Oil Trades Below $31 as Rising U.S. Crude Stockpiles Expand Glut

Oil traded below $31 a barrel after U.S. crude stockpiles rose to the highest in more than eight decades as Saudi Arabia and Russia propose to freeze output amid a worldwide surplus.

Futures lost as much as 1.4 percent in New York, trimming the first weekly advance this month. U.S. supplies expanded to 504 million barrels, the highest level in data going back to 1930, according to the Energy Information Administration.

 Iraq said Thursday it backs any decision to support prices and balance the market without indicating whether it would cap its own output.

"The market was caught by surprise by the rise in the U.S. inventories," Jens Pedersen, a Danske Bank A/S analyst in Copenhagen, said by phone.

Crude is still down about 18 percent this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December amid swelling U.S. stockpiles and as Iran seeks to boost exports to regain market share after sanctions were lifted.

Companies are confronting rating downgrades and oil-producing nations face bigger-than-expected withdrawals from wealth funds to cover budget deficits as energy revenues fall.

West Texas Intermediate for March delivery, which expires Monday, fell as much as 42 cents to $30.35 a barrel on the New York Mercantile Exchange and was at $30.56 at 9:38 a.m. London time.

Prices are up 3.8 percent this week. Total volume traded was about 2 percent below the 100-day average. The more-active April future was 1 cent lower at $32.92 a barrel.

PBOC Will Raise Reserve Ratios for Banks Who Don't Meet Criteria

China’s central bank said some banks will be forced to lock away more reserves, a move that may contain credit growth after advances by smaller lenders jumped in January.

Some banks no longer meet criteria for preferential reserve requirement ratios and will have those levels increased, the People’s Bank of China said Friday in a statement.

Prior to the announcement, Bloomberg News reported that some lenders will face a higher ratio as officials seek to limit the risks associated with last month’s jump in credit. The PBOC said its action wasn’t driven by the speed of lending.

The central bank also said a review it carried out found that some banks which previously didn’t meet the criteria for preferential ratios now do so. Adjustments to banks’ reserve requirement ratios will be made from Feb. 25, according to the PBOC.

In 2014, the PBOC introduced preferential reserve requirement ratios for banks whose loans to the agricultural sector or to small companies exceeded certain thresholds in relation to their overall lending.

Since then, bad loans at Chinese banks have been piling up as economic growth weakened to the slowest pace in a quarter-century. PBOC data released this week that showed lending jumped to a record in January stoked concerns that financial-system risks may be increasing.

This week’s data from the central bank indicates China’s four biggest banks weren’t the driving force behind last month’s credit binge. Small- and medium-sized lenders extended a combined 1.45 trillion yuan ($222 billion) of the new loans in January, accounting for 60 percent of the total increase, the data show.

The central bank defines small and mid-sized lenders as those which had less than 2 trillion yuan of assets at the end of 2008. The four banks had set lending targets for this year that were little changed from 2015, separate people with knowledge of the matter said Friday.

The collective market share for Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. dropped to 20 percent last month from almost 40 percent in December, the figures show.

Stocks Trim Weekly Advance as Oil Slides; Industrial Metals Rise

Stocks in Europe and Asia trimmed weekly gains as oil fell for the first time in three days, denting optimism that this year’s rout in commodities was easing.

A global equities gauge fell for the first time in six days, bringing to an end a rally fueled by the first signs that producers may consider steps to rein in a record crude glut. Friday’s drop in energy prices dragged the Bloomberg Commodity Index lower even as industrial metals rose.

Britain’s pound declined as David Cameron negotiated with European Union leaders over the U.K.’s membership of the bloc, while bonds across the continent rose. The yen strengthened against all of its 31 major peers, with the biggest gains coming versus Asian currencies.

“It’s a bumpy stabilization on oil, currency, spreads and equities,” said Didier Duret, who oversees about $219 billion as chief investment officer of ABN Amro Bank NV’s wealth-management unit. “The tail of energy has moved the psychology of the market.”

Commodities were left little changed on the week after Saudi Arabia and Russia, the world’s two largest oil-producing countries, agreed Tuesday to freeze output at near-record levels and Iran said it would support the measure without pledging its own cuts.

While that’s helping to calm financial markets, Capital Group Cos., the money manager with $1.4 trillion in assets, expects volatility to remain elevated amid a slowing global economy and uncertainty about central bank policies.

