By Carla Mozee, MarketWatch Eurozone inflation falls in
November
LONDON (MarketWatch) -- Oil stocks on Europe suffered Friday
following a decision by the Organization of the Petroleum Exporting
Countries not to cut its 30-million-barrel-a-day production target
for oil.
The Stoxx Europe 600 oil and gas group was pushed 3.5% lower,
and fell 9.5% for the week, after OPEC held to its production
target, disappointing those investors who had been hoping for the
cartel to reduce output, in an effort address the issue of
oversupply and curb the related drop in global oil prices.
Investors also assessed the impact of weak energy prices on
eurozone inflation, which fell 0.3% in November, according to data
released Friday by Eurostat.
The decline in inflation "just reiterates how serious a problem
low inflation levels have become to the European Union economy,"
said Jameel Ahmad, chief market analyst at FXTM, in emailed
comments. "Now that OPEC has decided against cutting oil
production, this has led to even weaker commodity prices and it is
anticipated that inflation levels might now decline even further in
the short-term. This in itself is going to place further pressure
on the ECB to move towards full-blown quantitative easing."
U.S. crude-oil futures (CLF5) dropped to a more than four-year
low, losing more than 6%, to trade just above $69 a barrel. January
Brent crude managed to turn slightly higher after Thursday's
session during which Brent futures hit their lowest since August
2010. Brent is the global oil benchmark.
Markets: The Stoxx Europe 600 index finished off session lows,
ending down 0.1% at 347.25, but oil stocks remained the worst
performers. Premier Oil PLC shares were knocked down 13%, leading
overall losses on the pan-European benchmark. Exploration firm
Afren PLC dropped 11%, Norwegian energy company Statoil ASA
stumbled 9.3% and Norwegian oil services provider Seadrill Ltd.
fell 8.8%.
Among oil majors, shares of Total SA fell 2%, Royal Dutch Shell
PLC fell 1.9% and BP PLC ended 1.4% lower.
But travel-related shares were among the best price performers
as oil futures fell, considered a benefit to the oil-price
sensitive sector. Air France-KLM SA climbed 6.8%, Deutsche
Lufthansa AG rose 4.9% and TUI AG moved up 3.5%.
The Stoxx 600 rose 0.6% for the week. Its 3.1% rise for November
was the strongest monthly gain since February.
Turning to country indexes, Germany's DAX 30 edged up 0.1% to
9,980.85. It finished the week higher by 2.6%, and the month higher
by 7%. The monthly rise was the best since January 2012, according
to FactSet data.
France's CAC 40 index on Friday rose 0.2% to 4,390.18, pushing
up its monthly rise to 3.7%. The U.K.'s FTSE 100 index slipped less
than 1 point to 6,723.4. It closed November higher by 2.7%, its
best monthly run since April.
Inflation: The weakness in energy prices showed up in the
eurozone's November inflation reading. The headline number fell to
0.3%, down from 0.4% in October. Stripping out the effects from
energy, food, alcohol and tobacco, core inflation reading stayed at
0.7%.
The data arrived as investors watch the European Central Bank
for signs it will launch full-blown quantitative easing, as the
eurozone economy grapples with low inflation levels and lackluster
economic growth. The ECB will meet next Thursday. Read: These 5
charts show how much Europe needs QE.
With expectations ramping up that ECB will launch sovereign-bond
buying, yields on government bonds throughout the eurozone have
been hitting all-time lows. The yield on Germany's 10-year bond
fell to 0.659% on Friday. At the same time, the yield on the
10-year French government bond dropped to 0.972%, after having
dipped below 1% for the first time on Thursday. Yields decline as
prices rise.
In other data news on Friday, the unemployment level for the
eurozone remained at 11.5% in October. The euro (EURUSD) late
Friday bought $1.2433, compared with $1.2467 on Thursday.
Elsewhere on the currency market, the Russian ruble (USDRUB)
fell to new lows Friday following OPEC's production decision, as
Russia takes in roughly 50% of its revenue from exporting oil and
gas. The dollar was buying 49.563 rubles compared with 48.795
rubles late Thursday.
Elsewhere on the European radar, Switzerland will hold a vote
Sunday on whether the country's central bank should more than
double its holding of gold. The referendum aims to force the Swiss
National Bank to hold a fifth of its assets in gold within five
years and keep the bank from selling gold in the future.
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