Oil prices edge up, but set for first annual drop since 2015

HOUSTON (Reuters) – Oil prices edged higher on Monday, the last day of 2018, but were en route for their first annual drop in three years as fears of a slowing global economy and emerging supply glut outweighed impending OPEC-led production cuts.

FILE PHOTO: A pump jack operates in the Permian Basin oil production area near Wink, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

Brent crude futures were up 21 cents at $53.42 a barrel by 1:28 p.m. EST, while U.S. West Texas Intermediate (WTI) crude futures were 10 cents higher at $45.43 a barrel.

Both oil benchmarks were down more than a third this quarter, the steepest decline since the fourth quarter of 2014.

In 2018, WTI has lost more than 25 percent, while Brent was down by more than 21 percent.

The year began with optimism that a years-long glut was tamed, pushing Brent to more than $86 a barrel in October, and ended with sharp drop on worries that soaring output would overwhelm 2019 demand.

The Organization of the Petroleum Exporting Countries and other producers including Russia, known collectively as OPEC+, opened their taps in autumn as demand reduced global inventories, then reversed course as priced tumbled.

The producers’ group now plans to cut 1.2 million barrels per day (bpd) beginning Jan. 1. It acted as fears a U.S.-China trade war, falling U.S. stock prices and rising U.S. shale output and interest rates would hurt global demand pushed crude lower.

“We’re flush with oil,” said Phillip Streible, senior market strategist at RJO Futures. “OPEC is out there cutting, but the market isn’t really pricing that in.”

A tweet by U.S. President Donald Trump claiming progress on a possible U.S.-China trade deal pushed crude prices up more than 2 percent in early trading on Monday. But oil lost ground and edged lower as traders focused to data showing China’s economy slowed further in December, analysts said.

Chinese manufacturing activity declined in December for the first time in more than two years, with the Purchasing Manager’s Index (PMI) falling to 49.4, a sign of contraction, a National Bureau of Statistics (NBS) survey showed.

Analysts also were bearish on 2019, according to a Reuters poll. A survey of 32 economists and analysts forecast an average Brent price of $69.13 next year, compared with $71.76 in 2018.

The global benchmark rose by almost a third between January and October, to a high of $86.74. That was the highest level since late 2014, the start of a deep market slump amid bulging global oversupply.

Prices rose through most of the year, continuing 2017’s recovery after several years of weak pricing that sent oil-rich economies into tailspins and forced hundreds of U.S. energy companies into bankruptcy. Renewed U.S. sanctions against major producer Iran, as well as healthy economic conditions and concerns about crude supplies, had elevated crude until October.

However, when Washington gave unexpectedly generous sanction waivers to Iran’s biggest oil buyers, concerns about a global oversupply and sluggish economic growth clouded markets.

“OPEC and non-OPEC producers found themselves competing with additional supplies from the U.S. that overwhelmed the market,” said Andy Lipow, president of Lipow Oil Associates in Houston.

The United States, which broke its 1970 peak of 10.04 million bpd in November 2017, became the world’s top producer in 2018, hitting an all-time high of more than 11.5 million barrels per day (bpd) in October, the U.S. Energy Information Administration said.

Prices could stagnate for weeks until OPEC’s cuts begin to impact global supplies in mid-January and early February.

U.S. drillers added about 138 oil rigs in 2018, the second year in a row of boosting the rig count. But North American producers will likely begin to reduce spending on drilling in 2019 as prices fall below break-even levels for new wells in the Permian Basin and the Eagle Ford shale field in Texas, analysts said.

“You could have a meaningful rally,” said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. “More companies are reducing capital expenditures, and production probably isn’t going to go as high as forecast.”

Reporting by Collin Eaton in Houston, Koustav Samanta and Henning Gloystein in Singapore and Julia Payne in London, Editing by Marguerita Choy and Adrian Croft

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GE drags premier U.S. corporate debt, which posts worst year since 2008

NEW YORK (Reuters) – The stock market’s gyrations have grabbed the year-end headlines, but another key financial market, investment-grade U.S. corporate debt, is turning in its worst yearly performance since the financial crisis a decade ago.

