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Daily Agenda: Power Shifts: Saudi Throne and Greek Election
Chinese factory data shows weaker activity; U.S. home sales data on deck; U.K. posts strong consumer numbers.
Saudi Arabias King Abdullah, who had ruled the ultraconservative, oil-rich Middle Eastern nation since August 2005, has died, aged 90. Born in 1924, Abdullah watched his nation transition from dependence on U.S. oil producers developing and profiting off his nations massive reserves to the ascendancy of Saudi Aramco as the largest production and exploration company in the world. His successor, half-brother King Salman bin Abdulaziz, has already announced that there will be no immediate shift in oil policies for the Kingdom, with a brief rally in crude futures after the death of the former king to lose steam. The decision late last year by OPEC leaders, led by Saudi Arabia, to maintain output at 30 million barrels despite dropping prices continues to dominate risk narratives for crude oil markets. With rising North American production as a competitive threat and a weakened Russia that must keep supplies flowing to meet needs for cash, Saudi leaders appear to remain committed for now to a simple game of determining which countries can continue to withstand the pain of lower oil prices.
Greece holds national elections this weekend. Greek voters return to the polls Sunday for the nations general elections. In the wake of European Central Bank president Mario Draghis announcement yesterday of a massive new easing program, concerns over the potential government control of the euroskeptic, leftist party Syriza remains a primary risk narrative for sovereign debt markets in Europe. Polls currently show the party running in the lead.
China posts weak manufacturing activity numbers. HSBC manufacturing purchasing manager index levels for January released today registered marginally better than consensus forecasts at 49.8, a level that remains contractionary. Driven by low oil prices, the price subindex in the release reached a multiyear low of 39.9. The HSBC-sponsored index is broadly representative of midsized private sector operators, as opposed to the state-sanctioned measure, which focuses on larger companies.
Amount of Chinese banks sour loans increases. Fourth-quarter 2014 data from the China Banking Regulatory Commission released today indicated that nonperforming loan ratio for commercial banks in China increased to 1.29 percent. Critics have questioned the accuracy of the Commissions data gathering in the past, raising concerns that actual bad loan levels might be higher than reported. Earlier this month, Kaisa Group Holdings became the first major Chinese real estate developer to go into default in U.S. dollar-denominated debt.
U.K. cash registers felt holiday spirit. December retail sales data registered stronger than forecast, with a rise of 0.6 percent in the headline index over the prior month. Office of National Statistics figures suggest that cheaper fuel costs and the first major Black Friday discount season in the country left U.K. consumers in a buoyant mood through the holidays.
U.S. home sales data to be released. The National Association of Realtors in the U.S. will released existing-home sales data for December, with consensus forecasts for a slight increase over sales in the prior month. Analysts ascribed the sudden sales drop in November to unseasonal weather.
Earnings reporting season continues. In a major day for U.S. corporate earnings announcements, General Electric reported fourth-quarter 2014 earnings that were in line with analysts' consensus estimates, showing a modest increase for the three-month period and the fiscal year. Also announcing results today is fast-food giant McDonald's. Earnings fell well short of expectations at $1.13 per share, versus $1.40 for the same period in 2013.