China's electric vehicle boom may push oil prices to record lows
China's push to produce seven million electric vehicles (EVs) by 2025 could push oil prices to historical lows of around $10 a barrel, according to market watcher Nick Cunningham. In a blog post for Oilprice.com, he cited China's plans to spend $60bn on EV-related subsidies by 2020 and predictions of crude oil demand falling by eight million barrels a day as reasons why a drop in oil prices was likely. "The mass adoption of EVs could permanently keep oil prices low, even under some relatively modest assumptions about the growth of the EV market," Cunningham warned.

So another week begins, and many investors may be wondering how many records will be broken now — at least those that have nothing to do with Mother Nature.

That synchronized global uptrend is looking pretty intact, with almost every major world equity index at or near record highs. Asia has kept that going, and the Dow looks set for a fresh high this morning. Note that it’s been an incredible 236 days since the S&P 500 has had a decline of at least 3%.

This so-called “euphoriameter” says it all:

But alas, not all assets have been joining the party. Oil — incidentally trekking up this morning on unrest in Iraq and questions about the Iran nuclear deal — is set to finish the year with a whimper.

That leads us to our call of the day, which predicts things won’t get better for crude prices. In fact, they will probably get much worse thanks to China, according to Nick Cunningham, who tracks oil and the renewable energy beat.

“As the world’s largest auto market, China’s EV (electric-vehicle) policy, which is still being formulated, could supercharge the race for EVs,” says Cunningham in a blog post for Oilprice.com.

He rattles off a number of signs of China’s electric-car gear-up, such as big planned investments and a growing clampdown on autos that cloud its skies with pollution.

“It will only take a small change in oil demand to upend price forecasts. After all, prices crashed in 2014, falling from $100 per barrel down to $50 in less than a year,” he says.

Cunningham points to a Financial Times report that says China plans to produce 7 million EVs per year by 2025 and to spend at least $60 billion on related subsidies between 2015 and 2020.

And a Bloomberg New Energy Finance report that predicts EVs will cut crude demand by 8 million barrels a day by 2040 should “send chills down the spines of oil executives,” he warns.

Cunningham was expanding on a prediction made by Chris Watling, who believes growing interest in alternative energy fuels could drive oil prices to $10 a barrel over the next six to eight years.

The Longview Economics chief told CNBC on Friday that a key catalyst would be Saudi Aramco’s IPO — planned for later 2018, but now looking in doubt — saying they “need to get it away quickly before oil hits $10 a barrel.”

Cunningham didn’t lay out when oil might take a hit from the Middle Kingdom’s EV push, but seemed to see it as a sure thing.

“The exact point we reach peak oil demand is obviously very debatable, but in general, the mass adoption of EVs could permanently keep oil prices low, even under some relatively modest assumptions about the growth of the EV market,” he says. Read the full post here.

Key market gauges

Stocks are up at the start of trade with the S&P 500 SPX, +0.29% and Nasdaq COMP, +0.65% and Dow industrials DJIA, +0.12% DJIA, +0.12% all hitting new records.

As mentioned, WTI crude US:CLZ7 and Brent UK:LCOZ7 prices are trekking higher, driven in part by fear fighting between Iraq and Kurdish separatists will disrupt supplies. Gold US:GCZ7 and silver US:SIZ7 are inching up.

The dollar DXY, +0.09% is moving up against the euro EURUSD, +0.03% , after Catalonia’s leader defied Madrid’s demand for clarity on independence. Spanish stocks IBEX, +0.44% are weighing on the rest of Europe SXXP, +0.17% .

In Asia ADOW, +0.61% , the Hang Seng Index HSI, +0.07% closed at a 10-year high.

See the Market Snapshot column for more.

The anniversary of Black Monday is fast approaching. Here’s a look at whether it could happen again

The chart

In among that Asia cheer, the Nikkei 225 index NIK, +0.52% nabbed another 21-year high on Monday. While it may be hard for U.S. investors to get excited about Japanese stocks, MKM Partner’s chief market technician Jonathan Krinsky says they could be missing a big opportunity here.

He explains that Japanese stocks’ secular cycles are longer than the 15-to-20 years seen in the U.S. The last bear market ran for 28 years, and that’s how long the current bear market has been around, as this chart shows.

MKM Partners Wikipedia

Here’s what he has to say about the second chart: “Whether or not you want to call an end to the secular bear in Japan, it’s clear that the Nikkei is in a strong uptrend now.”

“There is an entire generation that has not witnessed a secular bull market for Japanese equities. The fact that Japan is breaking above a 25+ year secular trading range should not be taken lightly, in our view.”

MKM Partners

Note that a snap general election in Japan is set for Sunday. Here’s all you need to know about that.

The buzz

Apple AAPL, +0.69% is getting a lift after an upgrade to overweight at KeyBanc Capital. It set a price target of $187 for the iPhone maker, citing a more “aggressive market segmentation strategy.”

A busy earnings week kicks off with Netflix NFLX, +0.10% after the close. The streaming service is forecast to report earnings of 32 cents a share — 167% higher on the year and up more than 113% on the quarter.

Bitcoin BTCUSD, -1.25% , which went roaring higher last week, is now atop $5,700. WikiLeaks founder Julian Assange over the weekend had this to say about a big bump he’s seen in his bitcoin investment:

An oil platform operated by Clovelly Oil exploded Sunday in Lake Pontchartrain near New Orleans, causing multiple injuries.

Data from China showed producer prices shot up 6.9%, the latest surprise out of the country. That news pushed copper to a new three-year high above $7,000.

Read:5 reasons why investors need to watch China’s National Party Congress

Ophelia, which was the most powerful hurricane seen so far east in the Atlantic, has weakened but is still putting Ireland on lockdown:

The economy

The data calendar is less packed this week, but we will get some updates on housing starts and sales, along with the Fed’s beige book. For Monday, the Empire State index showed a jumped to a three-year high.

Check out our economic preview for the week.

Meanwhile, Fed Chairwoman Janet Yellen left open the possibility of further interest rate rises in 2017, speaking at a Group of 30 banking seminar on Sunday.

And: What you need to know about the Household Economic Stress Index

The stat

Getty Images

11.3% -- That’s was Huawei’s market share of smartphones in the second quarter of 2017, meaning the Chinese handset maker is in prime position to overtake Apple, on 12%, says an analyst at research group IDC.

The quote

Civilians carry the dead body of an unidentified man in the Hodan district of Mogadishu, Somalia October 14, 2017. Reuters

“The death toll will likely rise because over 450 people were injured while many others are still missing.” — Abdikadir Abdirahman, the head of Mogadishu’s hospital and ambulance services, tells Wall Street Journal as more than 300 now confirmed dead after weekend terror blast, the worst in Somalia in a decade.

Random reads

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Colin Kaepernick says NFL owners have colluded not to hire him

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Right-wing parties scored some victories in Austria this weekend

Microsoft is building tree houses for its employees

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