FILE PHOTO – A General Electric (GE) sign is seen during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai, China November 6, 2018. REUTERS/Aly Song

General Electric Co’s (GE.N) securities have weighed on both markets as the 126-year-old conglomerate founded by Thomas Edison has suffered staggering losses and asset writedowns.

GE shares have skidded around 56 percent in 2018, the fourth-biggest decline in the S&P 500 Index .SPX. GE’s $120 billion of bonds are not down as much, but the securities, which have long been a staple for fixed income managers around the globe, are among the leading drags on the main indexes tracking the $6 trillion investment-grade corporate debt sector.

GE’s bonds have crashed by around 14 percent – a monumental underperformance in bond market terms. Analysts worry this could signal worse times ahead for investment grade credit overall. According to the Bank of America/Merrill Lynch index, the sector’s total 2018 return is negative 2.5 percent, the largest drop since 2008.

U.S. companies feasted on low interest rates in the decade since the crisis, leaving corporate balance sheets leveraged to the hilt with some $9.1 trillion of debt, almost double the 2007 total of $4.9 trillion, according to Securities Industry and Financial Markets Association.

Now the Federal Reserve’s gradual tightening of its easy-money policy has investors rethinking their commitment to these assets. Bonds from dozens of formerly high-quality issuers are already trading as though they were no longer investment grade.

As interest rates rise, “the weaker links are going to be exposed,” said Kathleen Gaffney, director of diversified fixed income at Eaton Vance.

After this year’s sharp slide in GE shares, its debt load now stands at roughly twice its market capitalization of $63 billion.

KEEPING PLENTY OF COMPANY

GE’s debt is not alone in the doghouse.

Bonds from Ford Motor Co (F.N), AT&T Corp (T.N), Kinder Morgan (KMI.N), CVS Health (CVS.N), General Motors Co (GM.N) and Verizon Communications (VZ.N) also ranked among the weakest performers as the year wound down. Of the bottom 20 performers, 14 were triple-B rated, the lowest tier of investment grade. GE debt has been slashed to BBB+ which is just three steps above junk, and more than a third of GE’s bonds are already trading at junk bond levels.

Bonds most likely to be downgraded to junk are expected to be among the worst performers when the next economic downturn hits, according to Monica Erickson, portfolio manager of global developed credit at DoubleLine Capital LP.

She noted that around $3 trillion of triple-B bonds are now outstanding, comprising roughly half of the investment grade market, up from only about 20 percent a decade ago.

“With the triple-B market worth about $3 trillion, finding a buyer in the $1.2 trillion high-yield market could be difficult” in a downturn, she said. Many fund managers are required to keep only investment-grade debt in their portfolios, so they could be forced to sell at steep discounts if the debt gets downgraded to junk.

Currently, the junk market totals $1.2 trillion. Were GE to lose investment grade status, those bonds alone would suddenly account for around 10 percent of the high-yield market.

Not all triple-B credits will be downgraded in the event of a downturn, however, “you will probably have a larger percentage of this entire (investment grade) market shift into this high-yield market than has been the case historically,” Erickson said.

HOW MUCH GE DO YOU OWN?

GE’s new Chief Executive Officer Larry Culp is battling to restore profits and slash debt after the company lost $22.8 billion last quarter, mostly from its ailing power unit.

To shore up cash, it has slashed its once-fat quarterly dividend to just a penny per share, and Culp said GE would proceed with “urgency” on selling assets.

Those efforts have so far fallen short in the eyes of bond holders and credit ratings agencies.

In response to a request for comment, a GE spokesperson referred to Culp’s statements in its third-quarter earnings report and in recent media interviews about debt-reduction plans.

All three major bond raters have slashed GE’s credit ratings twice in the last 13 months. It is now labeled “BBB+” by Standard & Poor’s, with equivalent ratings from Moody’s and Fitch.

Roughly $43 billion worth of GE bonds sport prices of less than 90 cents on the dollar, with more than $17.5 billion selling for less than 80 cents. The lowest, a $2 billion perpetual bond sold in 2015, is currently quoted at about 63 cents on the dollar and now yields 17.5 percent versus its 4.1 percent coupon rate.

