By Carla Mozee, MarketWatch Eurozone inflation falls in
November
LONDON (MarketWatch) -- European stocks fell Friday, with oil
stocks sinking in a sea of red 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 3.8% lower,
and was on track for a more than 9% weekly loss. The slide was
triggered after OPEC on Thursday held to its production target of
30 million barrels a day, disappointing those investors who had
been hoping for the cartel to reduce output, in an effort to curb a
recent 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 on Friday (CLF5) dropped to a more than
four-year low, losing more than 6% to trade just above $69 a
barrel.
Markets: The Stoxx Europe 600 index fell 0.4% to 346.25, with
oil stocks leading the pack as the worst performers. Premier Oil
PLC shares were knocked down 12%, leading overall losses on the
pan-European benchmark. Ophir Energy PLC dropped 7.9% as did
Norwegian energy company Statoil ASA , and Subsea 7 S.A. , a
Norwegian seabed-to-surface engineering contractor, fell 7.1%.
Among oil majors, shares of Total SA fell 3.2%, Royal Dutch
Shell PLC was down 2.5% and BP PLC fell 2.3%.
But travel-related shares were among the best price performers
as oil futures extended losses, considered a benefit to the
oil-price sensitive sector. Air France-KLM SA climbed 6.3%,
Deutsche Lufthansa AG rose 3.7% and TUI AG moved up 3.4%.
The Stoxx 600 was in line for a 2.9% rise for the month, and a
0.4% gain for the week.
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 comes 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 0.697% on Friday, according to Tradeweb. At the same time,
the yield on the 10-year French government bond dropped to 0.978%,
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) was
trading at $1.2486, up from $1.2435 ahead of the release.
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 49.305 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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