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Energy volatility

After enduring a week of heavy selling, investors in oil and gas stocks will today be contemplating the ramifications of unconfirmed press reports that Santos has received a takeover offer. This will have the market considering what premium is warranted for the possibility of a takeover.

There is also likely to be spill over support for other oil and gas stocks. A bid for Santos would be a show of confidence in the sector and mean that existing investors taken out of Santos will be looking for alternatives.

The positive impact of a possible Santos bid will be an offsetting factor for the ongoing correction in oil and metals prices that will be a headwind for the ASX 200 this morning. The oil market is becoming nervous about a possible delay in a decision on extending the OPEC/Russian production agreement and was not helped by a build in US inventory last week

After yesterday’s disappointing wage data, today’s employment data will be a key focus for currency traders. After a run of very strong data in recent months, markets may be relatively forgiving of a modest downside miss in a volatile data series. However, another strong number could be supportive for the Aussie Dollar, franking the trend of recent month and confirming the picture of good business conditions on display in the NAB Business Conditions Index. 

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