Stock markets took another dive Friday

Market movers today

• Today focus will be on US data with the release of industrial production. We look for an increase in November after a correction in utility resulted in a weaker-thanexpected print in October. Industrial production is at odds with the very high ISM level but this should reflect too high ISM and we continue to expect a moderation over coming months.

• The US NAHB housing market index is due for release and it should increase further. Later this week housing starts and building permits will give more information about the housing market in the US.

• Focus will be on Wednesday’s FOMC meeting. We expect the FOMC to replace ‘considerable time’ with ‘patient’ in its statement. In the euro area we look for higher PMI, IFO and ZEW expectations, while the Chinese HSBC/Markit manufacturing PMI is likely to be unchanged in December.

• There are no Scandi market movers today but the Riksbank is under pressure to do something at tomorrow’s meeting.

Selected market news

Stock markets took another dive Friday as anxiety over the lower oil price continued to be in focus. Brent oil fell further to USD61 per barrel and there is still no sign of an end to the falling trend. The United Arab Emirates Energy minister yesterday said OPEC output would be unchanged even if prices go as low as USD40 per barrel. Hence the price war continues. Asian stock markets have taken the cue from the decline in the US Friday and are mostly lower but the S&P future has recovered some of Friday’s losses. Bond yields continued the trend lower late Friday with 10-year Bund yields falling to a new low of 62bp. US yields have stayed low in Asian trading.

The declining oil price has started to affect the broader US high yield market as weakness in energy junk bonds has spread to the rest of the market. US high spreads are now the highest in over a year.

Japanese prime minister Shinzo Abe booked a sweeping victory in the early elections as his coalition won two-thirds of the seats in the lower house. His top priority he said would be to tackle economic policies as he will continue his Abenomics in the fight to beat deflation through highly reflationary policies with strong help from Bank of Japan. The Japanese Tankan survey for Q4 released overnight was a mixed bag. The large manufacturers’ outlook was lower than expected at 9 (consensus 13) from 13 last quarter. However, the small manufacturers’ index was better than expected and the survey for the non-manufacturing sector was also better than expected for both small and large companies. The large enterprise fixed investment growth was the highest since 2008 at 8.9% (consensus 8.1%). Overall, the survey still supports the picture of a moderate recovery in Japan in the first half of 2015.