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After opening the day on a flat note, the Indian share markets have continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks from the FMCG sector and the telecom sector witnessing maximum buying interest. software and energy stocks are trading in the red.
The BSE Sensex is trading down 35 points (down 0.1%) and the NSE Nifty is trading down 7 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up 0.2%. The rupee is trading at 68.17 to the US$.
The euro is witnessing selling pressure today. The currency dropped to a 20-month low in Asia as investors assessed the implications of the resignation of Italian Prime Minister Matteo Renzi after he suffered a humiliating defeat in a referendum over constitutional reforms.
Moving on to the news from commodity markets... Crude oil is trading on a positive note today. Most of the gains are seen on the back of OPEC's Vienna meet last week.
The OPEC meet in Vienna took most of the headlines last week. The Organisation of Petroleum Exporting Countries (OPEC) met on 30 November to discuss a cut in crude output.
The OPEC agreed for a production cut starting January. The organisation, which accounts for a third of global oil supply, will reduce production starting in January by 1.2 million barrels per day (bpd) to 32.5 million bpd.
As a part of the OPEC deal, Russia has promised to gradually cut its crude output by up to 3,00,000 barrels per day in the first half of 2017.
All eyes are now set on Russia and other non-OPEC producers that are going to meet with OPEC on December 9.
While the above developments are final, the implementation depends on non-OPEC members such as Russia reliably committing to cut output at the meeting on 9 December. The decision also hinges on the speed at which American shale producers step up production.
Despite all this uncertainty, crude oil witnessed buying interest during last week after the OPEC decision to cut production starting January. This trend is visible in the chart below:
Until a few years ago, US$ 100 per barrel was the new 'normal' for oil price. And then this capricious commodity proved everyone wrong. Early this year, crude oil prices fell to US$ 30 per barrel for the first time in 12 years. The root of his turmoil has been the global supply glut.
Until now, OPEC had been pumping crude oil at record rates. Their goal was to drive down prices and drive out higher cost US producers.
But now, prospects for an OPEC deal have weakened. Oil prices continue to fall. The cartel's inability to stabilise prices come as no surprise. Asad Dossani, editor of Daily Profit Hunter, recently wrote that OPEC has lost control of oil prices. To know more on this, you can read his article titled OPEC Is Now Irrelevant.
In an extension of the frontiers of quantitative easing (QE), the Bank of Japan (BoJ) board member Makoto Sakurai said the central bank will continue to buy a massive amount of government bonds. Mr Sakurai says the strategy would be followed even under a new policy framework targeting interest rates. Markets shrugged off the announcement as they are of the view that the BoJ's bond-buying program is nearing its limits.
This announcement raised concerns about the Japanese economy. Economists and market participants are questioning the BoJ's policy measures. The BoJ still has plenty of work to do to reach its 2% inflation target.
Last month, the BoJ offered to buy unlimited amounts of five-year and two-year Japanese government bonds in order to keep ten-year JGB yields at or below zero per cent yield. BoJ governor Haruhiko Kuroda indicated to the Japanese Parliament that just because US interest rates are on the rise, doesn't mean Japan's must follow. Keeping ten-year yields at zero has emerged as a key part of the 2017 strategy of generation inflation through more government spending (fiscal policy).
If there's one place on this planet that epitomises all the wrong kinds of growth, the place is Japan. Too much money printing...too much debt...too much government intervention...too much stock market manipulation.
So why bother about Japan, you may ask.
Because that's where the rest of the world's central banks appear to be heading. Central banks' ownership of the world's assets has increased to about 40% of global GDP. Along with this, we have the problem of a massive debt bomb in the global financial economy. As Bill Bonner lays down the facts before you, the entire world has a debt problem - with US$ 223 trillion in debt, about three times global GDP.
We don't know about the timing. But the end is going to be ugly.
If you're interested in knowing what's really happening in the world of man and money, you can claim your free copy of Bill Bonner's latest book, Hormegeddon.
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