Brent Crude meanwhile continues its volatile fluctuations around USD60/bbl

Market movers today

• A very quiet day on the data front with US existing home sales and euro consumer confidence as main releases.

• US existing home sales are expected to fall slightly in November to 5.2m from 5.26m in October. Pending home sales, which is a good leading indicator for existing home sales, have been flat in the past months suggesting that the upward trend is weakening.

• Euro consumer confidence has stabilised somewhat after falling from May to September. We look for a small rise to -10.5 from -10.6 on the back of the sharp decline in the oil price and slightly better business confidence in some countries lately.

Selected market news

Friday ended a volatile week with a relief rally in equities as the Fed’s pledge to stay ‘patient’ and Putin’s liberal tone on the economy supported risk appetite. Asian stocks have also generally moved higher this morning. Going into the final weeks of 2014, focus in the financial markets is on the oil price development, the situation in Russia and the Greek presidential election.

Yesterday, oil ministers from Saudi Arabia and United Arab Emirates (UAE) blamed the oil price collapse on non-OPEC producers’ lack of co-operation, misleading information and general speculation. The ministers also re-affirmed their stance to keep output at current levels. UAE energy minister in particular reaffirmed that ‘OPEC is not a swing producer’ and ‘it’s not fair that we should correct the market for everyone else’. Brent Crude meanwhile continues its volatile fluctuations around USD60/bbl giving the first indications that the sell-off in the black gold is losing steam. Last week we published a new oil price forecast predicting the price will stay low in the short term and then gradually recover to USD78/bbl (Brent) by the end of 2015. In the short term, weak demand and oversupply are weighing on prices but over the course of next year we expect demand to pick up due to the global recovery. At the same time we believe non-OPEC supply will gradually ease.

Meanwhile we will continue to monitor the situation in Russia closely. A key risk factor is the lack of liquidity in the Russian money market. The Russian central bank has tried to stabilise the rouble by squeezing rouble liquidity, which has sent interbank market rate soaring. Consequently, the O/N rate and the one-month implied yield in FX swaps reached 50% and 40%, respectively. If the CBR refuses to act as a lender of last resort, it is a very risky policy that acts as effective monetary tightening, thereby threatening financial stability. Noteworthy, the contractionary Russian policies have seen some contagion as the Belarusian authorities on Friday decided– in an attempt to defend the effective BYR peg to the USD - to hike the key policy rate to 50% and to tighten the currency controls by imposing a 30% tax on buying foreign currency.

In Greece, prime minister Samaras continues the attempt to avert snap election by persuading opposition lawmakers to back Stavros Dimas.