RETAILING

Fed Warns on Global Growth Fears Federal Reserve officials, worried about weak growth overseas, are endorsing new measures by foreign officials—most notably at the European Central Bank—to stimulate their economies.

Fed officials rarely comment on the decisions taken by foreign central banks and have generally played down risks to domestic growth emanating from abroad. Yet minutes of the Fed’s Dec. 16-17 policy meeting included several references to the urgency U.S. officials and market participants are placing on new policy actions to counteract slow growth outside the U.S. (…)

The minutes showed Fed officials “regarded the international situation as an important source of downside risks to domestic real activity and employment.” They added that the risks were particularly serious “if foreign policy responses were insufficient.” (…)

The references, though subtle, amounted to a warning—particularly to the ECB—that markets and the global economy more broadly could respond negatively if foreign policy makers don’t deliver on expectations for action. (…)

Fed officials noted several reasons to remain upbeat about the U.S. economy.

“Several participants, pointing to indicators of consumer and business confidence as well as to the solid record of payroll employment gains in 2014, suggested that the real economy may end up showing more momentum than anticipated, while a few others thought that the boost to domestic spending coming from lower energy prices could turn out to be quite large,” the minutes said. (…)

Bingo! European Stocks Rally on Stimulus Prospects European stock markets surged, propelled by the prospects of further central bank stimulus which pushed the euro to a nine-year

German Factory Orders Plunge

New factory orders in November were down 2.4% in adjusted terms in the eurozone’s largest economy, coming in below the 0.8% decline expected in a Dow Jones Newswires survey of economists. Domestic orders fell 4.7% on the month while foreign orders declined 0.7%. Orders from the eurozone rose 2.7% on the month, while those from outside the currency bloc were down 2.6%. The ministry said on Thursday that the share of bulk orders was “drastically” below average.

New orders for the two months, October and November, were up 0.9% compared with average growth of 0.2% in the third quarter from the previous three months. Orders from the eurozone rose 2.0% in the October-November period versus the third quarter.

Eurozone Retail Sales Rose in November

The European Union’s statistics agency said retail sales rose by 0.6% for the second straight month, bringing the rise from November 2013 to 1.5%. That suggests consumer spending was on the rise in the fourth quarter, likely reflecting the fall in oil prices, and leaving households with more money to spend on other goods and services.

The pickup was driven by a 1.4% rise in sales of goods other than food and gasoline.

World’s Best Forecaster Targets Euro-Dollar Parity

(Note: he was the best last year…)

• Pound Drops to 17-Month Low as BOE Seen Maintaining Rate in 2015

Oil Holds Gains After Rebound Spurred by Drop in U.S. Stockpiles Oil was steady after an unexpected drop in U.S. stockpiles spurred the biggest gain in two weeks yesterday.

Venezuela: bonds and barrels A Venezuelan default could change the oil market

(…) The predicament for the Venezuela government’s finances seems simple. Yearly oil revenues were about $90bn when Venezuelan crude was $100 per barrel. At less than $50, revenues will decline precipitously. Debt service this year amounts to $10bn. The government could attempt to adjust – say, by cutting imports further and conserving US dollars to pay debt – but bondholders might just as well brace themselves for impact. The simple average bond price in 20 sovereign defaults since 1998 was $49 one month later, says Moody’s, so the holders may bet that their recovery on Venezuelan bonds could beat the current price of $42.

That is where things become interesting. Creditors can seize assets. For Venezuela, the juiciest ones are the country’s oil sales to the US, and also its US assets such as Citgo (which refines Venezuela’s heavy crude). In fact the threat of creditor seizure is strong enough to discourage default: it would attach a large discount on any further oil sales, worsening the revenue shortfall further. But if Venezuela does default, it might withhold its oil rather than see it seized, or the oil could get caught up in the dispute. It is only 1m barrels a day. But less supply is just what the oil market needs at present.

Add Natural Gas Prices to Putin’s Long List of Problems

While the fuel held up better than oil last year, weakening just about half as much, the average cost on Europe’s biggest open market will fall 13 percent this year to the lowest since 2010, according to the median of 13 traders, brokers and analyst estimates compiled by Bloomberg. Part of the reason for the drop is that global production capacity of liquefied natural gas will jump the most in four years, boosting competition for Russian pipeline flows that meet almost a third of Europe’s demand. (…)

Russia gets 14 percent of its export sales from gas. State-run Gazprom’s revenue will drop 7.6 percent to 6.13 trillion rubles ($99 billion) in fiscal year 2015, the first decline since 2009, according to the mean estimate of 18 analysts surveyed by Bloomberg. (…)

Global LNG output will expand by 5 percent, or 14 million metric tons, this year, according to Bank of America Corp. That’s the fastest pace since 2011 as new projects start from the U.S. to Australia.