By comparison, the average triple-B bond yields 4.7 percent, according to BAML index data.

The cost to insure GE bonds against default is near the highest since the financial crisis. Yet the biggest risk facing bond investors is being unable to sell their holdings if the company’s credit fundamentals worsen.

“You’ve got a lot of sellers and no buyers,” said a GE debt investor who asked not to be named because of compliance reasons. And so “we have not yet sold our debt holdings.”

“You’ve seen people head toward the exit, and there’s not a buyer, so you get a big trade down,” the investor said. “Everyone’s getting questions from their boss or their client asking ‘how much GE do you own?’”

Reporting by Kate Duguid; Editing by Dan Burns and David Gregorio

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Trump says ‘big progress’ on possible China trade deal

WASHINGTON/BEIJING (Reuters) – U.S. President Donald Trump said on Twitter on Saturday that he had a “long and very good call” with Chinese President Xi Jinping and that a possible trade deal between the United States and China was progressing well.

U.S. President Donald Trump listens to questions from reporters about an impending U.S. Government shutdown as he participates in a bill signing ceremony for the “First Step Act” and the “Juvenile Justice Reform Act” in the Oval Office of the White House in Washington, U.S., December 21, 2018. REUTERS/Joshua Roberts

As a partial shutdown of the U.S. government entered its eighth day, with no quick end in sight, the Republican president was in Washington, sending out tweets attacking Democrats and talking up possibly improved relations with China.

The two nations have been in a trade war for much of 2018, shaking world financial markets as the flow of hundreds of billions of dollars worth of goods between the world’s two largest economies has been disrupted by tariffs.

Trump and Xi agreed to a ceasefire in the trade war, deciding to hold off on imposing more tariffs for 90 days starting Dec. 1 while they negotiate a deal to end the dispute following months of escalating tensions.

“Just had a long and very good call with President Xi of China,” Trump wrote. “Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”

Chinese state media also said Xi and Trump spoke on Saturday, and quoted Xi as saying that teams from both countries have been working to implement a consensus reached with Trump.

“I hope that the two teams will meet each other half way, work hard, and strive to reach an agreement that is mutually beneficial and beneficial to the world as soon as possible,” Xi said, according to the state-run Xinhua news agency.

Having canceled his plans to travel to his estate in Florida for the holidays because of the government shutdown that started on Dec. 22, Trump tweeted, “I am in the White House waiting for the Democrats to come on over and make a deal.”

The Republican-controlled Congress was closed for the weekend and few lawmakers were in the capital.

The shutdown, affecting about one-quarter of the federal government including 800,000 or so workers, began when funding for several agencies expired.

Congress must pass legislation to restore that funding, but has not done so due to a dispute over Trump’s demand that the bill include $5 billion in taxpayer money to help pay for a wall he wants to build along the U.S.-Mexico border.

The wall was a major 2016 campaign promise of Trump’s, who promised then that it would be paid for by Mexico, which has steadfastly refused to do so. Trump has since demanded that U.S. taxpayers pay for it at an estimated total cost of $23 billion.

He sees the wall as vital to stemming illegal immigration, while Democrats and some Republicans see it as an impractical and costly project. The standoff over Trump’s demand for funding will be a test for Congress when it returns next week.

In the interim, thousands of employees of federal agencies such as the Homeland Security, Justice, Commerce, Interior, Transportation, Agriculture and other departments were staying at home on furlough or soon to be working without pay.

For instance, members of the U.S. Coast Guard will receive their final paychecks of the year on Monday, the service said in a statement on its website on Friday after previously warning that payments would be delayed due to the shutdown.

FILE PHOTO: U.S. President Donald Trump speaks during a signing ceremony for H.R. 2, the “Agriculture Improvement Act of 2018” in Washington, U.S., December 20, 2018. REUTERS/Jim Young/File Photo

“The administration, the Department of Homeland Security [DHS], and the Coast Guard have identified a way to pay our military workforce on Dec. 31, 2018,” the service website read.

That paycheck will be their last until the government reopens.

The Federal Emergency Management Agency also said on Friday that it would resume issuing new flood insurance policies during the shutdown, reversing an earlier decision.

