•Stocks expected to fall back toward 2022 lows in first half
•High inflation, recession, profit contraction are main risks
Investors ready to turn the page on the worst year for equities since the global financial crisis should brace for more pain heading into 2023.
That’s the blunt message from top strategists at Morgan Stanley, Goldman Sachs Group Inc and others, who are warning that stocks face fresh declines in the first half as corporate earnings succumb to weaker economic growth and still sky-high inflation, and central banks remain staunchly hawkish.
Oil prices rose by $2 per barrel last Friday after Moscow said it could cut crude output in response to the G7 price cap on Russian exports, putting the market on track for a second week of gains.
Brent crude was up by $2.22, or 2.7 per cent, to $83.20 a barrel, while U.S. West Texas Intermediate (WTI) crude was at $79.43 a barrel, up $1.93, or 2.49 per cent.
Russia may cut oil output by five per cent to seven per cent in early 2023 as it responds to price caps, the RIA news agency cited Deputy Prime Minister Alexander Novak as saying last Friday.
Russia’s Baltic oil exports could fall by 20 per cent in December from the previous month after the European Union and G7 nations imposed sanctions and a price cap on Russian crude from Dec. 5, according to traders and Reuters calculations.
A massive winter storm was cascading across a broad swath of the United States, forcing thousands of flight cancellations, confounding travelers’ plans during what was expected to be a busy holiday season.
“Crude prices are higher as energy traders focus on Moscow’s response to the price cap put on Russian oil and not so much the thousands of flight cancellations that will disrupt holiday travel,” OANDA analyst Edward Moya said.
Last Thursday, benchmark oil prices fell as flights were scrapped. The storm could also upend motorists’ plans to travel during Christmas and New Year’s, but heating oil demand could rise due to the extreme weather.
“As U.S. crude oil inventories fall and winter storms hit the U.S., cold temperatures are expected to extend southward to Texas, Florida, and the Eastern states. Demand for heating oil will soar,” Leon Li, an analyst at CMC Markets, said.
By Sagarika Jaisinghani and John Cheng, Bloomberg