Friday’s weak finish on Wall Street meant the Dow Jones Industrial Average slipped into negative territory for the year.
By Peter Martin
Tuesday, October 14, 2014
Though the US economic picture has continued to look solid, confidence is being undermined by weakness elsewhere in the globe, particularly the Eurozone, which continues to struggle with stuttering economic growth and too-low inflation.
Those concerns over the possible detrimental effect on the US recovery have now begun to be voiced by some key members of the Fed. Not least amongst those officials warning about the possible effects of weak overseas growth has been Richard Fischer, the Vice Chairman of the Fed, who in a speech on Saturday at an IMF-organized event in Washington suggested the path back to normal monetary policy for the US might have a few kinks caused by a global slowdown. ‘If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,’ Mr Fischer said.
With economic news thin on the ground today on account of the Columbus Day holiday, the news flow from the weekend has swayed the financial markets more than normal, with Mr Fischer’s remarks contributing to weakness in the dollar. By early afternoon in New York, the euro had gained 0.33% against the dollar, rising to a rate of 1.2672, while USD/CHF declined 0.42% and USD/JPY slipped 0.24%.
Another story from the weekend having an impact today was news of Iraqi cuts in the price of its oil. SOMO, the state organization that oversees Iraq’s oil exports, announced that it would be following Iran and Saudi Arabia in trimming its oil prices and increasing the discount to benchmark prices at which it sells oil to Europe and Asia. Earlier this month Saudi Arabia reduced its oil prices for Asia to the lowest level in close to six years.
Data published on Friday showed Saudi oil production of 9.704 million barrels per day in September, increasing from the 9.597 million bpd seen in August. Reuters reports that Saudi Arabia has communicated a willingness to accept lower oil prices, tallying with the bigger picture in which there have been no signals from OPEC of an intent to reduce output.
In some quarters this is being interpreted as market share being prioritized over prices and there has been a sharp drop in the price of oil futures in the market today. US light crude oil futures were down 0.52% at $85.40 a barrel by the afternoon in New York, having been close to $84 a barrel earlier in the session. Brent crude, one of the other major oil benchmarks, has lost more than 1.5% today.
Last week was a trying period for the stock market and some substantial losses in the morning created the impression that the trend was going to carry on where it left off today. Prices have recovered as the day has worn on though, with the Dow Jones Industrial Average rebounding into positive territory, gaining 0.07% or 11 points to 16,555. The broader S&P 500 index remains in the red though, off by 0.18% or 3.5 points at 1902.6 by early afternoon in New York.
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