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Commodity stocks weigh on FTSE
The eurozone euphoria that is driven by quantitative easing talk is not felt in London as natural resource stocks weigh on the British market.
Oil and mining stocks are leading the FTSE 100 lower as turmoil in the commodity markets has taken the shine off the European Central Bank easing chatter.
European equity markets are riding high on the back of the possibility of the ECB launching QE at the meeting next week. Although some eurozone markets have gotten over the initial excitement they are still in better shape than their UK counterpart.
The dramatic drop in car sales in China highlights how big its slowdown is, and this set the pace for the London-listed mineral extractors. It is survival of the fittest for the oil companies, and the market is showing Afren no mercy after its dismal reserves update in Kurdistan.
Oil downgrade sparks selloff
The Dow Jones is down 135 points at 17,601, as big oil stocks bring the benchmark into the red.
The oil downgrade by Goldman Sachs has stripped Chevron and Exxon Mobil of 2% of their share prices. As there are no economic announcements to draw attention away from the crumbling oil price, the market is giving the Goldman Sachs report its full attention. The Wall Street bank has not escaped the selloff either, and the finance house has given up 1% in early trading as the market awaits its Q4 figures on Friday.
Alcoa will report its figures tonight after the closing bell, and this round of the reporting season will be a welcomed distraction from the doomed oil market.
Brent below $50 a barrel
Brent oil is back below $50 a barrel as Goldman Sachs slashed its price forecasts for oil.
WTI has had an even worse day than Brent as the Wall Street bank stated light sweet crude would need to trade near $40 in order to shake out the shale gas producers.
The market believes the Saudis have no intention of cutting supply while the shale gas producers are on the scene, and the battle between them is going to drive oil even lower.
Gold is still riding on the coattails of the mixed jobs report from the US on Friday, and the disappointing wage growth figures will keep a Federal Reserve's interest rate hike at bay.
QE chatter sends euro lower
The increased speculation that the ECB will embark on full-blown QE has put another dent in the single currency. Market chatter of a €500 billion bond-buying scheme is bruising, but the asset purchases scheme is convenient for investment grade government bonds only, and this means that Greek debt will not be included.
We are less than two weeks away from the Greek election and the polls are still pointing to a Syriza victory. As the anti-austerity party edges closer to power in Athens the euro’s value will keep being eroded.