Equity Markets And The Oil-Links

Asian trade: Japanese markets are trading in the green, helped by speculations that the teaser commodity prices will help consumption pick up again, reducing the recovery period.

The declines seen in the oil markets have a wide array of consequences in the equity markets it seems. First, it dragged commodity stocks lower, affecting the market, as a whole. The (sudden) next side effect is to make investors speculate the lower energy prices mean cheaper production costs and thus a bigger profit for almost every manufacturer. Simply looking at crude’s chart, investors are right to think demand could pick up earlier stimulated by the lower energy prices, since oil had fallen from a high reached just a few months back of $147, to today’s value of $43 a barrel.

This is a huge drop by every standard. However, the price of crude oil did not fall on speculation (as it did when it rose), but it fell mostly due to a very weak demand outlook. Just half a day back, the ECB projected a full-blown recession in 2009 in Europe, while the Fed is thinking at quantitative easing. These two decisions were made because of the grim outlook, rather than anything else.

In tonight’s session, the Nikkei gained 53.53 points (0.68%) to 7,977.77, while the Australian S&P/Asx gained 4.50 points (0.13%) to 3,536.90.

Crude oil is continuing its plunge, trading again near the low of the current year. Crude oil for January delivery gained $0.20 to $43.65.

Gold is trading mixed for now, despite the volatility seen earlier in the day. Bullion for immediate delivery rose $0.80 to $769.40.

Previous Wall Street trade: The Business Roundtable's quarterly CEO Economic Outlook Index tumbled to 16.5 in the quarter, the biggest drop it has ever taken, to the lowest point by far in the survey's six-year history. A reading below 50 means that CEOs expect contraction rather than growth. The Business Roundtable's 160 member companies together employ almost 10 million people and generate $5 trillion in annual revenue.

The index had stood at 78.8 in the third quarter; the prior low of 49.3 was recorded in the first quarter of 2003.
 
Friday's Non-Farm Payroll report is now expected to show a loss of 340,000 jobs in November, which would bring the yearly total of jobs lost to just over 1.5 million. AT&T became the latest major company to announce lay-offs; the largest phone company said today it would cut 12,000 jobs next year as the economy weakens.
 
"The economy is in a self-reinforcing negative feedback loop," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "More lay-offs mean lower sales and profits, which just fuels further job cuts. The sooner the new administration puts its economic stimulus plan into action, the better."

Previous European trade: In Europe, the Dax has shed 6.57 points (0.14%) to 4,560.67. The U.K. Ftse fell 5.30 (0.13%) to 4,165.04.