World oil prices are now nearly 40% lower than they were in June. Oil prices saw further steep falls after the OPEC cartel announced last Thursday it would maintain its output levels despite global oversupply.
Paul Sommerville, of Sommerville Advisory Markets, says that while the equity markets have been relatively steady over the last few weeks, there has been huge moves in the commodity and foreign exchange markets, especially when it comes to oil. He explains that when assets move very fast in financial markets, stresses and strains become evident. He says the US consumer obviously benefits from lower oil prices because they are passed on through the pumps very quickly there, while consuming nations such as China and India do very well from the falls but the stresses hit the likes of Russia. The country is a huge oil producer and their currency has fallen 40% against the dollar this year. It also impacts on countries like Venezuela - which has become the main worry for the bond markets. The bond markets now perceive that there is a good chance that Venezuela will renege on its debt.
Describing as "incredible" what is happening in the foreign exchange markets at the moment, Mr Somerville says that every central bank around the world is trying to talk down their currency, adding that currency wars are going on at the moment. He says the European Central Bank has been somewhat successful in this course of action in the last three months. The ECB chief Mario Draghi is due to speak at a press conference later today in Frankfurt and he is expected to talk down the euro again, the analyst says. On today's ECB meeting, Mr Sommerville says there will be no change in rates whatsoever, but what is expected is some more "jawboning". After announcing a lot of policy moves during the year, Mr Draghi has to wait and see if they are working, he adds.
***
MORNING BRIEFS - Both Aer Lingus and Ryanair have published passenger numbers for November. Aer Lingus said the total number of passengers it carried in November - including on Aer Lingus Regional - was 702,000. That is down 3.6% compared to November 2013, and brings total passengers for the year to the end of November to 10.373 million. But Ryanair passenger numbers grew by 22% in the month to over 6.35 million customers, bringing its annual traffic to November to 85.4 million customers.
*** The European Central Bank is expected to leave interest rates unchanged today and wait for next year to decide whether to take the leap to government bond-buying. The ECB's monthly rate meeting will focus on the debate over quantitative easing in the euro zone, as recent figures have pointed out European weakness and America's strength. A decision on that may come as early as the three months of next year.
*** Carphone Warehouse is announcing an investment in a new data centre to support the roll-out of its new mobile operator next year. The new mobile service will launch in July and targets 6% of the market within the first five years. The data centre - which will officially open in January in Citywest in Dublin - will house the infrastructure to develop and run the service. The move is a total investment of €30m, leading to the creation of up to 50 full-time jobs, as well as indirect employment through indigenous partnerships.
*** Venture capital firm Hoxton Ventures is launching a €6m early stage venture capital fund for Ireland. It is part of its overall $40m fund set up to bridge the gap between Europe and Silicon Valley. The €6m will focus on Irish investments and this will be helped by the appointment of Dylan Collins as a partner. He is the Irish technology entrepreneur behind SuperAwesome - the biggest children's ad network in the world, Jolt Online - bought by Gamestop in 2009 - and DemonWare. This is all happening in partnership with Enterprise Ireland. Hoxton has been meeting Irish entrepreneurs for the last few months, has reviewed a number of investment opportunities and expects to make several investments in Irish startups over the coming three years.
