suggests British business are suffering from weaker overseas demand, partly due to China’s economic worries. It leaves the government’s vision of a rebalanced economy led by a revitalised factory sector looking as distant as ever.
And it also highlights why demand for oil is weak, leading to supply gluts and sliding prices.
#UK industrial output plunges most in almost 3 years https://t.co/5yhzXLiMYA via @jillianfward pic.twitter.com/hV5IHG855b
— Zoe Schneeweiss (@ZSchneeweiss) January 12, 2016
Updated
Many US oil producers will suffer severe financial pain, and possibly go bust, unless the oil price recovers from its current lows, analysts fear.
Marketwatch has the details:
As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research. Survival, for some, would be possible if oil rebounded to at least $50, according to analysts. The benchmark price of U.S. crude settled at $31.41 a barrel, setting a 12-year low.
More than 30 small companies that collectively owe in excess of $13 billion have already filed for bankruptcy protection so far during this downturn, according to law firm Haynes & Boone.
More here: Plunging prices could force a third of U.S. oil firms into bankruptcy
Retail magnate turned football chairman Mike Ashley could suffer a double relegation this year.
Shares in his Sports Direct chain have fallen by almost 4% this morning, as the aftermath of last Friday’s profit warning continues to reverberate. Yesterday they tumbled by 7%, as analysts scramble to reassess their view of the company’s prospects.
Sports Direct is currently valued at £2.4bn, which is not enough to maintain a place in the FTSE 100 index. And with Newcastle United 18th (two from bottom) in the Premier League, it could be a year to forget for the club’s owner.
This chart shows how Beijing drove up the interest rate on offshore yuan deposits overnight, in a bid to strengthen the currency.
CHART: The overnight bank rate for China's offshore currency just exploded (via @BIAUS) https://t.co/V8ZkzeRFnB pic.twitter.com/oy50xbINaz
— Nicola Duke (@NicTrades) January 12, 2016
This was designed to ‘encourage’ traders to hold renminbi and inflict losses on speculators who were betting against it.
The latest slump in the oil price isn’t causing alarm in the European stock markets.
Instead, shares are rallying as traders applaud China’s aggressive moves to prop up the yuan overnight.
The German DAX has gained 1%, bringing some relief to Frankfurt where investors have been worrying about a global downturn. In London, the FTSE 100 gained half a percent.
But there’s been so much volatility this year that markets may not stay higher for long.....
Updated
Debenhams has also beaten festive expectations, posting a 1.9% jump in like-for-like sales over Christmas.
That’s rather better than its main rival, Marks & Spencer, which posted a 5.8% decline in general merchandise sales. M&S blamed unusually warm weather, but clearly some retailers coped better than others ...
Starting to look a lot like the weather wasn't a Christmas problem, it was an M&S Christmas problem... Debenhams & Morrisons sales up.
— Simon Neville (@SimonNeville) January 12, 2016
Updated
2015 was a rough year for UK supermarket chain Morrisons, as it struggled to cope with falling sales and profits.
But this year has begun better, with the company beating forecasts over the crucial Christmas period.
My colleague Sean Farrell explains:
Morrisons achieved a surprise increase in sales over Christmas as customers returned to the supermarket chain.
Sales at stores open a year or more, excluding fuel, rose 0.2% in the nine weeks to 3 January, Morrisons said in a trading statement. City analysts had expected like-for-like sales, which exclude new stores, to fall 2%.
Morrisons said customers were starting to return to its stores with like-for-like transactions up 1.3% in its core supermarkets during the period. The chain has been badly hit by competition from the German discounters Aldi and Lidl and has cut prices to compete.
And the City likes the news - sending its shares soaring 12% in early trading.
Other supermarkets are benefitting too - Tesco shares are up 5.5%, and Sainsbury’s has gained 2.8%. Perhaps Christmas wasn’t as bad as feared....
Morrisons shares surge 12% to 171p after better than expected Christmas: Tesco dragged higher too - up 6% to 154p and Sainsbury +3% to 251p
— Fiona Walsh (@_fionawalsh) January 12, 2016
Updated
China shares rally after Beijing supports the yuan
There is relief in Shanghai as the China’s stock market closes up today.
The Shanghai composite ended the day 0.7% higher at 3,215 points, meaning it is ‘only’ down 13.8% so far this year.
Investors welcomed the news that Beijing had stepped up its support for the yuan today.
As mentioned in the introduction, China’s central bank intervened aggressively in the offshore currency markets today, boosting the renminbi and sparking a record surge in the city’s money-market rates. That might scare off speculators who had been been betting against the yuan.
#China stocks end higher in state efforts to stabilize the Yuan. pic.twitter.com/NhJGYXa06E
— Holger Zschaepitz (@Schuldensuehner) January 12, 2016
Updated
OPEC members who don’t like the look of $30 per barrel oil should take a deep breath -- analysts at Standard Chartered think prices could hit $10(!) a barrel.
The bank argue that the strength of the US dollar, and pessimism in the stock market, could send oil down to levels not seen since 1999.
“Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the US dollar and equity markets.
“We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far.”
Nigeria: OPEC could hold emergency meeting
The slump in the oil price could prompt the OPEC cartel into an emergency meeting, according to Nigeria’s energy minister.
Emmanuel Ibe Kachikwu, Nigeria’s minister of state for petroleum resources, told reporters at a conference in Abu Dhabi that a couple of OPEC members have already suggested a meeting.
This would give an opportunity for OPEC members to cut production rates, something they’ve declined to do at their scheduled meetings.
#OPEC may hold emergency meeting in Q1 if #crudeoil prices remain low, says Nigerian oil minister Emmanuel Ibe Kachikwu
— Platts Oil (@PlattsOil) January 12, 2016
OPEC’s strategy appeared to be keen to flood the market with crude, drive prices down, put rival suppliers such as shale out of business, and pick up the pieces later. The speed of the slump in prices over the last 18 months may prompt a rethink, though..
#Crude | RTRS - NIGERIA OIL MIN SAYS OPEC MEMBERS MAY LOOK INTO HOLDING EMERGENCY MEETING IF PRICES DROPPED <$30 pic.twitter.com/2wLo5s2xGG
— Ioan Smith (@moved_average) January 12, 2016
Oil on brink of falling through $30
Oil is coming under renewed pressure today, as traders speculate about just how low the crude price will fall.
Crude prices tumbled by another 3% today, hitting fresh 12 year lows. It is being driven down by concerns over the world economy’s weakness which is fuelling the oversupply glut.
Brent, sourced from the North Sea, hit a low of $30.43 per barrel in early trading, before struggling back to $30.80
As we warned yesterday, Morgan Stanley analysts believe oil could hit $20 this year -- and at this rate, it might happen sooner than crude producers would like.
Introduction: China 'goes nuclear' to prop up the yuan
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It looks like another day dominated by two familiar themes - China, and oil.
Overnight, Beijing has managed to strengthen the yuan, seemingly throwing the monetary kitchen sink at its currency to prevent another devaluation.
“The market suspects that the People’s Bank of China is possibly using major state banks to directly drain yuan liquidity in offshore markets,” said a dealer at an European bank in Shanghai.
The dealer described the strength of the central bank’s actions as being of “nuclear-weapon” level strength. “Its actions are comparable to steps taken by other central banks when they previously fought against international speculators, such as George Soros,” he said.
That means European markets are likely to be calm this morning:
Our European opening calls: $FTSE 5874 up 2 $DAX 9818 down 7 $CAC 4313 up 1 $IBEX 8848 down 38 $MIB 19752 down 4
— IGSquawk (@IGSquawk) January 12, 2016
On the UK front, we find out how Britain’s industrial sector fared in December, at 9.30am GMT.
And Bank of England governor Mark Carney is giving a speech in Paris this afternoon , at 2.15pm GMT. Hopefully he might touch on the turmoil that has gripped the world markets this year.
And there’s a flood of UK company news, particularly on the retail front. Struggling supermarket group Morrisons, high street chain Debenhams, and pasty-purveyer Greggs are all updating the City.
UK companies posting numbers - GREGGS, WM MORRISON, AO WORLD, DEBENHAMS, SAGA, BIG YELLOW - US - CSX
— David Buik (@truemagic68) January 12, 2016
We’ll be tracking all the main events through the day....
Updated