The Stoxx Europe 600 Index slid 0.5 percent, after rising as much as 0.3 percent. While the equity benchmark was set for a 4.7 percent gain this week, it’s still down more than 10 percent this year amid concerns ranging from global growth and the deepening oil slump, to the creditworthiness of lenders and dissipating faith in central-bank support.

Oil Extends Gain as Iran Backs Output Freeze Without Vowing Cuts

Oil extended gains above $31 a barrel as Iran supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels, without saying whether it would curb its own output.

Futures climbed as much as 3.5 percent in New York after rising 5.6 percent Wednesday. Iran backs any measures to stabilize markets including the output cap, Oil Minister Bijan Namdar Zanganeh said after talks with Qatar, Iraq and Venezuela, according to a report from the Shana news service.

U.S. crude stockpiles are forecast to have increased by 3.5 million barrels last week, according to a Bloomberg survey before government data Thursday.

Oil is still down 16 percent this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December and as U.S. crude inventories swelled.

Zanganeh didn’t mention if Iran, the second-biggest OPEC producer before sanctions were intensified in 2012, would deviate from plans to boost exports after the lifting of penalties last month.

“The market is re-evaluating the downside risks at the moment,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney, said by phone.

“There is no expectation whatsoever that Iran will curb exports. Until we see the fundamentals improve, we’re not going to get a sustainable uplift in the price.”

European Stocks Struggle as Nestle Disappoints; Bonds, Yen Rise

European shares faltered at a two-week high as investors assessed disappointing earnings from Nestle SA, while government bonds rose and oil held gains.

Stocks in Europe fell 0.1 percent at 9:11 a.m. in London. Treasuries advanced, and the yen also climbed. Japan sold five-year bonds at auction with a negative yield for the first time. Emerging markets and currencies rose.

The Mexican peso gained a second day after lawmakers took unprecedented steps to protect the currency. Crude held gains with Iran backing an output freeze by key energy-producing nations.

Global stocks have regained much ground after falling into a bear market last week, fueled by oil’s rally coupled with the Federal Reserve’s acknowledgment of market gyrations.

St. Louis Fed President James Bullard said Wednesday recent turmoil that’s contributed to a further decline in investors’ inflation expectations has given the central bank scope to delay raising interest rates.

China’s consumer price inflation quickened while factory-gate deflation moderated, signaling that demand is beginning to stabilize

Fed Minutes Show Concern About Global Market Turmoil

Federal Reserve policy makers debating their outlook for interest rates last month expressed concern that the fall in commodity prices and the rout in financial markets increasingly posed risks to the U.S. economy.

“Participants judged that the overall implications of these developments for the outlook for domestic economic activity was unclear but they agreed that uncertainty had increased,” according to minutes of the Federal Open Market Committee’s Jan. 26-27 meeting released Wednesday in Washington. “Many saw these developments as increasing the downside risks to the outlook.”

Policy makers, who projected in December that they’d raise interest rates four times this year, are grappling with the fallout of market turbulence that has cast doubt over the economic outlook globally.

Fed Chair Janet Yellen suggested in congressional testimony last week that the central bank could delay its plans for tighter policy to assess how the economy reacts to current headwinds.

The minutes go into more detail than the FOMC’s statement on policy makers’ concerns about the risks to the U.S. economy.

While voting members “generally agreed” they couldn’t assess the balance of risks to the outlook in the statement, officials “observed that if the recent tightening of global financial conditions was sustained, it could be a factor amplifying downside risks,” according to the report.

U.S. Stocks Rally as Hardest-Hit Shares in 2016 Continue Rebound

U.S. stocks rallied, with the Dow Jones Industrial Average rising more than 250 points, as the year’s most-battered shares continued to recover and energy shares climbed with oil prices.

Chevron Corp. gained 4.1 percent to a one-month high. Priceline Group Inc. surged 11 percent to help lift an index of retailers after the online travel agent’s results beat estimates.

Freeport-McMoRan Inc. rallied 12 percent after filings showed Carl Icahn boosted his stake in the copper producer. Citigroup Inc. and Bank of America Corp. increased more than 2.2 percent as lenders posted their best three-day rally in more than five years.

The Standard & Poor’s 500 Index rose 1.7 percent to 1,926.82 at 4 p.m. in New York, capping its first three-day advance this year and closing at a two-week high. The Dow climbed 257.42 points, or 1.6 percent, to 16,453.83.

The Nasdaq Composite Index gained 2.2 percent. About 9.2 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.

The firm oversees about $230 billion. “This move, if anything, is on washed-out sentiment being yet again a usual bottoming indicator.”

