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Nikkei plunges more 632 points on oil price collapse

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Yeah, cheap affordable oil will spell the death of Japan. What this economy needs is really, really, really expensive imported energy.

18 ( +21 / -3 )

Japan should use this opportunity to buy all the oil it can and store it for a rainy day,,,

11 ( +14 / -3 )

I just can't understand how the falling price of oil is having such a huge effect on the world economy. Shouldn't this make it cheaper to do almost everything? Drive, produce, make plastics etc. Sure there are sectors that would be affected, but I almost feel there is some form of collusion going on, but I don't understand who it is benefiting.

20 ( +22 / -2 )

What's good for consumers is bad for business.

17 ( +18 / -1 )

I just can't understand how the falling price of oil is having such a huge effect on the world economy. Shouldn't this make it cheaper to do almost everything?

The stock market often has very little to do with the health of the real economy since it also prices in events that happened in the past. So for example: A fall in oil prices will be good for consumers and the economy going forward since prices will fall and people will be able to buy more. But its bad news for some companies who paid high energy/materials/transport costs to produce the inventories sitting in their warehouses which will now have to be discounted to compete with goods being produced today. The fall in the market reflects these profits being wiped out.

11 ( +12 / -1 )

The dollar dropped to 117.26 yen from 117.59 yen Tuesday in New York. A strong yen hurts the profitability of Japan’s exporters.

Let's play "spot the sentence that was inserted by an LDP/Abe/Kuroda propaganda editor"!

5 ( +8 / -3 )

“drown in oversupply”

Seriously?

7 ( +7 / -0 )

To understand what is going on, besides usual market panic, a couple of factors must be considered to explain why a drop in the price can create worry in the market.

One is that supply is greater than demand not just because of excess production but because of other economic factors creating uncertainty about the future, especially over-accumulation of other goods (China has build enough new cities, for example), so there's less productive activity and thus less demand.

Another is that fossil fuels, especially easily accessible oil, have long been an easy wealth generator--think about how much it would cost to pay someone to physically provide the same amount of calorie power as a barrel of oil and why oil companies have been some of the most profitable for many decades. But now because the extraction costs have gone up, the price is sinking and climate change means a lot of potential wealth must be left in the ground, there is a huge present and future loss of wealth.

3 ( +5 / -2 )

I just can't understand how the falling price of oil is having such a huge effect on the world economy. Shouldn't this make it cheaper to do almost everything? Drive, produce, make plastics etc. Sure there are sectors that would be affected, but I almost feel there is some form of collusion going on, but I don't understand who it is benefiting.

I think slumping oil prices are more of a symptom of a slow or slowing global economy, rather than a cause. If your currency is heavily dependent on oil, like it is where I live, then it will have a huge impact on the price of imported goods.

2 ( +2 / -0 )

A certain amount is due to depressed demand in resource-exporting countries such as Australia and Brazil, but mostly it is speculation by the sophisticated and panic by the sheep. Let's just hope it does not turn into a self-fulfilling prophecy.

0 ( +1 / -1 )

The theory is that the drop in oil price is caused by a low demand of it which is caused by factories not getting orders to make stuffs. The chain is long and complicated, but at the end of the line it comes down to consumers not buying stuffs which means profit will be down. Nothing scares the leeches in Wall$treet more than the phrase "profit is down".

Don't expect "prices" to be cheaper, because producers are going to let supplies run out to avoid lost, which in theory will push "prices" up again.

0 ( +2 / -2 )

In this country of Rising Sun, Nikkei has risen only twice this year ! Free fall...reporters are struggling to explain such a steep drop today.

0 ( +1 / -1 )

"The theory is that the drop in oil price is caused by a low demand...."

The main factor here is supply. OPEC and Saudi are intent on keeping the taps open to drive US shale operators out of business ("With friends like that who needs enemies.")

Added to that is Iran's sanctions lifting.

7 ( +7 / -0 )

I guess the days of cheap fuel are numbered. I remember in 2006 that gas got up to over ¥200 per liter. A glut economy is always destined to fail.

0 ( +1 / -1 )

Some guy at Salon pointed out:

A lot of high-yield debt was packaged into collateralized loan obligations (CLOs), resembling the securities composed of mortgage loans during the housing bubble. Other debt went into mutual funds marketed to ordinary investors, not just the big boys. And energy-related junk bonds, the raw material inside these other derivatives and investments, “could be worth close to zero,” according to Gretchen Morgenson at the New York Times.

But that would impact securities, not equities. Global stock markets were due for a correction anyway; once the stimulus of lower energy prices is felt in the market, things should stabilize.

2 ( +2 / -0 )

My portfolio has taken a massive hit this year. All of last year's gains have been wiped out in the space of 3 weeks! Hopefully these falls are but a blip.

