U.S. shares erased Thursday’s minor gains on Friday’s session, resuming the downward trend observed last week. The ongoing rout in energy prices has been seen as the cause, although this week’s Federal Open Market Committee (FOMC) and its likely interest rate hike has spurred concerns worldwide over the possible implications of such a move by the Federal Reserve. The Standard & Poor’s 500 index declined 39.86 points, or 1.94%, to trade at 2,012.37. Friday’s declined totaled the index’s weekly loss at 3.8%, marking its steepest loss since August. The energy sector led the decliners with a 3.4% decline while no sector moved out of negative territory. The CBOE Volatility Index, which offers the implied volatility on the S&P 500, has risen steadily over the course of last week, adding 64% to settle at a level of 24, markedly higher than its average of 20. The Dow Jones Industrial Average fell 309.54 points, or 1.76% to trade at 17,265.21, posting a 3.3% weekly decline. The Nasdaq Composite dropped 111.71 points, or 2.21%, to close Friday’s trading session at 4,933.47, smashing through the significant support level at 5,000. Overall, the tech-heavy index posted a total of 4.1% in declines over the course of last week.
Crude oil remained around multiyear lows in early Monday trading in Asian markets after a new report from the International Energy Agency (IEA) has shown that the agency expects a slowdown in demand next year. The report has detailed an alarming decrease in global demand, from 1.8 million barrels a day in 2015 to just 1.2 million in 2016. OPEC’s high output policies have also been cited in the report as a cause for price declines, along with Iran’s expected re-entry to market after sanctions will be lifted from the country. Most telling, however, was that OPEC posted similar expectations of demand in 2016, signaling the possibility of more declines as the market moves into next year. Crude oil was last seen trading at $35.43 a barrel, down 17 cents, or 0.48% in Monday’s early session. Brent oil 20 cents, or 0.61%, to trade at $37.73 a barrel. Both oil variants have lost more than 15% over the last two weeks, marking multi-year lows not seen since 2008 and 2009.
This week’s economic data releases begin today with the release of the Japanese Tankan Large Manufacturers Index, followed by U.K. inflation, German economic sentiment, as well as U.S. inflation data on Tuesday. On Thursday, data releases begin with German manufacturing PMI, U.K. unemployment and the long-awaited FOMC by the Federal Reserve. The central bank has been long expected to raise interest rates, with the market betting on a change in monetary policy this week.