Equity gains are coming virtually as fast as the losses that sent the S&P 500 to its worst start to any year, with almost half of 2016’s decline made up in three days. The rally today occurred as oil climbed more than 5 percent, Federal Reserve officials expressed caution on the economy and data on manufacturing was better than forecast.

This year’s most beaten-down industries have bolstered the gains since the main U.S. equity index closed at a 22-month low last Thursday, amid a sense that the selling was overdone.

Banks in the benchmark are up 9.7 percent in the last three sessions, recovering from the lowest level since 2013, while retailers have surged 7.3 percent, rebounding from a 16 percent drop to begin 2016.

Goldman Sachs Survey: More Than Half Our Clients Expect Negative Returns for Global Equities This Year

The S&P 500-stock index is down 9 percent since the start of the year on concerns ranging from negative interest rates to a hard landing in China. A new survey from Goldman Sachs Group Inc. shows that a growing proportion of its clients are worried about a global recession.

"More than one third of the clients attending our recent macro conference in Hong Kong expect cash will post the highest risk-adjusted return of any asset class in 2016. Nearly 60 percent of the participants forecast global equities will deliver a negative return this year."

Kostin and team don’t discredit the heightened concerns, but they do point out that consumers are still sending a number of strong signals that point towards a continued expansion.

The team said that the strength of the consumer should not be overlooked. "Many investors believe the economy is on the precipice of a recession. However, quantitative and qualitative measures of consumer activity suggest spending will continue and the economic expansion will persist."

So unless the consumer starts exercising more caution and spending decelerates, Goldman remains bullish on the global economy. The most recent retail sales numbers were relatively strong across the board, increasing for a third straight month in January, with 8 of 13 major categories showing increases in demand from the prior month.

It's worth noting that Goldman started the year with one of the lowest 12-month targets for the S&P 500, at 2100, but with a number of other firms lowering targets, Goldman is now near the front of the pack. Stocks would have to rise 13 percent to reach that target.

Stocks

The Asia Pacific gauge dropped 0.8 percent as of 8:10 a.m. London time, with Japan’s Topix tumbling 1.1 percent after earlier jumping more than 1 percent. The Shanghai Composite Index advanced for a second day, gaining 1.1 percent.

The Stoxx Europe 600 Index rose 0.4 percent. “Stay cautious,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion.

“Don’t be afraid to reduce risk because we expect things to be volatile from here -- it’s a relatively defensive message. There are a lot of economic issues that need to be worked through. We’ve been incrementally paring back” risk positions, including equities, he said.

Australia’s S&P/ASX 200 Index declined 0.6 percent, led by a 4.2 percent slump in a gauge of energy stocks. Woodside Petroleum Ltd., the nation’s second-largest oil and natural gas producer, tumbled 6.9 percent after reporting a 99 percent collapse in full-year profit amid the rout in energy prices.

Futures on the Standard & Poor’s 500 Index retreated 0.2 percent after the benchmark capped its best two-day gain since August on Tuesday, rising 1.7 percent.

Asia Stocks Drop With Won After Yuan Fix; Treasuries Advance

Asian stocks fell with South Korea’s won and the yen strengthened after China lowered the yuan’s daily fixing by the most in six weeks. Malaysia’s ringgit slumped to a two-week low as a deal between Saudi Arabia and Russia to freeze oil production failed to assuage anxiety over this year’s crude selloff.

The MSCI Asia Pacific Index of shares dropped for the first time in three days, while the Indonesian rupiah and the won depreciated more than 0.5 percent amid speculation their central banks will bolster stimulus to help boost economic growth. European stocks opened higher, while U.S.

equity-index futures declined. American crude was below $30 a barrel after the world’s two biggest oil producers agreed to hold output near record-high levels, dashing speculation they would cut it.

Central bank attempts to calm global markets this year amid unprecedented volatility have had mixed success, with Japanese shares initially falling after the Bank of Japan announced a move into negative interest rates. Japan’s overnight call rate fell below zero for the first time in a decade, traders said.

Oil’s volatile journey in 2016 has fueled that uncertainty, amid concern over the impact on inflation. Minutes of the Federal Reserve’s most recent meeting, where officials indicated they were monitoring the turmoil in markets, are due Wednesday. Chair Janet Yellen has subsequently indicated the global ructions may delay further tightening of U.S. monetary policy.

Saudi Oil Minister Signals More Action May Follow Output Freeze

Saudi Arabian Oil Minister Ali Al-Naimi said the output freeze agreed with Russia and two other countries on Tuesday might be followed be more action to improve the oil market.

