SPY fell 1.4%
The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) fell by 1.4% and 4.1%, respectively, on November 12. Oil represented by the United States Oil (USO) fell further by around 3% on the day. The petroleum status report released by the EIA (Energy Information Administration) revealed the rise in crude oil inventory by 4.2 million barrels for the week ended November 6, 2015. The prior weekly change in crude oil buildup was 2.8 million barrels.
Because of the supply glut in oil, oil prices fell steeply, affecting energy stocks and even Russia’s GDP growth rate. Oil is currently priced around $42 per barrel. The chart above presents the percentage change in the price movement of USO and the Direxion Daily Russia Bull 3X ETF (RUSL) as of November 12.
Russian GDP growth rate falls shy of estimates
Russia’s economy is majorly dependent on revenue from oil export. Hence, the plunge in oil prices adversely affected the economic growth as well as the stock price movement of the Russian companies mentioned above.
For the third quarter of 2015, Russia’s economy contracted by 4.1% versus the estimated 4.4%, as reported by official statistics on Thursday, November 12. The slump in oil prices led to a recession-like situation in Russia while Western sanctions imposed on Russia over Ukraine added to its woes. Russia’s poverty rate rose to the extent of 15.1% in some regions of the country. Overall, Russia’s economy is anticipated to recover no sooner than 2017 as estimated by the World Bank, as Russia is struggling to recover amid the glut in oil supply.
We’ll take a look at the impact of the plunge in oil prices on SPY and EWU in subsequent articles.