Oil inventories stay in back seat, Europe and Iran driving

Quote of the Day

Change always comes bearing gifts.

Price Pritchett

Europe remains the main risk asset price driver but other things are happening around the world and some of these are also working their way into the mix as a market price driver. Overnight the Chinese government cut bank reserve requirements by 0.5% from Dec. 5 onward as China now seems to be moving toward an accommodative monetary policy. The move by China was welcomed in the market place as China now seems to be joining the developed world economies and slowly starting to stimulate the largest economic growth engine in the world.

Back to Europe... Finance Ministers agreed yesterday to guarantee as much as 30% of new bond sales from problem member countries to enhance the regions bailout fund and to enhance its ability to cap yields by also buying bonds. In addition the Finance Ministers are seeking a larger role for the IMF and the ECB in fighting the debt problems. Europe is continuing to move forward in trying to solve their debt issue problems with the market still somewhat skeptical that it is even a solvable problem in the short term. But at least for the moment the panic mentality has been somewhat abated. The cloud of uncertainty remains in place but it is not getting any larger at the moment.

The marginal improvement in Europe has resulted in global equity markets improving marginally on the week so far as shown in the EMI Global Equity Index table below. The Index is currently up 1.6% on the week as a result of modest rallies in the west. All bourses in the index remain in negative territory for the year with eight of the ten bourse still showing double digit losses. Three markets remain above the bear market threshold of 20%. Global equities are still mostly a negative driver for oil prices but as we have seen so far this week the momentum could be changing in the very short term.

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