Reporting by Yeganeh Torbati and Katanga Johnson in Washington; additional reporting by Lusha Zhang, Ben Blanchard and Ryan Woo in Beijing; Editing by Kevin Drawbaugh, Daniel Wallis and Diane Craft

Wells Fargo to pay $575 million in settlement with U.S. states

A Wells Fargo logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

NEW YORK (Reuters) – Wells Fargo & Co (WFC.N) will pay $575 million to settle claims made by U.S. states that the bank created phony accounts and committed other customer abuses, according to a statement by the Iowa attorney general’s office.

Two years ago, Wells Fargo agreed to pay $190 million to settle federal government claims that the bank created phony customer account, and improperly referred and charged customers for various financial services products. The deal announced on Friday will settle similar claims by attorneys general from all 50 states and the District of Columbia. The settlement was reported earlier by Reuters.

“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” Chief Executive Officer Tim Sloan said in a statement.

As of the end of the third quarter of 2018, Wells Fargo had set aside $400 million of the settlement amount and expects to allocate the remaining $175 million by the end of this year, the company said in the statement.

As part of the settlement, Wells Fargo will create a customer restitution review program to refund customers who have not gotten compensation from remediation efforts already in place. The bank will also create a website outlining the existing remediation programs.

Friday’s settlement marks the most recent in a long list of penalties related to Wells Fargo’s sales scandal, which initially related to the bank opening millions of accounts in customers’ names without their permission. It has since touched on businesses ranging from mortgage banking to auto lending.

After reaching settlements with the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, the Los Angeles city attorney and the New York attorney general, Wells Fargo still faces probes by the U.S. Securities and Exchange Commission, the Department of Justice and the Department of Labor, according to its most recent securities filing.

So far, the scandals have resulted in over $2 billion in fines and an unprecedented growth restriction imposed by the Federal Reserve.

Reporting By Imani Moise in New York and additional reporting by Patrick Rucker in Raleigh, North Carolina; editing by Jonathan Oatis

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Dramatic stock market rally runs out of steam

(Reuters) – A dramatic global stock rally faded on Thursday after a fall in Chinese industrial profits and in U.S. consumer confidence offered reminders of the pressures on the world economy.

Still, an index of world stocks stayed off near two-year lows hit earlier this week before Wednesday’s 1,000 point-plus surge on the U.S. Dow Jones index, which was attributed to the strongest holiday sales in years.

“Yesterday was a blowout day for U.S. equity markets which triggered optimism that this could be a key reversal day but the upward momentum has not really followed through,” said Lee Hardman, an analyst at MUFG in London.

“One reason is that maybe the sharp move higher was driven by year-end rebalancing, which exaggerated the scale of the rebound, and now we have reverted to the trend which has been in place most of this month.”

That trend is toward weaker stock, U.S. dollar and oil prices along with stronger demand for safe-haven government bonds, gold and Japanese yen.

MSCI’s gauge of stocks across the globe shed 0.85 percent and U.S. crude fell 2.29 percent to $45.16 per barrel after each staged big rallies the day prior. [O/R]

In a sign some consumers are getting nervous about the economy amid volatile stock markets and the partial shutdown of the U.S. government, the Conference Board’s consumer confidence index dropped to a five-month low in December and came in weaker than even the lowest economists’ estimate in a Reuters poll.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 27, 2018. REUTERS/Eduardo Munoz

Earlier, markets in mainland China as well as Hong Kong closed weaker after data showed earnings at China’s industrial firms dropped in November for the first time in nearly three years.

A Reuters report added to the gloom around the world’s second-biggest economy, saying the White House was considering barring U.S. firms from buying telecoms equipment from China’s Huawei and ZTE.

That overshadowed positive noises from the U.S. government on trade talks with Beijing, its efforts to temper the White House’s recent broadsides against the Federal Reserve and a report showing the number of Americans filing applications for jobless benefits fell marginally last week in a sign of labor market strength.