1 ( +2 / -1 )

Stocks are on sale!

1 ( +1 / -0 )

Ah... What is it that always happens to bubbles? Well, the asset bubble that has been fueled by the FED's ZIRP "money"printing is passing a bit of gas. But I suspect, as does RBS, that there's much more flatus to be expelled. Poof!

0 ( +1 / -1 )

I just can't understand how the falling price of oil is having such a huge effect on the world economy.

The reason is rather simple. There is an oversupply of oil, because oil producers expected there to be a demand for oil. They expected the demand because economists predicted economic growth, and more oil consumption as a result.

Unfortunately, the increase in demand never occurred, because consumption didn't increase, and consumption didn't increase because the economists and politicians appear to be wrong about economic growth, and the health of national economies.

Poor demand for oil goes hand-in-hand with poor demand for other goods as well. Prices for iron, steel, and other metals are also dropping, which are more indicators of a drop in demand, consumption, and economic health. This can only spook the stock market into a selloff, because since the economy isn't doing as well as many had hoped, increased business and sales have not occurred (except in a few places), and this lack of sales will affect earnings, and stock prices.

In time, low oil prices will improve the economy, but we are more than a year away from that happening.

1 ( +4 / -3 )

yet fuel surcharges remain in effect for months as oil has been oversupplied all this time, and the dollar to yen today at 116,with global pricing, but what is odd is that there are more automobiles not hybrids being driven than any period in time for Japan yet gas remains high at the pumps, and the excuse of refinery cleaning just doesn't cut it as my counterparts in the US say, its all lies and more white collar criminals at the stock exchange. This is clear and cut currency and economic strangling and manipulation and Japan should be the leaders to put these criminals behind bars.

3 ( +3 / -0 )

And to think that it was only a decade ago that the global media were awash with the "certainty" that we had reached "peak oil," and from here on out, EVERYTHING would be different? There was a "vast consensus" the "very soon the oil fields in Saudi Arabia and elsewhere would never again be able to produce enough energy to supply the world's population." And as for America's production becoming perhaps THE major factor in determining energy pricing? Yeah, right! Those days were clearly over...remember?

Turns out...not so much. So much for "consensus."

0 ( +2 / -2 )

bjohnson23: " This is clear and cut currency and economic strangling and manipulation and Japan should be the leaders to put these criminals behind bars."

Are you kidding? Japan practically created currency manipulation and stepped in the limelight again under Abe and Kuroda's intentional deflation (which they still deny). Leaders will never put the criminals behind bars when the criminals ARE the leaders themselves.

4 ( +5 / -1 )

When markets are in panic mode, only the negative points are entrenched in traders & investors actions. We had almost 4 weeks of relentless selling.

In perspective, cheap oil is positive for consuming countries like Japan & China.

After the sharp mark-down of Asian stocks, including China & Japan, stocks now offer value for mid term & long term investors. Expect stocks to bottom & range soon. Time to buy some, not sell.

1 ( +2 / -1 )

Tina, agreed

-4 ( +0 / -4 )

Cripes, I'd hate to see what the almighty Nikkei does if oil prices skyrocket...

0 ( +1 / -1 )

London FTSE 100 is a whisker away from official bear market territory. The price of oil is a reflection of supply and demand. Gold is the only riser emerging unscathed from market turmoil. Analysts are convinced that the Chinese economy is facing imminent collapse.

http://goldprice.org/gold-price-hong-kong.html

1 ( +1 / -0 )

Cheap oil is good for many businesses but what ppl perhaps miss is why there is so little demand for oil? The reason being reduced consumption (especially from China) meaning that businesses are producing less, reduced energy demand, reduced demand for oil, etc etc. Cheap oil is not a driver of the economy, it is the symptom of a poor global economy.

But in the meantime, good for cheap international flights! :D

1 ( +1 / -0 )

Wow. The USD dropped 0.3 yen against the yen?! Catastrophe!

BTW, all of you oil experts going on about supply and demand are on the wrong path. Financial instruments similar to subprime real estate collections were created for oil loans and their value is worthless now. The market realizes that large players holding those are going to lose big money on those, like in 2008, which will affect the entire economoy as the subprime/lehman shock did.

0 ( +1 / -1 )

The stock market often has very little to do with the health of the real economy since it also prices in events that happened in the past. .... But its bad news for some companies who paid high energy/materials/transport costs to produce the inventories sitting in their warehouses which will now have to be discounted to compete with goods being produced today. The fall in the market reflects these profits being wiped out.

Spot on.

0 ( +0 / -0 )

IEA releases Oil Market Report for January.....Supply and demand, oversupply would be more to the point

http://www.iea.org/newsroomandevents/news/2016/january/iea-releases-oil-market-report-for-january.html

0 ( +0 / -0 )

Could it be, that the " great global monetary stimulus programs" created global bubbles, through fiat debt monetization? After all, global interest rates are the lowest since 6,000 BC. Global government debt is over $200 trillion, the highest in recorded history.

