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A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.

There are 10 to 15 reasons why equity markets are selling off but my overriding theory is this: The approaching end of U.S. Federal Reserve monetary stimulus and the sharp slowdown in the European economies provided the catalyst for big investors to recognize asset price excesses they knew were already there.

Everybody knew that U.S. crude oil production had ramped higher and imports had been slashed, yet the West Texas Intermediate crude benchmark price remained elevated. Everybody knew the S&P 500 was trading at valuation levels well above historical norms, and that earnings growth was dependent on financial engineering, not consumer demand. Everybody knew that the yield spread on lower-quality corporate bonds was wafer thin and approaching early 2007 levels.

The market now needs to recalibrate. If you're looking for a sign that equities have stabilized, look to the U.S. small cap index, the Russell 2000. It provided the first warning of the lower risk tolerance that has been punishing markets and, if it bottoms out, that's a good sign for equities as a whole.

On to the links.

Reports from the Middle East suggest no respite for investors in energy markets. Officials in Kuwait joined with Saudi Arabia in suggesting that oil production will not be cut despite the sharp slide in the commodity price.

Energy economist Phil Verleger sees similarities between the Organization of Petroleum Exporting Countries (OPEC)'s actions now and in 1997 before a huge drop in the oil price. He writes:

"Saudi Arabia's actions in 1998 and 1999…displayed a boldness not seen before. As prices weakened during the Asian debt crisis, the Saudis declined to cut production. Instead, when Venezuela suggested it might produce at a maximum rate, the Kingdom indicated it would do the same. Prices plummeted and were only restored after Mexico, Oman, Norway and the other OPEC members joined Saudi Arabia in reducing output."

"A veteran economist looks at oil price collapses of yore, and sees parallels to today" – Platts'

"Kuwait joins Saudi view of no immediate OPEC supply cuts" – Bloomberg

"Oil producers enter supercycle's dark side" – Reuters

"Oil demand growth this year seen weakest since 2009" – Bloomberg

See also: A terrific chart from Reuters on OPEC production responses through time – ReutersGraphics

Also in the oil patch, the financial health of shale oil producers is a matter of fierce debate this morning. CNBC is warning of a "debt spiral" as smaller companies are unable to finance their debt at lower commodity prices. On the other hand, the Financial Times is quoting experts as stating that most shale production will remain profitable even at $80 (U.S.) per barrel.

"Here's why shale oil stocks are tanking" – Pisani, CNBC

"U.S. shale mostly still profitable with oil at $80" – FastFT (subscription may be required)

Speaking of "no respite", the economic data out of Europe's largest economy remains abysmal. Business Insider reports:

"The German government just cut its economy's 2014 GDP growth forecast to 1.2 per cent from 1.8 per cent and 2015 forecast to 1.3 per cent from 2 per cent. This follows more awful figures from the euro zone: industrial production dropped 1.9 per cent in the year to August. Economists had expected a 1.6 per cent drop between July and August, but got a steeper 1.8 per cent decline."

Anonymous economist Macroman had the best market summary over the weekend, one that was highlighted by several well-known economists on Twitter.

The report surveys the market's about-face on inflation and interest rate fears, the U.S. dollar and Federal Reserve policy. For me, this was the key quote:

"One of the reasons that the last few years have been challenging for global macro investors is that key assets haven't really gone anywhere, oscillating within ranges that sometimes are broad and sometimes aren't. One of the key features of this environment has been that central banks have tended to 'push things to the middle.' CBs have tended to lean against price extremes in markets, most notably against overtly hawkish developments in monetary pricing and 'undue' weakness in risky assets."

"What now" – Macro Man

See also: "An ABC correction" – The Fat Pitch

Tweet of the Day is from @mark_dow "Great article, except that the [EU] single currency pretty much is doomed theatlantic.com/business/archi… "

Diversion: "The wealthiest American in every state" – Vox

Follow Scott Barlow on Twitter @SBarlow_ROB

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