“The reason we agreed to a potential freeze of production is simply the beginning of a process to to asses in the next few months and decide whether we need other steps to stabilize the market,” Ali Naimi said after meeting the Russian, Qatari and Venezuelan oil ministers in Doha. “We want a stable oil price.”

His comments will feed speculation that today’s meeting may be the first step on the way to an agreement among the world’s leading oil producers to curb production and revive prices. Crude has slumped to a 12 year-low earlier this month as oil-producing countries fought to defend market share, allowing global stockpiles to reach an all-time high.

The production freeze, set at January levels, is conditional on other nation’s agreeing to participate, Russia’s Energy Ministry said in a statement after the meeting ended. The deal doesn’t yet include Iran and Iraq, two OPEC members that have increased output in recent months.

According the IEA, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015.

Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data. Venezuela pumped 2.4 million barrels a day and Qatar produced 680,000, according to the IEA.

Brent Jumps Above $35 as Saudi Arabia Meets With Russia in Qatar

Brent crude surged above $35 a barrel as energy ministers from Saudi Arabia and Russia, two of the world’s biggest oil producers, met in Doha on Tuesday to discuss the market.

Futures climbed as much as 6.5 percent in London, heading for the biggest three-day gain since August. Saudi Oil Minister Ali al-Naimi is speaking with Russia’s Alexander Novak, Qatar’s energy ministry said. Representatives from Qatar and Venezuela are also attending, the ministry said.

Venezuela has lobbied exporters including Russia, Iran and Saudi Arabia to arrange a meeting between OPEC members and other suppliers in an attempt to reach an agreement to balance the market. Oil is still down about 5 percent this year amid the outlook for increased Iranian exports and BP Plc predicts the market will remain “tough and choppy” in the first half as it contends with a surplus of 1 million barrels a day.

Brent for April settlement advanced as much as $2.16 to $35.55 a barrel on the ICE Futures Europe exchange and was at $35.32 at 8:17 a.m. in London. The contract rose 3 cents Monday to close at $33.39 after an 11 percent gain Friday. The European benchmark crude was at a premium of $1.82 to West Texas Intermediate for April.

Yellen Heads for March Crossroads as Market Urges Policy Detour

Janet Yellen has her eyes on the road.

After the Federal Reserve chair assured U.S. lawmakers that the U.S. economy is strong enough to weather a gradual tightening of monetary policy, she is set to spend the next four weeks measuring the bumps that financial-market turbulence put on the path to higher interest rates.

With jobless data signaling full employment and inflation expected to rise toward 2 percent over the medium term, the March 15-16 meeting of the Federal Open Market Committee will be a test of how data dependent policy makers are prepared to be.

Since the Fed raised interest rates for the first time in almost a decade in December, Yellen and her colleagues have stressed that the pace of future tightening will be determined by incoming data about the economic outlook.

While those readings don’t undermine the case for higher borrowing costs, tighter financial conditions and market volatility reflecting uncertainty over global economic prospects are risks that may stay Yellen’s hand.

The mantra Yellen recited frequently during her testimony to the House Financial Services Committee and the Senate Banking Committee last week was that monetary policy is “by no means” on a preset course. Her comments upstage the minutes of the Jan. 26-27 meeting the Fed will release on Wednesday, though these will still provide important clues about the balance of views within the committee.

Goldman Channels FDR's `Nothing to Fear' With Sell Gold Call

Goldman Sachs Group Inc. says it’s time to bet against gold as bullion’s rally to the highest level in a year isn’t justified, backing the bearish call with a comment from a former U.S. leader in a report that was issued, appropriately enough, on Presidents’ Day. Prices fell.

Gold will slump to $1,100 an ounce in three months and $1,000 an ounce in 12 months, analysts including Jeffrey Currie and Max Layton wrote in the report that was dated Feb. 15 and received on Tuesday. It was headlined with a remark from former President Franklin D. Roosevelt,.

There’s “nothing to fear but fear itself,” the analysts entitled the seven-page note, channeling comments from Roosevelt’s 1933 inauguration when the U.S. economy was being ravaged by the Great Depression. “It’s time to sell the fear barometer,” the bank said, and recommended shorting gold.

Gold jumped to highest since February 2015 last week as sinking equity markets, weaker oil prices, and diminished bets for higher U.S. borrowing costs spurred haven demand. Prices were further boosted by the spread of negative interest rates and concerns about a crisis in Europe’s banks. 

