MarketWatch rounded up the 10 most important news events of the past week. We focused on market-related issues, but we’ve included other subjects of interest to readers.
1. How much of a threat is Greece to the eurozone?
Despite the victory of the Syriza party in Greece’s elections and leader Alexis Tsipras’ loathing of the austerity bailout deal the country’s outgoing government made with eurozone authorities, European Central Bank executive board member Benoît Coeuré said on Monday that Greece will still have to repay its debt of 240 billion euros ($ 279 billion).
Darrell Delamaide believes eurozone officials ”will not be able to roll over the new Greek officials with their traditional bullying and blustering,” and that “Tsipras won’t compromise” as he seeks some relief of the country’s debt.
The prospect of a Greek default on sovereign debt helped push the euro to new lows this week, but Brett Arends believes the panic over Greek debt is overblown because even if the country refused to pay any of its debt, the default would amount to “less than 3% of the entire eurozone economy.”
2. Sinking euro and strong dollar
Matthew Lynn predicted this week that the euro EURUSD, -0.30% would fall to parity with the dollar, and then head even lower, because of the “tense game of brinkmanship between Brussels and Athens before a compromise is worked out.”
A lower euro means a rising dollar, and William Watts explained why this is hurting stocks right now.
Here’s a list of 15 U.S. companies that can be hurt by a falling euro because of high levels of sales to European customers.
3. Oil falls to six-year low
Crude oil prices hit a six-year low on Thursday, with the price of light, sweet crude for March delivery CLH5, +7.32% on the New York Mercantile Exchange slipping below $ 44 a barrel before recovering to close at $ 44.53.
While the drop in oil prices has been nothing short of breathtaking, investors can expect a typical commodity-price cycle, with a period of increasing production, and now increasing inventories, followed by a dramatic cutting of capital investment for new production, which will continue until prices recover significantly. Shawn Driscoll, manager of the T. Rowe Price New Era Fund PRNEX, +0.27% told Howard Gold this week that he expects oil to fall below $ 40 a barrel.
OPEC Secretary-General Abdalla Salem El-Badri said this week that he thought oil prices might have reached their bottom for this cycle and “will see some rebound soon.” Badri went so far as to say oil could eventually rise to $ 200, according to a Bloomberg report.
That runs counter to the prediction by Saudi Prince Alwaleed bin Talal last week that “we’re never going to see $ 100 anymore.”
Some major investors believe that now is the time to build up large holdings of oil-related stocks to be positioned for the eventual rebound in prices. Blackstone Group LP BX, +1.30% President Hamilton “Tony” James said the company was “scrambling” to invest up to $ 10 billion in energy companies, according to Bloomberg.
Two weeks ago, Jeff Reeves discussed how investing in oil stocks now could be painful over the short term, but very profitable over the long term.
4. Big Oil cuts back
Despite the decline in oil prices, Royal Dutch Shell PLC RDS.A, -1.38% reported an increase in fourth-quarter profits on Thursday, with improved profits in its processing business outstripping declines in the exploration and production division. But the company also said it would cut its capital expenditures on production by $ 15 billion over the next three years. Despite the profit and spending cut, Shell’s shares declined 3% on Thursday.
ConocoPhillips COP, +0.25% on the other hand, reported a fourth-quarter loss. The company announced in December that it would reduce 2015 capital spending by 20% because of the decline in oil prices. ConocoPhillips said Thursday it would lower spending by another 15%. Investors were pleased, sending the company’s shares up 1% on Thursday.