The reaction to Chinese economic data, which point to numerous weaknesses should mark the beginning of today’s session. The economic situation in China not only affects several European companies such as oil prices. Early this week, the fall in the oil price (Brent reached on Monday the lowest price since 2009) has been the main theme of the equity markets. In addition to the negative impact on the oil, mining and industrial sectors, the decline in oil prices affect the perception investors have of the world economy. The fall in crude oil price results in part from weakness in demand, which in turn reflects the economic slowdown in some parts of the globe. Moreover, the descent of the oil has another side effect. Crude oil is the main income of many Middle Eastern states and is the foundation of its social policies, usually quite generous. For example, the cost of extraction in Saudi Arabia is less than 10 USD / barrel but to finance its social programs the oil has to negotiate somewhere between 80 and 90 USD / barrel. With oil trading near the 40 USD / barrel, the Saudi kingdom and other Gulf states had to find other sources of financing. Thus, the sovereign funds of these countries have started to sell the assets held abroad. According to the Financial Times, in the 3rd quarter, Arab sovereign funds made at least 19 000 M.USD in redemptions of assets. The real amount is higher to the extent that many investment funds are not required to disclose the transaction of SWFs. According to the Financial Times, in 2015, Saudi Arabia has sold 70,000 M.USD in assets from their fund that manages 670 000 M.USD. In conclusion, if the weakness of oil persists, the equity markets will have to continue to absorb this selling pressure.
