Market mood brightens after torrid week

Markets appear to have found their feet after a week that saw the price of oil plunge to a 12-year low.


Markets breathed a sigh of relief

Markets appeared to find their feet again this week after stomach-churning falls in the first five trading days of 2016. Bears including RBS and former US Treasury Secretary Lawrence Summers continued to fret over the world economy's prospects, but by mid-week, US shares were on the rise for a third successive day, while emerging-market shares had posted their biggest jump in three weeks.

Oil was again the biggest talking point as it plunged to a new 12-year low around $30 a barrel before recovering slightly. It has lost almost a fifth this year, and 70% in 18 months.

What the commentators said

"It would take an unusual series of supply disruptions to change the course of this price behaviour," said Citigroup's Ed Morse. Demand remains sluggish, Iranian oil is set to re-enter markets, and Saudi Arabia shows no sign of ditching its strategy of trying to drown US shale producers. Stockpiles continue to grow after a year in which inventories probably expanded by 1.4 million barrels.

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Here's the most important thing for investors, said Nils Pratley in The Guardian: according to an industry insider, if the price averages sub-$40 this year, "dividends are toast at all major producers". And if this scenario stretches into 2017, "there will be budget crises in Russia and a fair number of Gulf states".

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.