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Wall Street Breakfast: Oil Heads For Biggest Annual Decline Since 2008

Seeking Alpha

Dec. 31, 2014

Economy

Oil fell lower in thin pre-holiday trade ahead of a key U.S. supply report, heading for its biggest annual decline since the 2008 global financial crisis. Crude’s nearly 50% plunge this year, spurred by the largest U.S. output in three decades and OPEC’s refusal to cut production, has rocked global markets. Brent crude is down 2.5%, under $57/bbl again. WTI is down 1.5% at $53.32.

The U.S. Bureau of Industry and Security said it will allow companies to sell oil condensate that has been processed through a basic distillation tower, giving them a green light for export without violating a four-decade-old-ban. The agency also published a list of answers to common questions about crude exports, providing guidelines for the first time on an area that has been blanketed in confusion, although many are saying there is still a lot of room for interpretation.

Investors are speculating over where the U.S. equities market will head in 2015, after an overall profitable year despite an oil slump, geopolitical tensions and the end of QE. Prior to the final trading day of 2014, the Dow was up 9.9% when dividends are included and the S&P 500 15.4%. Despite falling back yesterday, U.S. stock index futures are all up about 0.1%.

After finishing at the end of the line the previous year, Shanghai stocks are closing 2014 as the world’s top-performing major equity market. With most of its gains coming in the past six weeks, the Shanghai Composite Index ended up 52% for the year, as hopes for more aggressive policy stimulus to counter its economic slowdown boosted banks and brokerages.

Lithuania is poised to become the 19th member of the eurozone at midnight tonight, following the path of other former Soviet satellite states, Latvia, Estonia and Slovakia. "We don’t have to accept the pressure of being a small country with a little currency," said Valdas Adamkus, who was president of Lithuania for about a decade until 2009. "Now we are members of the eurozone."

Stocks

REITs were among the hottest stocks of the year, producing a total return of 32.3%, including dividends, according to the FTSE Nareit Equity REITs Index. Analysts are predicting REIT shares to continue to perform well in 2015, after climbing this year to the biggest gains in nearly a decade on low interest rates and an improving economy. Winthrop Realty Trust (NYSE:FUR) was the top-performing REIT in 2014, rising 68.3% this year.

The UAE's Abraaj Investment Management is pulling out of a bidding war with Kellogg (NYSE:K) for Egypt's Bisco Misr. Kellogg was the last to place a bid for the snack maker, offering 89.86 EGP per share - for a total purchase price of $144M.

Far exceeding payouts at other leading banks, Goldman Sachs (NYSE:GS) paid its top 121 London bankers about £3M ($4.7M) on average last year. Bankers' pay in Britain remains a hot topic, with many shareholders voicing criticism, after large bonuses were blamed for encouraging risk-taking and contributing to the financial crisis.

BP is investigating whether its in-house financial traders were involved in a forex manipulation scandal that led six banks to collectively pay $4.3B in fines, the FT reports. Though its main task is to manage forex risk, BP's (NYSE:BP) treasury trading unit also operates as a profit source.

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Today's Markets:

In Asia, Japan closed. Hong Kong +2.2% to 3234. China +0.4% to 23605. India +0.4% to 27499.

In Europe, at midday, London +0.3%. Paris +0.6%. Frankfurt closed.

Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -1.5% to $53.32. Gold -0.1% to $1199.50.

Ten-year Treasury Yield -2 bps to 2.17%

Today's economic calendar: