As the abbreviated holiday week commences, oil markets remain under pressure with Brent-linked crude futures contracts for January delivery reaching an 11-year low in trading in London this morning. The impact of sustained low energy prices has now rippled into every facet of the global economy. Media reports surfaced over the weekend that Saudi Arabia may float some state-owned enterprises in an attempt to free up cash to offset slumping state oil revenues and close a bulging deficit gap. Meanwhile the fallout of lower fuel prices in high-yield and equity markets in the U.S. continues. Among the latest causalities is Houston-based Cheniere Energy CEO Charif Souki, who was relieved of command over the natural-gas company last week after a revolt spearheaded by activist shareholder Carl Icahn.
Spanish election results inconclusive. Prime Minister Mariano Rajoy’s People’s Party lost its majority in national elections over the weekend, forcing it to seek coalition partners to retain control over the government. Anti-austerity party Podemos captured 69 of the seats up for grabs with a pledge to reject European Union-imposed debt-cutting measures. If no coalition can be constructed, a further round of voting will occur by March.
Small step forward for Puerto Rico debt talks. On Friday the Puerto Rico Electric Power Authority announced that it had reached a tentative agreement with creditors that would see over $8 billion in debt restructured. The discussions have been put on hold until tomorrow as details are hammered out. If successful, the negotiations may point the way to further compromises in advance of a Supreme Court session in 2016 to discuss whether Puerto Rico’s government should have access to Chapter 9 bankruptcy rights.
Currency Collapse. A decision by the central bank of Azerbaijan to allow the nation’s currency to float freely resulted in a decline of more than 48 percent versus the U.S. dollar in trading on Monday. The manat rate’s sharp decline was driven in part by reduced expectations for development of the Central Asian nation’s massive oil and natural-gas reserves.
Putin to appeal to courts. After Ukraine defaulted on a roughly $3 billion debt payment to Russia last week, the Kremlin has announced that it plans to take legal action against its neighbor in London courts. Ukraine’s economy has reached a point of near collapse after Russia annexed the Crimea and supported separatists in a civil war in the eastern part of the country.
