US stocks are poised to kick off on a weaker note with investors exercising caution against a backdrop of a fresh fall in oil prices and a sliding euro as speculation mounts over whether Greece will exit the euro.
Late this morning, US stock index futures indicated the S&P 500 will open eight points lower at 2,050, with the Dow Jones 62 points lower at 17,770. Nasdaq is seen kicking off 18 points weaker at 4,212.
This morning US crude fell to $51.40 a barrel, its lowest since May 2009, before recovering a little to trade around $51.90. Meanwhile, Brent crude for February dropped as low as $55.25 a barrel, also its weakest since May 2009, before edging back to $55.67, down 75 cents.
Jasper Lawler, market analyst at CMC Markets, says that with little economic data to work from and minimal corporate news at the start of the year, US markets today, at least early on, will likely be heavily exposed to oil price movements.
New York will also be closely eyeing developments across the pond following a report from Germany’s Der Spiegel magazine on Saturday that the German government sees a Greek departure from the euro as almost unavoidable, especially if the opposition Syriza party wins the upcoming Greek election. Syriza wants a renegotiation of the terms of Greece’s €240bn bailout by the EU and IMF.
Talk of a ‘Grexit’, Der Spiegel magazine from European Central Banks (ECB) president Mario Draghi that the Bank may act to stimulate the eurozone economy led to the single currency touching a nine-year low versus the dollar early this morning.
The euro fell by 1.2% against the dollar to $1.1864, marking its weakest level since March 2006, before recovering slightly to $1.194. That means a drop of 20 cents, or about 15%, since May 2014.
More broadly, Lawler notes that with the Federal Reserve having ended its quantitative easing programme, 2015 is widely accepted as the year that US interest rates rise.
He says: “Zero-bound rates and QE have been rocket fuel to stock markets for going-on six years. Without the fuel at high altitudes, markets will decelerate and eventually fall to ground. The deceleration must come first so with rates expected to remain low into mid-year, that still leaves room for further equity gains in 2015.”
On the corporate front, carmakers General Motors and Ford are expected to be some of the biggest movers when they report December car sales on Monday. November saw the highest car sales numbers in decades, so December is expected to show a slight pullback.
Nevertheless, with low oil prices and low financing rates expected to continue, and recalls of defective vehicles hopefully set to decline from all-time highs, Lawler reckons 2015 is set up to be a good year for US carmakers.
Vehicle recalls in the US over 2014 topped 60 million for the first time in a single year, largely because of the rush by carmakers to prevent more injuries and deaths from defective ignition switches and faulty air bags.