273 lines
7.4 KiB
Plaintext
Executable File
273 lines
7.4 KiB
Plaintext
Executable File
finance
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markets
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8227117
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-----
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# World markets fall as oil price hits 26-month high after Chinese rate rise
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## World markets tumbled on Monday as fears grew that China's attempt to
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control inflation could hit the tentative economic recovery in the West.
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![World markets fall and oil price hits 26-month high after Chinese rate
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rise][1]
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China's Shanghai Composite Index slid 1.9pc, the most the index has fallen
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since November Photo: Reuters
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[![Garry White][2]][3]
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By [Garry White][4] 11:18AM GMT 28 Dec 2010
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[Follow Garry White on Twitter][5]
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[Comments][6]
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Soaring oil prices, which hit a 26-month high, also unsettled investors, with
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losses seen from Shanghai to Wall Street.
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It came amid mounting fears that China's unexpected rise in interest rates
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could derail growth in Asia and damage an upturn for the world's major
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exporters.
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On Christmas Day, the** [People's Bank of China raised its benchmark rate by
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25 basis points][7] **to 5.81pc, as the country grapples with rampant food
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inflation and rising wage demands.
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However, analysts believe that tightening measures by Beijing may curb growth
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only slightly. On Boxing Day, analysts at JP Morgan Chase trimmed their 2011
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growth forecast for the Asian economic powerhouse to 9pc from 10pc.
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China's Shanghai Composite Index slid 1.9pc on Monday, the most the index has
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fallen since November.
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## Related Articles
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* [World markets review of 2010][8]
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28 Dec 2010
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* [Commodities in 2010: Gold glittered but silver was shinier][9]
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30 Dec 2010
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* [Shock fall in US confidence][10]
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28 Dec 2010
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* [Can the FTSE keep rising?][11]
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27 Dec 2010
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* [China interest rate rise to hit miners, metals][12]
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27 Dec 2010
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* [China raises interest rates on Christmas Day][13]
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25 Dec 2010
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Growth concerns prompted jitters in all the world's stock markets, which
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recently hit two-year highs. The German blue chip Dax index fell 1.3pc,
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France's CAC 40 lost 1pc and Spain's Ibex lost 2pc. The Dow Jones industrial
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average fell 0.2pc.
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Growth concerns hit German carmakers particularly hard, as China became the
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world's largest vehicle market in 2009. Shares in Daimler slumped 4.6pc, with
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Volkswagen shares plunging 5.7pc.
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On Tuesday, trading remained thin with European stock markets struggling for
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direction, with investors awaiting key reports later in the day on US housing
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prices and December consumer confidence. Earlier markets in China fell again
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but many exchanges remain closed for the festive holiday.
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The oil price, which has jumped 27pc since May, weighed heavily on market
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sentiment. The severe blizzard across the eastern seaboard of the US and
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continued cold temperatures in Europe are expected to push prices still higher
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as demand for heating oil grows.
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Brent crude for February delivery hit $94.52 in morning trading - its highest
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level since the height of the banking crisis in October 2008 - before profit
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takers moved in. Although UK markets were closed, Brent crude contracts can
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still be traded electronically.
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Oil prices are expected to rise steadily next year, with many analysts
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forecasting the price could cross the psychologically important $100 a barrel
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mark.
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Analysts from Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and
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JP Morgan Chase have all said they expect oil to move above $100 in 2011, with
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some raising the possibility that it could happen earlier in the year than
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many feared.
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"The key risk is that we are being too cautious and that the threat of $100
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per barrel oil that is implicit in our fourth quarter 2011 oil forecast
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arrives sooner than we expect - driven by not only a weak dollar, but also by
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rampant Chinese and emerging market demand," Lawrence Eagles, an energy
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analyst at JP Morgan, said in a recent report.
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"High oil prices were one of the contributors to the last global crisis,"
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according to analysts at JBC Energy. "The largest effect of an oil price shock
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on the economy occurs around three to four quarters after the price spike." In
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July 2008, the oil price hit $147 a barrel before the financial crisis caused
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it to fall below $40.
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Opec, the cartel which accounts for around 40pc of global crude production,
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said that it does not intend to raise its production any time soon. Opec's
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output quotas have remains steady since December 2008, when it curbed
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production to cope with the effects of the global recession.
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Qatar's oil minister, Abdullah al-Attiyah, said on Saturday that he did not
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expect the cartel to meet before its scheduled gathering in June 2011.
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"I do not expect an OPEC meeting before June because oil prices are stable,"
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Mr al-Attiyah said on the sidelines of a meeting of Arab oil exporting
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countries in Cairo.
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Mr al-Attiyah also said that he did not expect Opec would increase production
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at all during 2011, despite the prospect of rising demand if the recovery
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continues.
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[X][14] Share & bookmark
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Digg Fark LinkedIn Google Buzz StumbleUpon Y! Buzz
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[What are these?][15]
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* Share: [Share][14] [ ][16] [ ][17]
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[Tweet][18]
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http://www.telegraph.co.uk/finance/markets/8227117/World-markets-fall-as-oil-
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price-hits-26-month-high-after-Chinese-rate-rise.html
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Telegraph
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## [Markets][19]
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* ### [Finance »][20]
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* ### [Oil Prices »][21]
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* ### [Business Latest News »][22]
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* ### [China business »][23]
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* ### [Garry White »][3]
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In finance
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[![FTSE 100: Global markets ? in graphs][24] ][25]
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### [This week on the global markets - in graphs][25]
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[![Top ten most valuable companies in the FTSE 100: in pictures][26] ][27]
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### [Top ten most valuable companies in the FTSE 100][27]
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[![Global stock markets review of 2010][28] ][8]
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### [World markets review of 2010][8]
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[![Questor share tips for 2011.][29] ][30]
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### [Questor share tips for 2011][30]
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[![Sunday Telegraph share tips for 2011][31] ][32]
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### [Sunday Telegraph share tips for 2011][32]
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[X][14] Share & bookmark
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Delicious Facebook Google Messenger Reddit Twitter
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Digg Fark LinkedIn Google Buzz StumbleUpon Y! Buzz
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[What are these?][15]
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Share:
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* [ ][14]
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* [ ][16]
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* [ ][17]
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* [Tweet][18]
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* Advertisement
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![][33]
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telegraphuk
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Please enable JavaScript to view the [comments powered by Disqus.][34] [blog
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comments powered by Disqus][35]
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[![][36]][37]
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Advertisement
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[Market Data »][38]
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