Five things to know before the market trades this week, Dec 15 to 21

A woman casts her ballot to vote for members of the supreme court as part of Japan's general election in Tokyo on Dec 14, 2014. -- PHOTO: REUTERS  
A woman casts her ballot to vote for members of the supreme court as part of Japan's general election in Tokyo on Dec 14, 2014. -- PHOTO: REUTERS  

The year is fast winding down but investors still have plenty to mull over, with oil prices continuing their spectacular nose-dive and interest rate talk again intensifying.

1. Will the US Fed change those closely-watched words on interest rates?

The Federal Reserve's policy making body meets for two days starting Tuesday, and attention will once again focus on any possible change in its well-established language on the crucial question of when interest rates will rise.

The key phrase, used again at the October meeting of the Federal Open Market Committee, is a pledge to hold interest rates low for "a considerable time".

Everyone knows rates will rise some time, almost certainly next year, but investors have taken comfort in this now-familiar phrase.

Any change to indicate a rate rise will come sooner could spell heightened jitters - but some believe a variation is likely given better US economic data of late.

2. Just how low can oil prices go?

The crash in the price of crude oil - about 45 per cent since June last year - is good news for many, with petrol getting cheaper at the bowser and airlines welcoming big savings in jet fuel expenses.

But the sheer extent of the nose-dive and uncertainty about just when prices will stop falling has made markets very jittery indeed.

And of course there are losers as well. Stocks linked to oil exploration - like Singapore's big rig builders SembCorp Marine and Keppel Corp - take a hit.

And nations heavily reliant on oil income, such as Malaysia and Russia, are also facing a major reduction to their income.

Crude oil slumped to about US$62 a barrel on Friday, a fresh five-year low, so all eyes will be on oil markets this week.

3. Abenomics gets a muted mandate in downbeat election

In Japan, Prime Minister Shinzo Abe's ruling bloc won more than two-thirds of the seats in the lower house of Parliamentin a snap election on Sunday amid the lowest voter turnout since World War II.

As Japan appeared to be sliding back into recession, Abe billed the poll as a referendum on "Abenomics" - his radical strategy of pumping vast sums into the moribund economy. But according to exit polls carried out by NHK, the national broadcaster, there was a fairly even split between people who said they valued "Abenomics" (52 per cent) and those who said they did not (46 per cent).

The health of the world's third largest economy will continue to be firmly on the radars of many this week as the Bank of Japan release its closely watched Tankan survey of business sentiment for the fourth quarter on Monday.

4. US stocks suffered their worst week since 2011

The Dow Jones Industrial Index, a major barometer of large US stocks, fell 315.51 points, or 1.8 per cent, to finish at 17,280.83 on Friday. The Dow dived 678 points, or 3.8 per cent, for the week, in its worst week since September 2011.

The falling oil price was a major drag on markets, as some investors worried that sliding demand for oil reflects a weakening global economy. Energy-related stocks took a battering from the weaker oil price.

Investors around the world will want to know if last week was a limited correction after a series of solid US market gains - or if perhaps worse is yet to come, given broader global volatility.

5. Currencies are on the move

Two currencies already hit by the slide in the price of oil and other commodities - the Malaysian ringgit and Australian dollar - could depreciate even further.

Last week, the head of Australia's Reserve Bank, Glenn Stevens said he would like to see the Australian dollar as low as 75 cents to the greenback to help exporters. It has already fallen significantly to be trading around 85 cents to the US dollar.

At the same time, the Aussie has fallen to about $1.08 to the Singapore dollar - its lowest level in at least five years.

Lower oil prices are dragging down the Malaysian currency, which is now near its lowest level against the Singdollar in nearly two decades, about about RM2.66.