Oil prices fell along with the broad markets as concerns over the global economic slowdown persisted.

Oil

Markets were resilient a week ago Friday in response to OPEC announcing an increase in oil production. That did not prove to be the case as the week turned over and the commodity markets were decidedly negative.

The route of oil has been on-going since mid-2014. The short-term movement of oil is very unpredictable. Longer term, however, the impact of lower oil prices are increased efficiencies and decreased exploration. Increased efficiencies should spell improved profit margins. More importantly, decreased exploration will result in lower future supplies as existing well production decreases each year. The kicker is global demand is estimated to expand consistently over the next five years. This combination could create a boom in oil prices in the future. How far do they need to fall before this inflection point is reached? Tough to say.

US Data

Core retail sales increased 0.5% beating the 0.4% expectation. In addition, Consumer Sentiment rose to 91.8. The increase was related to improved job opportunities and lower gas costs. The bad news is that with continued falling import prices, -9.4% year over year[1], much of the US’ consumption is likely to be from imported goods.

Eurozone

GDP for the Eurozone came in at 0.3%, meeting expectations[2]. It certainly has some way to go, however given weak global trade, the positive production number is definitely welcome. Although international trade is currently weak, the Eurozone will likely benefit from a strengthening dollar and improved US consumer confidence.

The GDP forecast for France was lowered as their central bank cited terror attacks as having a substantial impact on tourism.

Japan

Previously reported GDP data for Japan reflected a recession, however, the most recent revisions released last week showed annualized GDP growth at 1.0%. Despite this news, the Nikkei 225 lost 1.3% across the week on global economic concerns[3].

Conclusion

The Oil markets, concerns over the slowdown in China, and expected Federal Reserve action all have undermined the holiday rally. There are two weeks to go and should external noises calm, the consumer has continued to support growth. In turn, reports of successful retails sales should strengthen market performance into the year-end.

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[1] www.mfs.com – week in review

[2] www.investing.com – economic calendar

[3] www.troweprice.com – weekly market wrap-ups