Oil remains volatile, with prices falling despite low US stocks.
UK-based banks are swapping their liquid assets for the illiquid assets of European lenders — but does the resulting mix have a lower or higher risk of contagion?
Use of the renminbi to settle cross-border trades fell.
Oil prices are continuing their volatile path, ‘tumbling’ to $97/bbl (January West Texas Intermediate) and $107 (January Brent). The reasons were continuing concerns about the eurozone crisis and the Chinese economy. Oil thus continues to show its tight coupling to the economic outlook in a balancing feedback loop. The falls would have been greater but the US Department of Energy announced last week that crude oil stocks are at the lowest level since January 2010, and stocks of distillates (including diesel and heating oil) are at their lowest level since December 2008. At the start of what promises to be a cold winter, that is not good news.
UK-based banks have been swapping assets with lenders in countries hit by the eurozone crisis, helping the latter to increase liquidity (in the face of falling creditworthiness), and charging handsomely for the privilege. These deals will bring bonuses for the individuals making them, but what is the impact on the organisations? As the liquidity of each party moves towards a common average, the FSA has warned of an increased risk of financial contagion. And a completely illiquid asset is worth zero.
US reports that the renminbi would soon replace the dollar looked premature as the People’s Bank of China revealed that the amount of cross-border trade settled in the renminbi fell for the first time.
And, for the record, two Facebook pages were created for Permabusiness today: one for the business, and one for the community.