Updated throughout the day
December 12, 2015
Panic in the junk bond market and a further oil price slump weighed heavily on stock markets on Friday. The S&P 500 was down 1.9%, the Nasdaq fell 2.2% and the Dow Jones Industrial Average tumbled 310 points. U.S.-traded crude dropped 3.1% to $35.62 a barrel, the culmination of an 11% plunge that was the biggest weekly fall since March.
Meanwhile U.S. high yield bonds posted their steepest decline since 2011, raising concerns that a six-year bull market in stocks and risky assets is ending.
On the other hand, U.S. retail sales increased 0.6% in November, surpassing expectations and providing ammunition for interest rate hawks.
Elsewhere in the world, selling of mining and energy shares hurt European indices. Germany’s DAX 30 index closed 2.29% lower at 10,356.66, and the UK’s FTSE 100 index plummeted 1.96% to end at 5,968.61 points. The French CAC 40 index lost 1.66% to 4,558.26, while the pan-European Euro Stoxx 50 index dived 1.88% to finish at 3,208.56 points.
Asian stocks also fell on Friday after reports that the chairman of China’s biggest non-state-owned conglomerate has gone missing. The Shanghai Composite sank 0.6%, the Shenzhen market fell 0.7% and Hong Kong’s Hang Seng was 1.1% lower. Japan went its own way, with the Nikkei Stock Average gaining 1% as the yen weakened helping to boost the earnings of exporters.
Here’s what else you need to know:
Climate deal final draft “agreed” in Paris. An French foreign office official told the AFP news agency the draft would be presented to ministers on Saturday. It follow two weeks of intensive negotiations among 195 nations. BBC
Missing Fosun boss said to be helping authorities. Chinese media report that Guo Guangchang, self-styled China’s Warren Buffett, is assisting Mainland authorities with an investigation. Fosun halted trading Friday after Guo mysteriously disappeared and should resume trading Monday. Guo’s disappearance is one of several vanishings recently. Citic Securities, China’s largest investment bank, said last week that it was unable to contact two of its top executives and last month Guotai Junan, one of China’s leading brokerages, said it could not reach its chairman and chief executive. Financial Times (paywall)
Surprising lift in China’s industrial production. The figures showed a faster-than-expected rise in November, suggesting the authorities efforts to boost growth could be working. The 6.2% increase in industrial output is the latest in a run of encouraging Chinese economic data. Meanwhile, retail sales rose 11.2% year-on-year, again pacier than expected. Wall Street Journal (paywall)
Alibaba to buy South China Morning Post. The Chinese Internet giant wants to reshape the media coverage of China, through the use of the Hong Kong English language daily. Alibaba says the Chinese government has no role in the purchase, but people are nervous that the company’s close alignment with the Communist Party could effect the news coverage. New York Times (paywall)
Third Avenue fund closure shakes credit markets. The liquidation of the biggest US mutual fund since 2008 has raised more anxieties about the country’s corporate bond market ahead of the Federal Reserve’s expected interest rate increase next week. High yield bond prices continued their slide. Activist investor Carl Icahn tweeted on Friday: “Unfortunately I believe the meltdown in high yield is just beginning.” Financial Times (paywall)
Saudi women hit the polls. For the first time Saturday, Saudi women are able to vote and run in a nationwide election. The women still cannot marry, enroll in university, or travel abroad without permission from a male relative. Some say the right to vote will do little to change this, but many female voters see voting as a major milestone. Wall Street Journal (paywall)
London finance vacancies drop by a third. Job vacancies in London’s financial services industry fell by 32% in November, as firms shelved hiring plans amid economic uncertainty. Vacancies are down 13% year-on-year. Bloomberg
Caterpillar loses president. Ed Rapp, group president for Resource Industries, is retiring early after being diagnosed with ALS, also known as Lou Gehrig’s disease. ALS is a progressive neurodegenerative disease. It has no known cure. CNBC
Car bomb hits near Spanish Embassy in Afghanistan. The Taliban claimed responsibility for the attack in the area that is home to embassies and a number of expatriates. Two Spanish police officers succumbed to their injuries, the Spanish government said on Saturday. CNN
DuPont and Dow Chemical to merge. Two of the nation’s oldest companies have been bitten by the strong dollar and falling commodity prices. The pair would be worth $130 billion. After the merger, the companies would split into three companies. Will the anti-trust regulators be impressed? Wall Street Journal (paywall)
You won’t believe this…
K-Pop group Oh My Girl detained at LA airport on suspicion of being sex workers. The eight members were travelling to America for an album cover shoot but were detained for 15 hours in customs. A statement from the group’s record company, WM Entertainment, said authorities held them after going through their costumes and props. They are now back in Seoul, while presumably LAX authorities search for justification for their actions by consulting the wit and wisdom of Donald Trump. BBC
Multi-million dollar U.S. mine-hunting drone can’t find explosives. A mine-detection system the U.S. Navy spent almost $700 million and 16 years developing can’t complete its most basic functions, according to the Pentagon’s weapon-testing office. CNN
Photo: paul.hartrick