Global Markets Lose $1 Trln This Week on Cheaper Oil

© AP Photo / Hasan JamaliGlobal oil prices continued falling Friday amid a worsening forecast by OPEC on oil demand by 2035
Global oil prices continued falling Friday amid a worsening forecast by OPEC on oil demand by 2035 - Sputnik International
Global markets went down today with a bright exception of Japan and Russia.

MOSCOW, December 12 (Sputnik) — Stock markets worldwide fell Friday on the continued sell-off in oil stocks and the investors’ worries that the recently published overtly optimistic US retail sales data will prompt the Federal Reserve hike interest rate in early 2015

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In Asia-Pacific, mainland China concerns added to the oil worries and the looming US Fed policy meeting. In Hong Kong, shares went down with the Hang Seng index losing 0.3% and China Enterprises Index shedding 0.2%. During this outgoing week both indices decreased 3.1%, being their biggest weekly retreat since mid-March. 

The Hong Kong-Shanghai Stock Connect scheme saw a strange reverse effect today with a money outflow from the mainland toward Hong Kong.  Mainland has lost 0.31 bnl renminbi ($50.12 mln) out of the 10.5 bln renminbi daily Hong Kong-bound quota today, which is frustrating for the liquidity-starved mainland. Investors do not see profitable opportunities enough, as China’s manufacturing is faltering, and the deflation threat and provincial debt controversy are undermining the nation’s investment appeal.  The Stock Connect was opened by Beijing this autumn as an opportunity to ensure a money influx from Hong Kong to mainland.

In Japan, Nikkei Index added 0.66% today as strong US consumption data boosted investors’ confidence in the Japanese exporters. The yen weakened, stimulating exports as well. Investors are also optimistic on the coming this weekend elections in Japan as Shinzo Abe is expected to win. Abe’s victory would also embolden his policy, dubbed ‘Abenomics’, of boosting economic growth by stimulating inflation. The broader Topix Index also added 0.2% today.

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In Europe, markets suffered the biggest weekly loss in 3 years as the Greek political crisis dubbed the ‘red scare’ happened this week. However, most indices went down on the retreat in energy stocks, as investors, worried by slumping oil prices, started selling their stakes in oil and gas companies.

The Stoxx 600 Index fell 5.2% during the week, losing about $468 bln. The Italian oil and gas company Saipem lost today 5% of its stock, hitting the 10-year bottom. The Royal Dutch Shell retreated 2.4%, the Spanish-based Repsol was down 4.8% and the French geophysical research enterprise CGG lost 4.6% its stock n the ongoing slump in oil prices. Brent crude fell below $63/bbl on the global oversupply.

"We're reaching a point where there's a risk of seeing corporate and sovereign defaults in energy-producing countries, which could revive global systemic risks," Christophe Donay of Pictet told Reuters. "I wouldn't be surprised to see the IMF helping some of the oil-producing countries next year… The key for asset managers for 2015 is really to diversify and hedge portfolios."

In the UK, FTSE 100 Index lost 2.5%, the French CAC 40 retreated 2.77%, the German DAX lost 2.72%. Russia’s MICEX Index added 0.32%, however the currency crisis is still unraveling with ruble depreciating 0.66% against the dollar to 56.8 and 0.83% against the euro to 70.53.

In America, markets went down on the energy assets sell-off as well, with S&P 500 heading for its record weekly drop in 2 months. Chinese industrial data add to this oil pessimism.

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The S&P 500 lost 0.82% (down 2.2% this week), the Dow Jones went down by 1.13%, and NASDAQ retreated 0.46%. However, as Americans rush to the shops in the pre-Christmas retail bonanza, investors might have had a more optimistic stance, if not for the looming Fed policy meeting. The possible rate hike and the negative market dynamics in the rest of world prompt many investors to think the US is going down soon as well.

“People are still nervous about the oil price and the European situation is worrisome,” John Carey of the Boston-based Pioneer Investment Management told Bloomberg. “Consumer confidence numbers look good and retail sales were pretty strong yesterday — the domestic picture is encouraging — but one school of thought is that the rest of the world is going to drag the U.S. down with it.”

As energy stocks are on the sell-off, the US Fed might decide the shale bubble has fully formed and is about to burst, responding to the risk with a sudden interest hike. Such a perspective renders investors psychic.

The global stock markets have lost this week a combined $1 trln on the slump in oil prices.

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