Macro issues driving oil, fundamentals take backseat

Quote of the Day

You learn something every day if you pay attention.

Ray LeBlond

Europe and the US continue to drive the market lower. Yesterday the second reading of 3rd quarter GDP in the US was revised downward by 0.5% to 2% growth but the market was expecting an unchanged level from the first reading and as such yet another negative market indicator. Also in the latest FOMC notes from the last US Fed meeting the Fed indicated that they do not expect a double dip recession but they do expect slow growth. They also indicated that they discussed additional stimulus to jump start the economy as well as adding another measure to their objectives...GDP.

Europe simply continues to disappoint the market on all levels. Today the latest gauge of European services and manufacturing output declined for the third month in a row as the sovereign debt problems and installation of austerity programs moves this sector of the world closer to another recession. Add a bit of fuel to the negative fire this morning the latest German Bund auction was under subscribed as even the solid countries are now being put in question by the bond market. The net result is all risk asset markets remain in sell-off mode including the oil complex.

Global equity markets are continuing to lose value as shown in the EMI Global Equity Index table below. The Index is now down 1.7% on the week widening the year to date loss to 17.3%. All bourses are in negative territory...including the US... with the remaining nine burses now showing double digit losses. The Index is now less than 3% below the bear market threshold of 20%. The equity markets are reflective of the tremendous amount of negative sentiment coming from Europe and a bit from the disappointing GDP result out of the US yesterday.

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