Investors stirred, not shaken by fiscal cliff

Updated 23 December 2012
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Investors stirred, not shaken by fiscal cliff

Global investors are betting Washington will overcome its budget deadlock despite an apparently serious setback. If they are wrong, there could be a sharp market reaction and the US dollar and Treasury bonds would be among the main beneficiaries, making for a very different dynamic to the euro zone crisis, where bond market pressure was instrumental in forcing policymakers to act.
Global stock markets fell yesterday, pushed lower by a drop on Wall Street, and the euro and oil prices also slipped as a new setback in talks to avert a US fiscal crisis and weak data out of Europe put investors on edge.
A proposal from Republican leader John Boehner to avoid the fiscal cliff failed to get support from his party, casting fresh uncertainty over negotiations to avoid automatic tax hikes and spending cuts in January. The three major US equity indices were off about 1 percent, with the markets also weighed down by a poor reading of consumer confidence.
Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock, said the only approach was to “hope for the best, but plan for the worst.” “Given the much greater downside from a fiscal cliff failure than upside from success, we continue to maintain our tactical defensive positioning,” Rosenberg said.


OPEC nears oil output deal ahead of key Vienna meeting

Updated 1 min 16 sec ago
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OPEC nears oil output deal ahead of key Vienna meeting

VIENNA: OPEC energy ministers expressed optimism Thursday they were nearing a compromise on oil output policy, with Saudi Arabia acknowledging that a big production hike would be “politically unacceptable” to archfoe Iran.
OPEC and non-OPEC partner countries are due to hold crunch talks in Vienna on Friday and Saturday to decide the fate of an 18-month-old supply-cut pact that has cleared a global oil glut and lifted crude prices to multi-year highs.
Saudi Arabia, backed by non-member Russia, is now racing to convince the alliance to raise production again in order to meet growing demand in the second half of 2018.
Adding an extra one million barrels per day to the market “sounds like a good target to work with,” Saudi Energy Minister Khalid Al-Falih said at a seminar organized by the Organization of Petroleum Exporting Countries (OPEC).
Regional rival Iran however is fiercely opposed to unwinding the agreed production curbs, as its oil industry is bracing for fresh sanctions following US President Donald Trump’s decision to quit the international nuclear pact.
Several other OPEC members, including Venezuela and Iraq, are also against major changes to the pact as they are unable to immediately boost production.
Signaling that positions might be softening, Saudi’s Falih acknowledged that “not every country can respond to an allocation of higher production” and said it was important to be “sensitive” to those concerns.
Allowing countries like dominant player Saudi Arabia to make up for the shortfalls of other members “may be a technical solution but it may not be politically acceptable to others,” he said at the Vienna seminar.
As the clock ticks down to the upcoming ministerial meetings, a face-saving compromise appeared to be in the works.
“We hope that there will be an agreement,” Iraqi Oil Minister Jabbar Al-Luaibi told reporters.
“Iraq is trying very hard to narrow the gap between the two blocs.”
UAE Energy Minister Suhail Mohammed Al-Mazrouei added: “I am very optimistic.”
Observers say the participating countries could simply agree to stop exceeding their quotas for cutbacks, and stick to the agreed target of trimming production by 1.8 million barrels per day (bpd).
The 24 nations in the pact, known as OPEC+, are currently keeping more than two million bpd off the market.
Most of the shortfall has come from Venezuela, where an economic crisis has savaged the nation’s petroleum production.
Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.