1 ( +2 / -1 )

Love it, love it, love it!

0 ( +0 / -0 )

"Financial instruments similar to subprime real estate collections were created for oil loans and their value is worthless now"

No one knows what those wide boys have been up to this time but you can bet it's very, very dodgy...

And we will all have to pay for it again!! :-(

1 ( +1 / -0 )

Plunge? Shouldn't this be good news for Japan? Oh yeah never mind, it's bad news for the investors who love exploiting expensive imported energy to Japan. That's why.

The main factor here is supply. OPEC and Saudi are intent on keeping the taps open to drive US shale operators out of business ("With friends like that who needs enemies.")

i thought it was targeted against Russia's energy industry for their involvement with Ukraine. Oh well, USA policies are backfiring.......again.

1 ( +1 / -0 )

0 ( +0 / -0 )

I am surprised that most of us have forgotten the low oil prices are caused by the US, as a desperate resort to punish Putin on his adventures in Ukraine and the Middle east

-1 ( +0 / -1 )

The stock market really should not be affected by the oil market. There is also plenty of storage for oil in Japan up in Fukushima with all the huge empty oil tanks used for water also. If there is a blockade, it would be good for Japan to have a huge supply on hand as a reserve. America does that.

The stock markets will go back up. They always do, so no worries on that.

-2 ( +1 / -3 )

JeffLee, where's the "fair bit of upside in Japanese stocks" that you mentioned could be expected 17 days ago?

http://www.japantoday.com/category/business/view/expect-less-and-buy-antacid-2016-investment-forecasts#comment_2120720

Just joshing of course. Not many would have predicted what has happened so far this year, except for the perma-bears who are of course usually wrong until they aren't.

0 ( +1 / -1 )

"JeffLee, where's the "fair bit of upside in Japanese stocks" that you mentioned could be expected 17 days ago?"

My timeframe is for 2016 (I believe that article was on the outlook for the year). The year is, um, 3 weeks old.

Anyway, how come the yen hasn't hit 200, like all the Japan skeptics told us it would by now? Indeed, why are investors snapping up the yen amid all the uncertainty and volatility? Food for thought, eh?

0 ( +0 / -0 )

@ shonanbb

The stock markets will go back up. They always do, so no worries on that.

Tell that to China...

0 ( +0 / -0 )

There are many more factors than just the low price of oil for stock market declines. The main concern is the slowing of the world economy; mainly because of the slowing Chinese economy.

0 ( +0 / -0 )

"Tell that to China..."

The Shanghai market is down only slightly from a year ago.

0 ( +0 / -0 )

Thanks to oil market plunge. Japan & China should take advantage of this "GIFT" and buy cheap long-term oil contracts and oil firms and oil related resources. No need to fight over energy resources in the nearby sea and restart oil dangerous nuclear plants.

0 ( +0 / -0 )

My timeframe is for 2016 (I believe that article was on the outlook for the year). The year is, um, 3 weeks old.

I did say I was just joking :) No one can predict these short term shifts in sentiment.

But if one was looking for decent upside at the very start of the year, given the massive slump that has occurred one must be thinking that it now looks like 2016 has a huge pot of gold waiting at the end.

Anyway, how come the yen hasn't hit 200, like all the Japan skeptics told us it would by now?

Yes, anyone who said it would be 200 by now, was wrong. As for myself, I did a quick review, and I give myself a 7 out of 10 for what I could find.

On Mar 25 2015, I was looking for the yen to fall to 125, which it later did. http://www.japantoday.com/category/business/view/aso-urges-boj-to-be-mindful-of-weak-yen-risks/comments/popular/id/5242266

On May 28 2015, I was looking for further fall to 130, which admittedly turned out to be wrong. https://www.japantoday.com/smartphone/view/politics/policymakers-warn-against-excessive-yen-volatility

However by Aug 25 2015 I suspected that "The yen may have already posted its lows for 2015 against the dollar", which turned out to be spot on. https://www.japantoday.com/smartphone/view/business/chinas-slowing-economy-whats-wrong

In 2016 I still favour dumping yen for dollars at some point, but not sure today if now is a good time to start.

But I am not even considering risking any of my money on Japan's stock market until Abe is either out of power or he finally executes on his much more of his lofty promises. I think the Abenomics rally is over, and even if that turns out not to be the case, I don't see the potential rewards justifying the associated risk, when there are far more attractive things to do with ones savings in other places around the world.

Indeed, why are investors snapping up the yen amid all the uncertainty and volatility?

Speculators, rather than investors, I would say.

0 ( +0 / -0 )

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