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Oil prices continue to dominate the markets as the International Energy Agency lowered oil demand expectations for the fourth time in five months. Brent crude is showing every sign that it will continue heading lower, and it appears that it is only a matter of time before it challenges the $60 level.
With the Iranian oil minister Bijan Namdar Zangeneh now stating that he can see oil being squeezed down to $40 a barrel, panic is beginning to set in. The FTSE, having a far greater weighting to the energy and commodity sector, has suffered more than most and early trading has seen a further 1.6% knocked off it, taking December’s move to down 6%.
Overnight, Chinese industrial figures continued to soften, encouraging BHP Billiton to lower its expectations for Chinese steel consumption and alter its production levels accordingly.
Bellway’s pre-AGM statement, outlining robust operating margins and significant investments on land opportunities, has not been enough to prevent the markets selling off shares.
Regardless of the harsh words in OFWAT’s latest review the safe-haven status of utility equities has still seen the likes of United Utilities and Severn Trent move higher, with oil and energy companies dominating the list of fallers.
Despite the broadly encouraging economic data that has come out of the US, equity markets have been unable to disentangle themselves from the negativity that has oozed out of Europe. Without a major turnaround this is likely to be the worst week for the Dow Jones in over a month.
Considering the strong retail sales figures from earlier in the week, markets would under normal circumstances have expected this afternoon’s University of Michigan confidence figures to send US traders into the weekend with a healthy nudge higher. At the moment though this feels like whispering into an oncoming gale.
Ahead of the open we expect the Dow to start 136 points lower at 17,460.