Five countries crushed by oil price collapse

Good Morning,
- 5 countries crushed by oil price collapse

- Gold 1,061.40 (+0.15%); Silver 13.875 (+0.24%); Platinum 873.30 (+0.08%); Palladium 546.00 (-0.54%).

- New Zealand Dollar Forecast to Strengthen Further

- $GOLD prices may continue to decline through near-term trading

- Top event risk over the next 24hr: US Initial Jobless Claims (DEC 26) (15:30 GMT), US Continuing Claims (DEC 19)

- Europe Equities Update: Euro Stoxx 3287.98 (-0.79%); FTSE 100 6274.05 (-0.64%); CAC 40 4677.14 (-0.52%); DAX 10743.1 (-1.08%).
- Precious Metals Update (USD): Gold 1062.14 (+0.07%), Silver 13.93 (+0.07%), Platinum 873.45 (+0.25%), Palladium 548.93 (+0.89%).
- $NZD, $AUD, and $CAD are expected to be the most active major vs $USD with 1W implied volatility at 9.80, 8.40, 8.38 respectively.

- Countries that produce the world's crude are getting crushed by low prices. Huge budget surpluses are turning into deficits, and generous social programs are being replaced with austerity and cuts. Oil has collapsed below $37 a barrel, compared to over $100 in mid-2014. The global oil glut, OPEC's determination to pump like there is no tomorrow, and slowing demand from China and other countries are pushing oil prices to new lows. Here are the five countries hit the worst. Venezuela Venezuela has the world's largest oil reserves. Its government has for years used the money it makes producing oil to pay for pensions, health health care, social benefits and even to subsidize housing and grocery stores.
But now, the economy is on the brink of collapse. Inflation soared over 150% in 2015 and is expected to rise over 200% next year. The government is unable to pay its bills, and food and basic supplies are in short supply. The economic downturn has led to political turmoil. Earlier this month, the country's opposition won a majority in an election for the first time in 17 years. Russia's budget is based on an oil price of $50 per barrel, but oil is trading around $37. The International Monetary Fund expects Russian GDP will shrink by 3.8% this year and by another 0.6% in 2016.

- In an ominous sign for first-quarter oil prices, U.S. government data showed a surprise stockpiling of crude and no slowing in production as the year comes to a close. The weekly Energy Information Administration data showed a jump of 2.6 million barrels of inventory, when many analysts expected a decline. Inventories dropped sharply — by 6 million barrels the previous week. "More bad news for the oil patch, as inventories across the board rose, especially at a time of year when we expect inventories to decline as refiners meet their end of year inventory targets," said Andrew Lipow, president of Lipow Oil Associates.
A decline in oil prices weighed on energy stocks in the Asia Pacific region on Thursday, with the Australian market hovering around a two-month high. Australia's S&P ASX 200 was off 0.1% at 5315.10, after nine straight positive days. "Everything's been extremely correlated to oil" said Ilya Feygin, managing director at WallachBeth Capital LLC. Elsewhere, Hong Kong's Hang Seng Index was up 0.1% while the Shanghai Composite Index slipped 0.1%. Energy shares in Hong Kong were down 0.7%. A decline in oil prices also rippled through markets in the U.S. Wednesday, triggering losses in energy stocks and currencies of commodity-exporting countries. U.S. crude-oil prices declined 3.4% to $36.60 a barrel as Saudi Arabia reiterated its commitment to keeping oil production high. Data showed an increase in U.S. crude supplies. A flood of crude has helped drive oil prices lower for more than a year. Brent crude oil recently rose slightly by 0.6% to $36.66 in early Asia trade. With financial markets around the world shut Friday for the New Year holiday and many closing early today, the MSCI Asia Pacific Index is on track to finish down 4.4% for the year. Weighing on the index have been markets in much of Southeast Asia but also Taiwan and Hong Kong, all of which have felt the pressures of China's slowing economy. The Hang Seng Index is on track to finish down nearly 7% this year. Singapore's FTSE Strait Times is down 14% and Taiwan's Taiex is off 11%.

- The following are the FX signals from Barclays Capital and CitiFX month-end fixing models. Month-end fixing models provide signals for trading FX on the last day of the month (Thursday December 31). Barclays: We expect the passive rebalancing of hedges at month-end to lead to USD buying interest. Moderate signals were generated against EUR and AUD, while there were more modest signals against all the other major currencies. "Equity markets lost some ground across developed economies as the ECB delivered less easing than anticipated, while the Fed finally started its hiking cycle. In dollar terms, the US markets underperformed as as the greenback weakened against most G10 currencies, except GBP and CAD, during the month. Bond markets remained relatively stable across the board, but outperformed in dollar terms in Europe and Japan," Barclays clarifies. Citi: The preliminary month-end FX hedge rebalancing estimate points to buying of EUR and selling of all other currencies vs USD on Thursday, 31 December.  "The signal to buy EUR is strongest, measuring around +0.5 historical standard deviations. Euro area equities and bonds never fully recovered from the ECB surprise at the start of the month, meaning that foreign investors in euro area assets will need to buy EUR to move their FX hedges back on target.
Relatively better performance of US, Japanese and UK assets reduces euro area investors’ rebalancing needs and leaves this month’s estimated EUR flows skewed towards buying by foreign investors. For the second month running there is no strong overall USD signal – stable US bond and equity indices have failed to create significant tracking error in FX hedges," Citi clarifies. 

- Here is the top global event risk for the today; US Continuing Unemployment Claims, Chicago PMI, CNY PMI, US Initial Jobless Claims
Have a great New Year's day and a prosperous new year!