US stocks closed sharply lower on Wednesday as investors sold off consumer- discretionary stocks on the backdrop of renewed slump in oil prices. The dollar weakened after the release of Federal Reserve’s Beige Book, which is a collection of anecdotal evidence about US economy reported by Federal Reserve’s business contacts. The reports painted a mixed picture of the US economy as nine of Federal Reserve’s twelve districts showed modest growth on the back of growth in consumer spending through the holiday season. At the same time nearly half of the twelve districts reported overall declines in manufacturing activity due to the strong dollar and weak demand from overseas. Live dollar index shows the ICE US Dollar index, a measure of the dollar’s strength against a basket of six currencies, edged down 0.1% to 98.944. The Dow Jones Industrial Average slumped 2.2% to 16,151.41, posting a 7.3% loss so far this year. The S&P 500 dropped 2.5% with all ten main sectors finishing in the red led by consumer-discretionary and health care stocks, down 3.4% and 2.9% respectively. Energy stocks fell 1.8%. Nasdaq Composite sank 3.4%. Investors will be focusing now on corporate earnings reports which will provide further guidance for stock prices. Analysts estimate earnings for S&P 500 members fell 6.7% in the fourth quarter. Today at 14:30 CET initial jobless claims and continuing unemployment claims, as well as December Import Prices will be released in US. At the same time Federal Reserve Bank of St. Louis President James Bullard will speak on US economy in Memphis.
European stocks ended higher on Wednesday as better-than-expected economic data from China bolstered market sentiment. Customs data showed Chinese exports rose 2.3% in yuan terms in December while they recorded better-than-expected decline of 1.4% in dollar terms. The euro strengthened against the dollar ahead of the release of the minutes from the European Central Bank’s December policy meeting. The Stoxx Europe 600 index rose 0.4%, but Germany’s DAX 30 closed down 0.3% dragged down by 0.4% loss in Volkswagen on the news the carmaker has taken out a $1.1 billion dividend from its Swedish truck subsidiary Scania and Sweden has launched a preliminary investigation into suspected fraud by the carmaker after emissions scandal. France’s CAC 40 added 0.3% as consumer prices rose 0.2% in December, driven higher by a seasonal increase in the price of services.
In economic news, the decline in euro-zone industrial production in November was bigger-than-expected due to unusually warm weather. Today at 11:00 CET flash reading of fourth quarter GDP will be released in Germany. The tentative outlook is positive. And at 13:00 CET Bank of England rate decision will be announced. The central bank is expected to leave the interest rate unchanged at 0.5%. At 13:30 CET minutes from the ECB December policy meeting will be released.
Nikkei slumped 2.7% today following the selloff in equities in US and the decline in mining shares as oil prices edged lower. Data showing core machinery orders fell 14.4% in November from the previous month didn’t help buoy investor confidence either. The yen strengthened on the back of higher risk-aversion and volatility in Asian stocks.
Oil futures prices are falling today to fresh 12-year lows with WTI trading at a rare premium to Brent after US oil settled higher on Wednesday for the first time in eight sessions. February WTI closed up 0.1% at $30.48. However February Brent crude fell 1.8% to $30.31 a barrel on London’s ICE Futures exchange. US Energy Information Administration report on Wednesday indicated supplies of crude climbed 200000 barrels while gasoline and distillate stockpiles increased by 8.4 million and 6.1 million barrels last week. There are no signs of slowing global output as oversupply has resulted in global glut with global demand growth slowing. EIA data showed US oil production inched up by 8,000 barrels a day to 9.23 million barrels a day.