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article imagePrices tumble for both stocks and oil

By Ken Hanly     Dec 10, 2014 in Business
Stock markets in the United States, Canada, China, and Greece among other countries fell today after a sharp drop in oil prices yesterday and a further drop today.
OPEC decided earlier not to cut production, and now they predict a lower demand for crude in 2015 with economies such as China showing reduced rates of growth. The S&P index was the biggest percentage loser at 1.6 percent at 4PM in New York today. Big oil companies Concoco Phillips, Exxon Mobil Corp, and Chevron hit their lowest level since April of this year. The Dow also dropped 268.05 to 17,533 or 1.5 percent.
Michael James, of Wedbush Securities said: “Oil is lower on the reduced demand outlook and it’s not a surprise to see the rest of the market, at least in sympathy, going down on that. Without any news to prompt the market to move higher today, it puts the onus back on the bulls to see how much conviction they have in buying stocks.”
Oil prices slumped to the lowest levels in five years. OPEC lowered its prediction for 2015 as to how much oil would be needed by almost 300,000 barrels a day. The prediction is the lowest in 12 years. One group that is gaining amid all the gloom are the airlines who will profit from declining fuel prices. United Continental gained 1.9 percent, Southwest 1.8, and American Airlines Group by 1.3 percent.
The Toronto stock market S&P/TSX fell again today by a whopping 342.78 points to 13,852.95 with the energy group leading the tumble with a decline of 5.5 percent. The TSX is now down a total of 12 percent from its 2014 highs. It is now just 230 points away from wiping out its total gains for 2014. The Canadian dollar, the loonie, has been falling for some time and dropped 0.3 of a cent today to 87.11 cents US. On Wednesday, the price of crude contracts on the New York Mercantile by $2.88 to $60.94(US) a barrel.
North American markets were not the only ones to experience declines. The Shanghai Composite Index was down a whopping 5.4 percent to close at 2,856.27 the biggest percentage drop since August of 2009. The Chinese government's announcement that riskier bonds could no longer be used as collateral for loans was one factor in the drop. Zhang Gang, of China Central Securities said: "The policy change on bonds was the biggest drag on the market today as there's a liquidity crunch in the market. Investors have been overly speculative and the irrational surge has resulted in a bigger slump. The rally has ended." Recent data on Chinese trade was also week with a 6.7 percent fall in imports. The Japanese recession appears to be worse than predicted earlier. Fitch rating agency put Japan's A+ rating on negative watch. The agency said the downgrade was due to the high and rising government debt without any plan for dealing with it.
In Europe, Greek stocks were hammered after announcement of early presidential elections. As The Guardian reports: The Athens stock market plunged nearly 13 percent on Tuesday, its biggest one-day fall since December 1987, after the Greek prime minister’s shock decision to call early presidential elections. Markets feared that the high-stakes gamble by Antonis Samaras ... Voting for a new head of state will begin next week. Most polls predict that the leftist umbrella group Syriza will win any subsequent elections. They may even win an outright majority but even if they do not they will get the most votes. Under Greek electoral laws, this automatically awards them fifty extra seats in parliament. Syriza policies are all anti-austerity and will require even more government expenditures. Some of the policies are described here.
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