Further gains in the price of crude oil have helped to bolster the energy sector, but it has not been enough to compensate for declines in stock prices in other parts of the economy, as the leading US stock indices slipped into the red.
By Peter Martin
Tuesday, February 10, 2015
Confidence has been eroded by an obdurate speech delivered yesterday by Greek Prime Minister Alexi s Tspiras in which he laid out plans to ditch his country’s austerity scheme, while German Chancellor Angela Merkel insisted Greece must stick to the rules of its bailout.
By mid-afternoon in New York the Dow Jones was down 80 points or 0.45% at 17,740, while the S&P 500 Index slid 0.32% to 2048.9.
Oil advanced after OPEC upwardly revised its forecasts of oil demand for 2015, while trimming its predictions for supply from non-OPEC countries. The oil cartel now sees demand at an average of 29.21 million barrels per day, an increase of 430,000 from its previous projection. US light crude oil futures rose more than 3% to $53.40 a barrel, adding further gains to the strong rebound seen last week. This recovery in the crude price should help to stave off fears of deflation which have been gnawing at the market in recent weeks and which has been a topic at the G20 meeting this week in Istanbul.
Bank of Japan Governor Haruhiko Kuroda thinks that the historically low level of the price of oil should boost the global economy, though, and could lead to improved economic forecasts. ‘For the world economy, without a doubt, weaker oil prices are a plus,’ Mr Kuroda told reporters, adding that ‘We could see some movement toward upgrades of economic forecasts.’ USD/JPY fell 0.54% to 118.48 by mid-afternoon in New York.
Greece worries continue
Another major topic at the G20 meeting has been Greece and its increasingly bristly negotiations with its eurozone partners over whether the country will extend its €240 billion bailout. The newly-formed Greek government does not want to be tied to the austere stipulations that are part of the bailout, but German Minister of Finance Wolfgang Schäuble said that ‘Without a program, things will be tough for Greece. I wouldn't know how financial markets will handle it without a program.’
The lack of progress between the two sides means that Greece could soon face default, and British Treasury officials today met with British Prime Minister David Cameron in order to deliberate over the impact of Greece’s potential exit from the euro. These developments have not served to hinder the euro in the FX markets, though, and the shared currency strengthened 0.20% against the US dollar to 1.1337.
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