Goldman said it still expected rates to rise, putting the odds of U.S. recession at just 15 to 20 percent, and rejected the notion that a re-run of the crisis was likely.

Europe Futures Rise With Asian Stocks as Oil Jumps; Bonds Slide

European equity-index futures rose and Asian stocks headed for the biggest two-day gain in four years, extending a global rally in riskier assets on speculation that governments will act to boost economic growth and shore up the oil market.

Chinese shares led the advance in Asia after data showed a record surge in new credit last month, fueling bets that state-run banks will step up lending to revive the world’s second-largest economy. 

Futures on the Euro Stoxx 50 Index and Standard & Poor’s 500 Index both climbed at least 0.2 percent, while U.S. Treasuries fell as trading resumed after a holiday on Monday. Crude futures jumped as much as 4.6 percent in London after Saudi Arabia’s oil minister was said to plan a meeting with his Russian counterpart in Doha.

The 43 percent tumble in crude over the past year has restrained growth in oil-rich emerging countries and heightened sensitivity to any sign of willingness by Saudi Arabia, the de facto OPEC leader, to discuss coordinated production cuts. 

China’s lending data followed an expression of confidence in the economy from central bank Governor Zhou Xiaochuan over the weekend and reassurances from European Central Bank President Mario Draghi on Monday that policy makers will act should financial turmoil threaten price stability.

“Central banks will try to calm the markets down a little bit, and then investors will start to step back in,” said Sean Fenton, a Sydney-based money manager at Tribeca Investment Partners. “There’s enough value starting to emerge in certain areas that investors will eventually take advantage of that.”

Shares Jump From Europe to Japan as Oil Holds Rally; Yuan Soars

Stocks came back with a vengeance amid speculation losses that sent global equities into a bear market had gone too far, with rallies in crude oil and the Chinese yuan burnishing sentiment.

Shares in Europe capped their biggest two-day gain in more than four years and Japan’s Topix index soared the most since 2008, with markets in North America closed for a holiday. Developing-nation equities rebounded from their worst weekly drop in a month, as oil built on Friday’s surge. 

The yuan strengthened the most since a dollar peg was scrapped in 2005 after People’s Bank of China Governor Zhou Xiaochuan talked up the credentials of the world’s second-largest economy. Demand for haven assets such as gold and the yen waned, while nickel climbed the most in two months amid the yuan rally.

Chinese markets returned Monday from a week-long holiday, during which a gauge of global stocks capped a 20 percent slide from its May record and anxiety over the ability of central banks to quell the volatility intensified. 

Governor Zhou front-footed the market, making rare comments at the weekend on the health of the Chinese economy and asserting the stability of the local currency. Shanghai shares pared a drop of 3 percent, even as China reported a record trade surplus amid slumping imports and exports.

“The Chinese market didn’t react as bad as we feared and with the weak export data there is some big hope that the central banks will react quite fast,” said John Plassard, senior equity-sales trader at Mirabaud Securities LLP in Geneva. “It’s a mix of hope of intervention from the Asian central bank, short squeeze and also a relief in some energy and banking sectors, the most shorted sectors.”

Japan’s Topix Soars Toward Biggest Gain Since 2008

Stocks soared in Tokyo, with the Topix posting its biggest gain in more than seven years, as investors judged shares had been oversold and a report showing Japan’s economy shrank more than expected last quarter boosted the outlook for central bank stimulus.

The Topix surged 8 percent to 1,292.23 at the close in Tokyo, its best gain since October 2008, after plunging 13 percent last week. The Nikkei 225 Stock Average jumped 7.2 percent to 16,022.58 as the yen weakened for a second day.

 U.S. markets rebounded on Friday to halt the longest losing streak since September. Chinese mainland markets reopen Monday after a week long holiday during which global stocks fell into a bear market.

The Topix’s 14-day relative strength index fell to 26.49 on Friday, below the level of 30 which some traders say indicates that shares will rise.

A report Monday showed Japan’s economy shrank 1.4 percent in the fourth quarter on an annualized basis, more than economists’ forecast for a 0.8 percent contraction.

All of the 33 Topix industry groups rose, led by insurers, tire makers and brokerages. Megabank Mitsubishi UFJ Financial Group Inc., which had fallen 41 percent this year through Friday, jumped 8.7 percent.

Toyota Motor Corp., the world’s biggest carmaker, added 9.6 percent as the yen weakened against the dollar. Online retailer Rakuten Inc. tumbled 1.3 percent after reporting full-year profit slumped 37 percent.