The Dow Jones Industrial Average fell 366.52 points, or 1.6 percent, to 22,511.93, the S&P 500 lost 42.95 points, or 1.74 percent, to 2,424.75 and the Nasdaq Composite dropped 144.79 points, or 2.21 percent, to 6,409.56. [.N]

“So far, we don’t see a shift in fundamentals. Trade tensions between the U.S. and China remain the biggest unknown factor for 2019,” said Hussein Sayed, a strategist at online brokerage FXTM.

There were also renewed concerns in Italy, where troubled lender Banca Carige was denied a cash call by its largest shareholder, pushing its shares down 12.5 percent.

The concerns over a faltering global economy and signs of an oil glut pressured crude prices a day after their 8 percent rally. U.S. Treasury prices also reversed direction after falling sharply on Wednesday, with the 10-year note last rising 15/32 in price to yield 2.7452 percent.

Slideshow (2 Images)

Another safe-haven, gold, was up 0.9 percent to $1,277.68 an ounce, around a six-month peak.

Investors also bought yen, strengthening that currency 0.68 percent against the greenback at 110.62 per dollar. Against a basket of trading partners’ currencies the dollar was down 0.54 percent.

“We have started to see the yen regain its place as the safe haven of choice,” MUFG’s Hardman said.

Additional reporting by Abhinav Ramnarayan and Sujata Rao in London; Editing by Chizu Nomiyama and Frances Kerry

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U.S. stocks attempt rebound

(Reuters) – U.S. stocks were attempting a modest rebound on Wednesday, boosted by technology shares and an Amazon-led jump in retailers, following four sessions of steep losses that pushed the S&P 500 and Dow Industrials near bear market territory.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 26, 2018. REUTERS/Jeenah Moon

After a strong start, the S&P and Dow swung between gains and losses. At its session low, the S&P hit a fresh 20-month low and came within two points of entering bear market territory, measured by a drop of more than 20 percent from a closing high.

The gains were led by technology stocks .SPLRCT, which rose 1.49 percent. Their 9.2 percent slump in the past four sessions was the steepest among the 11 major S&P sectors, while the S&P 500 tumbled 7.7 percent.

Amazon.com Inc (AMZN.O) jumped 4.02 percent after reporting a “record-breaking” season. The stock was giving the biggest boost to the S&P and Nasdaq and led the consumer discretionary index .SPLRCD up 1.49 percent.

But investors anxieties were far from gone. President Donald Trump renewed his attack on the Federal Reserve on Christmas, blaming it for the market slump.

Trump also said the U.S. government shutdown, now in its fifth day, would last until his demand for funds to build a wall on the U.S.-Mexico border is met.

A little over 2,100 stocks on the New York Stock Exchange and the Nasdaq hit 52-week lows. That compares with at least 2,600 stocks breaching new lows in the past three sessions.

“The market doesn’t look so healthy. The concerns are government shutdown, the economy, the President – what time is he going to tweet out about Federal Reserve,” said Larry Benedict, founder of the Opportunistic Trader in Boca Raton, Florida.

“We’re seeing the same thing recently and it’s not really good. It opens up every day and it’s met by selling and it ends nearer the low or on the low than the high. For the market to make a bottom, you need a bit of capitulation or panic bottom.”

The S&P .SPX was up 24.41 points, or 1.04 percent, at 2,375.51, at 11:37 a.m. ET, a day after the Christmas holiday.

The Dow Jones Industrial Average .DJI was up 196.31 points, or 0.90 percent, at 21,988.51 and the Nasdaq Composite .IXIC was up 98.42 points, or 1.59 percent, at 6,291.34.

Eight of the 11 S&P sectors were higher, with the defensive utilities .SPLRCU real estate .SPLRCR and consumer staples .SPLRCS flat to lower.

Energy stocks .SPNY rose 1.8 percent as crude oil prices rebounded.

Retailers .SPXRT jumped 3.14 percent, led by Amazon, after a Mastercard report showed U.S. holiday sales were the strongest in six years.

The heavy-weight FAANG group – Facebook Inc (FB.O), Amazon, Apple Inc (AAPL.O), Netflix Inc (NFLX.O) and Alphabet Inc (GOOGL.O), rose between 1 percent and 4 percent.

