Oil-Related Stocks And Currencies Suffer As Oil Hits Another Five-Year Low -- 2nd Update

By Josie Cox 

Oil-related stocks and currencies continue to suffer after the commodity hit yet another five-year low, turning the heat up on major oil exporting economies--two of which made monetary policy announcements Thursday.

Brent crude late Wednesday slumped to $64.24 a barrel, its lowest level since July 2009. Even though it recovered somewhat Thursday, it continued to exert fierce downward pressure on oil-dependent stocks and currencies.

Russia's ruble hit an all-time low against the dollar of 55.35 ruble per buck, compared with just over 32 at the start of the year, even after the Bank of Russia raised key interest rates by one percentage point to 10.5%.

Even though an interest rate rise would traditionally strengthen a currency, some economists said that this was a relatively moderate move compared with what the central bank might have done.

"This was the minimum that the CBR was likely to do," said Tim Ash, head of emerging market research for Standard Bank.

"I guess this shows that the CBR is loath to do anything radical--and is like a rabbit caught in the headlights," he added.

The Norwegian krone meanwhile fell to a five-year low against the euro after the central bank cut its key interest rate to 1.25% from 1.5% to combat slowing domestic growth and the tanking price of oil.

The krone lost almost 1.5% against the euro after the announcement, to trade just over 9 krone per euro, while Oslo's main stock index rose by around 0.2%.

The krone has depreciated around 7.4% against the euro since the start of the year. Norges Bank was broadly expected to keep rates on hold. It last cut in March 2012.

Norway is Europe's biggest crude exporter and Norges Bank said in a statement Thursday that "activity in the petroleum industry is set to be weaker than projected earlier."

On Wednesday, a report by Business Monitor International, a research unit of ratings company Fitch, said that the oil tumble had materially increased the risk of sovereign default in emerging markets, like Venezuela and Nigeria, that are hugely dependent on revenues from oil.

Nigeria's naira was trading around 180 against the dollar according to Thomson Reuters data Thursday, taking its year-to-date decline to over 10%.

Elsewhere Thursday, European shares dropped for a fourth consecutive day at the open, as global growth fears continued to permeate markets and political uncertainty in Greece lingered. Later the Stoxx Europe 600 recovered somewhat to trade broadly flat on the day.

That bucks the falling trend in Asia, and particularly Australia. On Thursday, Australia's Horizon Oil Ltd. saw its stock fall 10.5% while the country's third-largest oil company, Santos Ltd., lost 5.4% after it said it would slash capital spending by 26% next year and consider asset sales.

The firm is trying to fortify its balance sheet against tumbling oil prices. Among Australia's large-cap oil companies, Santos has been the hardest hit by crude oil's plunge.

Dubai's main stock index was around 6.4% lower during early European trade. In the U.S., the S&P 500 was indicated opening 0.3% higher having tumbled in the previous session, pressured by energy producers.

Futures, however, don't necessarily reflect moves after the opening bell.

Switzerland's central bank left interest rates on hold, and maintained its cap on the Swiss franc. It also projected that inflation will run at -0.1% next year, against a previous forecast of +0.2%.

Finally on Thursday, the European Central Bank said it provided EUR129.8 billion in four-year loans to banks in the second installment of a lending program aimed at raising the ECB's balance sheet and spurring new credit to the private sector.

Demand was greater than the nearly EUR83 billion provided at the previous offer of four-year loans in mid-September, but was below the roughly EUR150 billion takeup expected by economists.

As a result, the outcome, could further heap pressure on the ECB to expand its broad-based asset purchase program early in the new year, to include sovereign bonds.

The euro was trading around 0.4% lower against the dollar at $1.244.

-- Todd Buell contributed to this article

Write to Josie Cox at [e-mail]

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