The Putin death cross

December 12, 2014

What do we call the moment when the  Russian ruble and a barrel of West Texas crude intersect? How about the Putin death cross? (Credit to Reuters Americas markets editor Dan Burns on this one).

The price of crude plunged through $60 a barrel late on Thursday and headed down through $59. Before long, the number of rubles a dollar can buy will be greater than the price of oil (no, this isn’t a perfect analogy, as we’re dealing with two currencies and a commodity, but let’s go on anyway).

The equity markets largely shrugged off the oil woes, but with liquidity diminished near the year’s end we should watch for losers among those who had taken long positions in the energy market, refiners, shale names and others. We should also watch for attendant selling in Apple, Google and other big-cap names that often serve as places to park money in the stock market.

The fun doesn’t end there. We’ll see later in the day if oil’s decline has sapped the appeal of Treasury Inflation Protected Securities, just as those bonds were starting to get off the mat. TIPs have had a rough go of it, given nobody sees inflation, but it had appeared things were changing. Reuters’ Richard Leong will have a story on that later in the day.

There are other factors lowering rates, too. Citigroup points out in its most recent interest rate survey that 65 percent of respondents expect yields to fall if Greece (still messed up) has to call early parliamentary elections – so the global contagion thing is alive and well.

Separately, markets were once again contending with the possibility of a  U.S. government shutdown that some traders said was a catalyst for the late-day pullback in the equity market.

The uncertain outcome of the price of oil falling through $60 a barrel – and those companies tied to energy production and refining – remains the larger issue. But this underscores the ways in which the United States is not devoid of political risk of its own. This wasn’t going to turn into the kind of shutdown that got everyone all nuts last year, but it sure is annoying.

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What would the departure of Putin mean to Russia and the oil markets?

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