Asia Stocks Rebound as U.S., Europe Futures Gain; Yen, Gold Fall

Asian shares rebounded from a three-year low, led by a surge in Japanese shares, amid speculation losses that pushed global equities into a bear market were excessive. U.S. and European stock futures rallied as China’s yuan jumped by the most since a dollar peg was scrapped in 2005.

The MSCI Asia Pacific Index was headed for its biggest gain since April 2009 and Japan’s Topix soared 8 percent.The Shanghai Composite Index declined as trading resumed after the week-long Lunar New Year holiday, while the yuan climbed to its strongest level of the year as China reported a record trade surplus.

U.S. crude slipped to about $29 a barrel, after a 12 percent surge on Friday that burnished investor sentiment. The yen retreated with gold as haven assets fell out of favor.An MSCI gauge of global equities capped a 20 percent slide from a May record last week as the Federal Reserve acknowledged the volatility around the world and signaled it may delay further monetary tightening.

China’s central bank stepped up efforts to restore stability to the nation’s currency and economy, with Governor Zhou Xiaochuan saying there’s no basis for continued yuan depreciation. After sinking for six straight days on glut concerns, crude futures jumped by the most in seven years on Friday as the Standard & Poor’s 500 Index rebounded on stronger-than-expected U.S. retail sales data.

An 11 percent drop in China’s exports in January was eclipsed by an even bigger tumble in imports, leaving a record $63.3 billion trade surplus for the world’s biggest trading nation, a report showed on Monday.

Japan announced a bigger-than-expected decline in fourth-quarter gross domestic product, spurring speculation the central bank will boost stimulus. Financial markets in the U.S. and Canada will be closed Monday for holidays.

Saudi Arabia Said to Ease Lending Rules to Boost Liquidity

Saudi Arabia is easing rules on bank lending to stimulate growth in the largest Arab economy, two people with knowledge of the matter said.

Banks were told they can lend the equivalent of 90 percent of their deposits, up from an earlier limit of 85 percent, by the Saudi Arabian Monetary Agency on Sunday, the people said, asking not to be identified as the information is private.

The move followed a request from the country’s committee of treasurers to ease liquidity constraints, one of the people said.

Saudi Arabia is seeking to revive its economy and stimulate credit as the slump in oil and government spending strain the banking system.

The three-month Saudi Arabia Interbank rate rose to 1.73 percent on Feb. 3, its highest in about seven years, according to data compiled by Bloomberg. Bets for a devaluation of the riyal reached their highest in about two decades in January, even after the country pledged to keep its currency peg.

Calls and e-mails sent to SAMA, as the central bank is known, after office hours in Riyadh weren’t immediately returned.

Smashed Valuations Show S&P 500 Used to Profit Recession

The simplest way of explaining the selloff that has driven U.S. stocks closer to a bear market than any time in five years is that investors are adjusting to a new earnings reality. Based on share valuations, that reality is pretty bleak.

While equity analysts continue to predict a rebound in Standard & Poor’s 500 Index profit this year, stocks are no longer buying it. Evidence can be seen by plotting the forward price-earnings ratio against its historical average, a comparison that could be read as suggesting investors don’t see profits rising anytime soon.

The S&P 500 has a forward 12-month P/E ratio of 15.2 times, the lowest in two years and down 13 percent from 17.4 at the start of 2016, according to Bloomberg data.

One way to get the multiple back to its historical average of 16.6 would be for corporate profits to fall this year. Currently, analyst estimates compiled by Bloomberg call for a 4 percent increase. The index climbed 2 percent at 4 p.m. New York time.

Contracting valuations haven’t gone unnoticed in official circles. The Federal Reserve said in its semi-annual monetary report on Wednesday that the drubbing in stocks has pushed P/E forecasts back in line with historical levels.

As equity investors grapple with threats ranging from slowing global growth to a strong dollar, their solution has been simple: sell stocks pending signs of a recovery.

They’ve done it for five days in a row, extending losses since last May’s high to 14 percent. S&P 500 companies are in the process of reporting their third consecutive quarter of earnings declines and are expected to see profits fall through June, analyst estimates show.

Among S&P 500 members, combined quarterly income growth has turned negative in 33 instances since 1937, data compiled by Bloomberg and S&P Dow Jones Indices show.

While half of those episodes lasted no more than six months, the others almost always dragged on, spanning five quarters on average. Out of the 17 occasions where earnings fell for at least three quarters, 14 occurred within three months of a bear market.