Recap: Week Ending November 28, 2014

November 30, 2014

Markets across the globe closed the week mixed as US markets were closed for Thanksgiving. Last week US equities were closed Thursday with an early close occurring Friday. Futures closed early both Thursday and Friday but remained open in the morning. The shortened week did not have any affect on the NASDAQ 100 which closed the week up 2.03% while other major indexes lagged behind. The S&P 500 was able to move 0.2% higher on the week where the Dow Jones was only able to gain 0.1%. The Toronto Stock Exchange Composite Index, also known as the TSX, was one of the weakest equity indexes across the board as the price of crude oil hit multi-year lows. The fall in oil was also accompanied by a fall in gold prices. Despite the shortened trading week, the economic calendar was relatively busy with key figures scheduled for release every day when the market was trading. Monday saw the Markit Services PMI for November come in at 56.3, which was worse than the previous reading of 57.1 and the consensus of 56.8. Tuesday the US reported their Q3 GDP annualized which beat the consensus of 3.3% and the previous reading of 3.5% coming in at 3.9%. The market did not react to these numbers with the Dow Jones seeing extremely narrow range trading both days. Wednesday the US Durable Goods Orders for October were released surprising analysts coming in at 0.4%, beating the consensus of -0.6% and the previous reading of -0.9%. This beat caused a slight bid to enter the markets, pushing the Dow higher on the day, marking one of the only days which saw any real upside towards the close. The main catalyst on the week was an OPEC meeting regarding the prices of oil Thursday.

Over the course of the past few months the price of oil has fallen by a third, making many in oil producing countries nervous. OPEC, which stands for Organization of the Petroleum Exporting Countries, is comprised of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, The United Arab Emirates, Algeria, Nigeria, and Angola. It must be noted that neither Canada or the United States is a member. In recent times, oil production in the US has been at all time highs. This heightened supply is met with a weakened demand creating an excess amount of oil. Such an excess supply has pushed prices lower for months as the US continues to produce and supply the world market. This has made many countries such as Saudi Arabia angry as buyers have been believed to have shifted their interests to the US. As a result, a price war appears to have occurred with Saudi pushing the price lower and lower in an attempt to shut down US oil producers who cannot afford to produce at such low levels. The result of the OPEC meeting was no interference in the oil market; this caused a sell-off in the price of crude to levels that it has not seen in years. OPEC does not want to interfere and let the market set prices, which will in turn be better for countries like Saudi, who are lacking the presence of buyers for their oil. The sell-off in crude had a rippling effect on the TSX, which sold off heavily as the reality that many oil producers may have to shut down sank in. The TSX closed the week -2.42% lower with energy companies leading the way down. If crude, it able to maintain these levels for a while longer there maybe serious effects on such companies which may in turn dramatically affect the Canadian economy.

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