Oil falls to five-year low, China exports slow, McDonald’s (MCD) same-store sales sink and Alipay platform (BABA) jumps in usage

Bourbon & Bayonets / Monday, December 8th, 2014

Markets opened lower on Monday morning after oil dipped to a five-year low. The price for a barrel of oil dropped more than $2 per barrel to $66.77. Pricing this low has not been recorded since October of 2009. This drop followed the recent meeting where OPEC decided they would not be cutting oil production despite the dropping price. There was also a report released on Friday by Morgan Stanley, which said that they predict oil prices could hit $43 per barrel next year. Adam Longson, an analyst with Morgan Stanley, said, “Without OPEC intervention, markets risk becoming unbalanced with peak oversupply likely in the second quarter of 2015.”

Concerns of global growth were mounting after China announced a less than stellar economic report. China announced that exports rose 4.7% and imports fell 6.7% in November. This left the country with a trade surplus of $54.5 billion. Economists were expecting exports to grow 8.2%, imports to rise 3.9% and hold a trade surplus of $43.5 billion. Andy Ji, a senior currency strategist with Commonwealth Bank of Australia, said, “Despite another record surplus, the details paint a grim picture with slower export growth and a contraction in commodity imports in volume terms.”

Shares of McDonald’s Corp (MCD) were trading down over 2% after the company announced that same-store sales dipped more than expected. Sales at stores open at least 13 months dropped 2.2% in November. This surpassed the 1.7% decline analysts were expecting. The company is still feeling affects of rising competition and the supplier scandal in China earlier this year. The company is refocusing their marketing plans and is placing more effort on giving consumers more choices, more convenience and more value for their money.

Shares of Alibaba Group Holdings (BABA) were trading lower after the company announced that transactions on Alipay skyrocketed in the last 10 months. Alipay is the company’s online payment platform. Transactions jumped up 54% during the first 10 months of 2014. The increase was partially attributed to shoppers in rural areas and smaller cities that have begun using their smartphones as a primary tool for online shopping. However 55% of those sales still came from cities like Beijing, Shanghai, Guangdong and Zhejiang. Alipay is the largest payment service provider in China.

That’s all for today,

Warren Gates, Normandy Research

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