The S&P ended Monday 19.8 percent below its all-time closing high, with roughly three-fourths of its stocks already in a bear market.

A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., December 24, 2018. REUTERS/Lucas Jackson TPX IMAGES OF THE DAY

The Dow finished Monday 18.9 percent lower than its closing high. The Nasdaq is already in bear market, along with the Dow Jones Transport Average .DJT and small-cap Russell 2000 index .

Advancing issues outnumbered decliners by a 1.70-to-1 ratio on the NYSE and a 1.89-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 194 new lows, while the Nasdaq recorded five new highs and 455 new lows.

Reporting by Medha Singh in Bengaluru; Editing by Anil D’Silva

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Trump again hits Fed on rate rises; says U.S. firms present buying opportunity

WASHINGTON (Reuters) – President Donald Trump on Tuesday reiterated that the U.S. Federal Reserve was raising interest rates too quickly but added that U.S. companies were “the greatest in the world” and presented a “tremendous” buying opportunity for investors.

FILE PHOTO: U.S. President Donald Trump holds a video call with U.S. military service members in the Oval Office on Christmas morning in Washington, Dec. 25, 2018. REUTERS/James Lawler Duggan/File Photo

“They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon,” Trump told reporters in the Oval Office, referring to the U.S. central bank.

“I have great confidence in our companies. We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy,” Trump said after speaking with U.S. troops deployed abroad via video conference.

U.S. stocks have dropped sharply in recent weeks on concerns over weaker economic growth. Trump has largely laid the blame for economic headwinds on the Fed, openly criticizing its chairman, Jerome Powell, whom he appointed.

Media reports have suggested Trump has gone as far as discussing firing Powell, and he told Reuters in August that he was “not thrilled” with the chairman.

On Monday, Trump said “The only problem our economy has is the Fed.”

All three major U.S. stock indexes ended down more than 2 percent on the day before the Christmas holiday. The S&P 500 has lost about 19.8 percent from its Sept. 20 closing high, just shy of the 20 percent threshold that commonly defines a bear market.

The Fed hiked interest rates again last week, as had been widely expected.

Treasury Secretary Steven Mnuchin on Monday hosted a call with the president’s Working Group on Financial Markets, a body known colloquially as the “Plunge Protection team,” which normally convenes only during times of heavy market volatility.

But the call did more to rattle markets than to assure them. Regulators on the call said they were not seeing anything out of the ordinary in financial markets during the recent selloff, according to two sources familiar with the matter.

Reporting by Makini Brice; Writing by Humeyra Pamuk; Editing by Dan Grebler

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Wall Street falls for fourth straight day, with no Santa in sight

(Reuters) – Technology stocks led a broad selloff on Wall Street on Monday, as the U.S. government shutdown threatens to spill into the next year and the White House moves into fire-fighting mode amid what is already the S&P 500’s worst December since the Great Depression.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 21, 2018. REUTERS/Bryan R Smith/File Photo

All the 11 major S&P 500 .SPX sectors were lower, and all the 30 components of the Dow Industrials .DJI were in the red, pushing them closer to bear territory. However, trading volumes are expected to be muted, with markets closing at 1:00 p.m. ET ahead of the Christmas holiday, and could exaggerate movements.

The high-growth technology .SPLRCT and healthcare .SPXHC sectors continued to lead the retreat, dropping 1.5 percent and 1.7 percent, respectively. Also lower were the FAANG stocks – Facebook Inc (FB.O), Amazon.com Inc (AMZN.O), Netflix Inc (NFLX.O), Apple Inc (AAPL.O) and Google-parent Alphabet Inc (GOOGL.O).

“Volumes will be greatly reduced on a day like today and the twist is we have a lot of things going on. It will be interesting to see how the market digests all of this in a three-and-a-half hour session,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

“The main factor on investors’ minds is the government shutdown and what the resolution can be. It’s really fear of the unknown that has given investors grief.”

With the equity markets in free fall, Treasury Secretary Steven Mnuchin spoke with the chief executive officers of the six largest U.S. banks, who confirmed they have enough liquidity to continue lending and that “the markets continue to function properly.”

