The Week Ended on a Negative Note

January 12, 2015

Last Friday world financial markets closed with a slump of major stock indices. In Europe, in particular, due to weak statistics from Spain and Italy as well as reports of the ECB’s preparation of models of buying investment-grade assets, the British FTSE 100 fell 1.05 percent down to 6,501.14 points, the German DAX dropped 1.92 percent down to 9,648.50 points, and the French CAC 40 shed 1.9 percent closing at 4,179.07 points.

The Russian market ended up deep in the red – the MICEX index fell 2.1 percent down to 1,515.37 points, and the RTS index plunged 3.6 percent altogether reaching 782.62 points. This new drop  was linked to oil prices bouncing around $50 a barrel again and Fitch’s downgrading of the issue ratings on Russia's senior unsecured foreign and local currency bonds to 'BBB-' from 'BBB'. The agency also gave a negative outlook for Russia’s ratings, which means that there might be a selloff of Russian securities by banks and investment funds that have no right to hold such countries’ securities in their portfolios.

In the USA, the Dow Jones shed 0.95 percent closing at 17,737.37 points, the S&P 500 fell 0.84 percent down to 2,044.81 points, and the NASDAQ lost 0.68 percent finishing the trading session at 4,704.07 points. Even positive US labor market data had no bearing on the trading results. US non-farm jobs increased by 252,000 in December 2014 whereas the forecast figure was 240,000. Unemployment reached 5.6%, the lowest rate since 2008. Such upbeat reports were dampened by the news of another petroleum company going bankrupt this year. According to media reports last Friday, WBH Energy, based in Texas, filed for bankruptcy. The decision was made as the company defaulted on its $50 million liabilities caused by falling oil prices. Last Tuesday, it was also reported that Laricina Energy, a Canadian oil producer, defaulted on its $150 million debt for the same reason – a sharp drop in oil prices globally.

At the same time, the NYMEX price of WTI oil futures for February went down by $0.43 and made $48.36 a barrel. The ICE price of February futures for oil of mark Brent was down by $0.85 reaching $50.11 a barrel. With that, February futures dropped under $50 a barrel three times in a week, getting to $48.90 a barrel.

On the Forex market, EUR/USD closed on a slight rise last Friday. The pair may start forming a new support level and closing last week’s gap.

Anna Gorenkova, NordFX Analyst

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