Crude Oil Selloff Weighs on Risk Assets

 

Crude Slide Continues, Bleeds into Equities

All major US equity indices finished in the red today, with the tech-heavy Nasdaq faring the worst as it declined 1.65%.  Overall, stocks remained positive on the week despite US crude’s fall down to its lowest level since February.  WTI futures sold off for a tenth consecutive session, its longest losing streak in the past 34 years, sliding 0.8% to $60.20/barrel.  All eyes will be on the OPEC meeting this weekend, as market participants closely monitor what could be a contentious meeting between Saudi Arabia and the smaller nations who blame the large oil producer and Russia for the fall in prices – a cut in production at this meeting or the discussion of one could mean a rally in crude.

 

 

US Treasurys benefitted in the flight to safe haven assets.  Yields/swap rates declined 3-6 bps across the curve, as the 2-year note yield fell from its highest in the past ten years to 2.925%.  The US dollar also climbed today, gaining 0.19% against major currencies as it approached its highest level in the past sixteen months.  Next week financial markets will pay close attention to the consumer price data set to be released on Wednesday, especially after today’s robust producer price print (see below).

 

 

Producer’s Prices Increase by Most in Six Years

October’s Producers Price Index surprised to the upside- with prices increasing .6% over the month- the biggest increase in six years. Within the index, there were significant increases to the cost of machinery and other industrial supplies, signaling that producers may see their margins compressed as their input prices go up. Notably, the increase in prices re-affirms the Fed’s current path of interest rate hikes, with the market now pricing in a 76% of a hike in December.