-Spanish election turmoil: No clear winner emerged from yesterday’s Spanish government election. Current prime minister Mariano Rajoy, as leader of the largest party following the vote, will get the first chance to form a government, but with insufficient seats to form a majority (even under a coalition with fourth-place Ciudadanos), it is likely that negotiations on a new government will be difficult. The left-wing Podemos party turned in a very strong showing. If no new government is possible, then a new election will be needed. Spanish government bonds fell in trading this morning, pushing the 10-year yield to the highest in five weeks while the IBEX 35 Index dropped 1.9 percent.
-Brent crude lowest since 2004: Brent crude slumped to the lowest level since 2004 with futures for February settlement on the London-based ICE Futures Europe exchange falling as low as $36.05 a barrel before trading at $36.43 at 10:52 a.m. London time. The drop comes as crude production in Russia reaches its fastest pace since the fall of the Soviet Union. The continuing oil rout has caught speculators off-guard as they cut short positions in the commodity ahead of the latest drop in prices. Things are so dire, oil ministers are starting to point to the ‘strong fundamentals’ that will lift prices. Meanwhile, Azerbaijan’s currency, the manat, is plunging after the oil exporter removed its peg against the U.S. dollar.
-Trade agreement: With the year almost over, investors are looking for the best trades of 2016 and luckily for them, there seems to be broad agreement on where bond funds need to be in the next 12 months. BlackRock Inc., Pacific Investment Management Co. and Prudential Financial Inc. all say debt from Europe’s less-creditworthy borrowers such as Portugal, Italy and Greece is poised to excel once again as the European Central Bank extends its quantitative easing program.
-China interest rates: China’s leaders intend make monetary policy more «flexible,» according to a statement from a meeting of top economic policymakers as the government prepares more stimulus to support its flagging economy. In what may be a major shift at the People’s Bank of China, the central bank has been surveying the country’s lenders on the possibility of removing its benchmark deposit and lending rates. Policymakers have been moving toward creating what the central bank calls an interest-rate corridor to guide borrowing costs after policymakers scrapped a deposit-rate ceiling in October. Shares on the Shanghai Composite Index added 1.8 percent to close at a three-week high.
– Toshiba forecasts massive $4.5 billion annual loss: Toshiba expects to post a $4.5 billion loss this year as it deals with the aftermath of a massive accounting scandal. The estimated loss is significantly higher than analysts had expected, and is six times more than the 90.5 billion yen ($734 million) loss it posted for the first half of the year. Some of the losses are associated with a huge restructuring plan Toshiba announced Monday. The company will cut about 6,800 jobs in its consumer electronics divisions by the end of March, and another 1,000 employees at its headquarters, according to company statements released after markets closed in Tokyo. Toshiba shares plunged 10% Monday in anticipation of the reorganization.
-Why the bull market in stocks isn’t dead yet: Don’t write off the bull market in stocks just yet. Yes, there’s a flurry of threats that could bring about the bull’s demise in 2016 — U.S. stocks aren’t cheap, China’s economy continues to stumble and the Federal Reserve is removing the easy-money punchbowl that kept the good times rolling on Wall Street. But market professionals surveyed by CNNMoney believe that the U.S. stock market will claw its way past these obstacles and reach new heights next year. On average, survey respondents estimate the S&P 500 will end 2016 at 2,194 — up 9% from Friday’s close. That would represent a solid rebound from 2015’s lackluster performance. The S&P 500 is down over 2% so far this year, putting it on track for its worst year since the 2008 financial crisis. «We think this cyclical bull market has more room to run and expect a good (but not great) return for the stock market in 2016,» wrote Scott Wren, senior equity strategist at the Wells Fargo Investment Institute.
-Gas falls below $2 a gallon It’s here: The average price of a gallon of gas nationwide has fallen to less than $2. The U.S. average hit $1.998 a gallon on Monday morning, down from exactly $2.00 on Sunday, according to AAA. Gasoline hasn’t been this cheap since 2009. The $2 price is a milestone, but cheap gas was already available in most of the country. More than two-thirds of gas stations nationwide are selling gas for less than $2 a gallon, according to the Oil Price Information Service, which tracks prices for AAA. And virtually every state had some stations already selling gas for less than $2. «The only question is how long we stay below $2 — is it days, weeks or months,» said Tom Kloza, chief oil analyst for OPIS. «I happen to think that this will be something that persists into at least January.»