OPEC Decision Roils Markets The tumbling price of oil hammered commodity-dependent currencies as well as shares in oil and gas companies, a day after OPEC kept its output target.
(…) Russia’s ruble, which this year has also been pummeled by geopolitical tensions and resulting sanctions, hit yet another all-time low against the dollar, while fellow oil-linked currencies such as the Canadian dollar, Norway’s krone and Nigeria’s naira slipped too.
One dollar now buys more than 49 rubles. It started the year close to 32. (…)
Barclays economists said they now expect Brent crude to sink below $70 per barrel and the West Texas Intermediate benchmark to fall even further.
“Over the course of the coming months, oil markets will have to find a new equilibrium—a world where demand elasticities are tested, and non-OPEC supply sensitivities, and particularly the pain threshold for U.S. producers becomes better understood,” they wrote in a note. (…)
Some perspective from The Short Side of Long:
U.S. Personal Income and Spending Growth Remain Moderate
Overall personal income increased 0.2% during October (4.1% y/y) after an unrevised 0.2% September rise. Wages & salaries earnings improved 0.3% (4.4% y/y) while proprietors income jumped 0.5% (3.3% y/y). Disposable income increased 0.2% (3.9% y/y) and in real terms it ticked 0.1% higher (2.5% y/y).
Personal consumption expenditures increased 0.2% (3.6% y/y) following no change in September, revised from down 0.2%. Motor vehicle purchases fell 1.7% (+7.0% y/y) following a 4.5% decline while spending on furnishings & durable household equipment improved 0.4% (2.6% y/y) after a 0.3% gain. In constant dollars, overall spending increased 0.2% (2.2% y/y).
The equal gains in income and spending left the personal saving rate stable at 5.0%, though September’s rate was revised down from 5.6%. Personal savings fell 0.4% (+10.5% y/y) following a 1.3% rise.
U.S. New Home Sales Improve
New home sales during October edged up 0.7% m/m to 458,000 (1.8% y/y) following a 0.4% rise to 455,000 in September, initially reported as 467,000. The latest figure disappointed expectations for 470,000 sales in the Action Economics Forecast Survey.
Eurozone Sees Further Rise in Jobless, Fall in Inflation The number of people without jobs in the eurozone rose for the second straight month in October, while the annual rate of inflation fell further below the European Central Bank’s target in November, increasing the likelihood of aggressive stimulus measures.
The European Union’s statistics agency Friday said the number of people without work increased by 60,000 in October, the biggest monthly rise since January 2013.
Eurostat also said consumer prices were just 0.3% higher in November, than in the same month of 2013, as the inflation rate slowed from 0.4% in October to match the five-year low reached in September.
The inflation rate has now been below 1.0% for 14 straight months, while the ECB targets a rate of just under 2.0%.
Excluding prices of energy, food and other volatile items, the core rate of inflation was unchanged at 0.7%. (…)
Figures also released Friday showed German retail sales rose 1.9% in October, the largest increase since June 2011.
But the WSJ omits saying that retail sales had dropped 2.8% in September…
However, French consumer spending dropped 0.9% in October from September, the sharpest month-on-month decline since June 2013, the French statistics agency Insee said. The consumer spending figures came on top of other weak data in October. On Thursday the labor ministry reported a record high in the number of unemployed people.
And French consumer spending was off 0.5% in September…
Japan’s CPI falls to 0.9% Further fall highlights challenges facing PM Abe as he heads to polls
Core consumer prices, all prices excluding fresh food, slowed to an annual pace of 2.9 per cent growth year-on-year in October, in line with forecasts. Stripped of any impact of the sales tax rise in April, core prices are up 0.9 per cent.
Pressure Grows for Rajan to Follow China Cut as India Slows
Growth slowed to 5.3 percent last quarter, inflation is at a three-year low, Chinalowered borrowing costs and Finance Minister Arun Jaitley is calling for a cut. While almost all economists expect Rajan to ignore the clamor and hold the benchmark rate at 8 percent on Dec. 2., markets are pricing in a reduction and forecasters are moving up their rate-cut calls. (…)
A rate cut would signal a divergence among the biggest emerging markets, with India and China easing policy to boost growth as Russia and Brazil raise rates to fight inflation. Rajan has kept one of Asia’s highest interest rates unchanged since January after pledging to lower Indian inflation once and for all when he took over the central bank last year.