Markets in the US continued its steep decline on Friday on the back of the plunging oil prices which continue their momentous fall breaking below levels not seen since 2009. Reports from China also indicated that the slowdown in the worlds second largest economy continues to worsen. Oil prices continued to fall after reports from the IEA said that oil demand would remain lower as compared to previous expectations.
Many analysts believe that even though lower crude prices are a huge positive for the consumer, it’s a huge negative for energy companies. Many believe that if the prices of crude continue to fall lower many energy companies in the US economy would be driven out of business as the cost of extracting oil far exceeds the market price for crude. The IEA also spoke about the adverse impact the falling crude prices would have on the economies of oil extracting countries, as it believes that the economic benefit that would be received by net importing economies would be comparatively lesser than the dire consequences that oil extracting companies would suffer in terms of economic growth and inflation.
In reports coming out of China, the factory output in the worlds’ second largest economy declined to 7.2% in November as compared to 7.7% in October which is being seen as a huge negative for the global growth story. Many analysts now expect that the Central bank in China would introduce further stimulus into the economy which can be considered to be a little positive for equities. The dollar was largely higher against most major currencies. Gold and other precious metal prices dipped in trade today. The Dow Jones Industrial Average and the S&P 500 were both down close to 1% in intra day trade today on the back of heavy volumes which is a bearish sign.