Oil Falls After Goldman Cuts Forecasts
Crude oil fell about 3 percent on Friday after Goldman Sachs slashed its price forecast through next year, while global equity markets slid on worries over the economic outlook and whether the Federal Reserve will raise interest rates next week.
A drop in U.S. consumer sentiment in September to its lowest in a year also weighed on Wall Street, as the University of Michigan's preliminary reading for the month slid to 85.7, compared with the final reading of 91.9 in August.
It was also much lower than the median forecast of 91.2 of economists polled by Reuters.
"This is the first survey to reflect what people are feeling" about the economic slowdown in China and the U.S. stock market's recent sell-off, said Phil Orlando, chief equity strategist at Federated Investors in New York. "At least in the near-term it's going to create some dislocation."
Stocks in Europe and on Wall Street fell, with the pan-European FTSEurofirst 300 index down 0.70 percent to 1,405.14 and MSCI's all-country world stock index down 0.39 percent.
The Dow Jones industrial average fell 59.33 points, or 0.36 percent, to 16,271.07. The S&P 500 slid 11.21 points, or 0.57 percent, to 1,941.08 and the Nasdaq Composite lost 32.12 points, or 0.67 percent, to 4,764.13.
Wall Street's most influential voice in oil trading, Goldman Sachs, slashed its 2016 forecast for U.S. crude to $45 a barrel from $57 previously, and Brent to $49.50 down from $62, citing oversupply and concerns over China's economy.
Citing "operational stress" as a growing downside risk to its forecast, Goldman said while not its base case, crude could fall further to near $20 a barrel.
U.S. crude futures' front-month contract was down $1.66 at $44.26 a barrel. The front-month in Brent, the global benchmark for oil, was off $1.60 at $47.29.
U.S. Treasury prices gained as stocks fell and as investors focused on whether the Fed will raise rates for the first time in almost a decade when its policy-makers meet next week.
"It's all about whether the Fed indicates that they are going to do some kind of tightening," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New York.
Benchmark 10-year notes were last up 13/32 in price to yield 2.1741 percent.
"The knee-jerk reaction on the Fed lift-off is negative," Orlando said. "We think the Fed lift-off is a positive for the economy and stocks, because it means the Fed is rubber-stamping the fact they truly believe the economy is strong enough."
The dollar was little changed in thin, listless trading ahead of next week's Fed meeting.
The dollar index, a basket of currencies valued against the dollar, fell 0.06 percent to 95.400.
The dollar's biggest gains included a 0.40 percent increase against the Swiss franc, which weakened to more than 1.10 francs per euro for the first time since the Swiss National Bank lifted a currency cap last January.
(Additional reporting by Jamie McGeever; Editing by Bernadette Baum)