Mnuchin’s plan to convene a call with the President’s Working Group on financial markets also unnerved investors. The group, formed after the stock market crash of October 1987, is known more commonly as the “Plunge Protection Team” and met in 2009 in the latter stages of the financial crisis.

“We’re in a turbulent time and it will be interesting to see how we end the year. But right now, it certainly looks like Santa Claus isn’t coming to town,” Barkhos said.

At 10:10 a.m. ET, the Dow Jones Industrial Average .DJI was down 379.14 points, or 1.69 percent, at 22,066.23, the S&P 500 .SPX was down 41.42 points, or 1.71 percent, at 2,375.20 and the Nasdaq Composite .IXIC was down 87.86 points, or 1.39 percent, at 6,245.14.

A bruising December for the U.S. markets – triggered by concerns over a partial federal government shutdown, the U.S.-China trade dispute and interest rate hikes – has put the S&P 500 .SPX on pace for its biggest monthly percentage decline since 2008.

At the end of Friday’s session, the Nasdaq was down nearly 22 percent from its record high close in late August and formally in a bear market. The S&P and Dow are also not far off those levels, having sunk 17.5 percent and 16.3 percent, respectively, as of Friday from their closing highs.

The drop in markets picked up last week after the Federal Reserve raised rates for the fourth time this year and said it would largely continue with its rate hike path and slim down its vast holdings of bonds, draining the easy money that has helped power the stock market’s decade-long bull run.

President Donald Trump has criticized the Fed for raising rates and reports over the weekend suggested he had privately discussed firing Fed Chairman Jerome Powell. Mnuchin later said Trump does not believe he has the power to remove Powell.

Declining issues outnumbered advancers for a 3.84-to-1 ratio on the NYSE and a 2.40-to-1 ratio on the Nasdaq. The S&P recorded no new 52-week highs and 230 new lows. The Nasdaq recorded the new highs and 664 new lows.

Reporting by Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty

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Japan court extends Ghosn detention by 10 days

FILE PHOTO: Carlos Ghosn, chairman and CEO of the Renault-Nissan-Mitsubishi Alliance, attends a press conference on the second press day of the Paris auto show, in Paris, France, October 3, 2018. REUTERS/Regis Duvignau/File Photo

TOKYO (Reuters) – A Japanese court on Sunday extended for 10 days the detention of ousted Nissan Motor Co (7201.T) chairman Carlos Ghosn, who is facing new allegations of making the car maker shoulder $16.6 million in personal investment losses.

The extension announced by the Tokyo District Court means Ghosn will remain in Tokyo’s main detention center, where he has been confined since his arrest last month on initial allegations of financial misconduct.

Ghosn was re-arrested on Friday based on suspicions that around October 2008 he shifted personal trades to Nissan to make it responsible for 1.85 billion yen ($16.6 million) in appraisal losses, prosecutors said.

They said the move inflicted damage on Nissan by having it deposit a total of $14.7 million on four occasions between June 2009 and March 2012 into a related bank account.

Reporting by Daniel Leussink; editing by Darren Schuettler

VW says diesel scandal cleanup to cost 2 billion euro in 2019: paper

FILE PHOTO: New Volkswagen cars are seen at the Berlin Brandenburg international airport Willy Brandt (BER) in Schoenefeld, Germany, August 14, 2018. REUTERS/Hannibal Hanschke/File Photo

FRANKFURT (Reuters) – Volkswagen’s (VOWG_p.DE) cleanup of a diesel cheating scandal will cost it 5.5 billion euros ($6.25 bln) in 2018 and around 2 billion euros in 2019, Chief Financial Officer Frank Witter told German weekly Boersen-Zeitung.

Since 2015, the German car making group has paid more than 27 billion euros to settle investor and consumer lawsuits as well as regulatory fines and remedies tied to resolving excessive emissions levels in its diesel cars.

In 2020 Volkswagen Group will see costs of about 1 billion euros related to emissions cheating, Witter told the paper.

VW is sticking to plans for listing its trucks business in 2019 and continues to see growth potential in China, the world’s largest car market, Witter said.

($1 = 0.8797 euros)

Reporting by Edward Taylor; Editing by Ros Russell

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