By Josie Cox
The price of oil hit a fresh five-year low early Tuesday,
slamming energy stocks and the currencies of commodity-dependent
economies.
In early trade, Brent crude, which has now fallen more than 40%
since the start of the year, fell an additional 1.2% to $65.37 a
barrel--a level last seen in August 2009. It later retraced
somewhat, but equities and currencies remained firmly under
pressure.
The Stoxx Europe 600 subindex of oil and gas companies was down
by around 1.4% by midmorning, taking its year-to-date decline to
almost 12%, and making it the day's worst performing subindex taken
from the broader Stoxx Europe 600 index. Not a single name was
trading in the green at the open. The biggest decliners included
Seadrill Ltd., Premier Oil PLC and Fugro NV.
ING credit strategist Nadège Tillier said that for the majority
of OPEC members, a price of $65 a barrel already means they are
selling oil below the cost of production. "In the long run, a price
below $85 per barrel means financing difficulties for most oil and
gas companies," she said.
On Monday, U.S. oil giant ConocoPhillips had already said it
would cut capital spending by 20% next year to $13.5 billion, a
sign that it is treating the plunge as more than a temporary
dip.
Jefferies economists meanwhile, published a note on Tuesday in
which they lowered their average price forecast for Brent in 2015,
2016 and 2017 by 16% to $72, $83 and $90, respectively. They had
already cut forecasts in October but said the latest fall is "more
material" than expected.
In currency markets, Russia's ruble stumbled. The currency has
depreciated by more than 40% against the U.S. dollar so far this
year.
Nigeria's naira was around 2.1% lower against the buck,
according to Thomson Reuters data, after the country's central bank
on Monday sold an additional $200 million of reserves, in an
attempt to strengthen its ailing currency, according to a memo
written by the central bank.
One dollar currently buys more than 184 naira, almost 13% more
than at the start of the year.
Beyond oil, the picture was equally bleak across Europe, where
stocks fell deeper into the red, extending a day-earlier move
inspired by weak data from Asia and Europe.
Having closed the previous session 0.7% lower, the Stoxx Europe
600 fell an additional 0.9%, mirroring similar falls on country
indexes in Germany, France and the U.K.
The biggest faller on London's FTSE 100 index was beleaguered
retailer Tesco PLC. Its shares fell by around 16% at the open after
it lowered its full-year profit forecast, citing changes it has
made in the wake of an accounting scandal and investment in its
business amid fierce competition.
Elsewhere in Europe, Greek stocks and bonds tumbled Tuesday,
after the government's decision to bring forward a high-stakes
parliamentary vote for president.
The main stock index in Athens slipped over 8% making it the
worst-performing index in the region. The yield on the country's
10-year government bond rose 0.38 percentage point to 7.55%,
reflecting a fall in the price of the debt.
On Monday, a government spokeswoman said that the parliament
would vote on a new president on Dec. 17--two months ahead of
schedule--to replace head of state Karolos Papoulias, whose
five-year term was slated to end in March.
The announcement came just hours after eurozone finance
ministers decided to extend Greece's deadlocked bailout talks into
early next year.
Deutsche Bank analyst George Saravelos said that both events set
markets up for "a very elevated period of event risk into
year-end."
Japan's Nikkei index closed lower on Tuesday too, snapping a
seven-day winning streak, after figures Monday showed that the
economy had contracted 1.9% in the third quarter. Also, in China,
the Shanghai Composite Index tumbled 5.4%, the biggest daily
percentage drop in more than five years.
In the U.S., the S&P 500 on Monday recorded its biggest
one-day percentage drop since last October. On Tuesday it was
indicated opening 0.3% lower. Futures, however, don't necessarily
reflect moves after the opening bell.
Write to Josie Cox at josie.cox@wsj.com
Access Investor Kit for Seadrill Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=BMG7945E1057
Access Investor Kit for Premier Oil Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B43G0577
Access Investor Kit for Fugro NV
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=NL0000352565
Access Investor Kit for ConocoPhillips
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20825C1045