A surprise slump in US crude oil stocks last night led to a strong rebound in crude oil prices. WTI oil jumped nearly 3% to the $47.3 area this morning, from its five-month low.

DoE data released last night showed US commercial crude oil inventory dropped by 5.24 million barrels in the previous week, far more than the consensus of a 1.59 million drop.  That said, US inventories have registered five consecutive weeks of net decreases with an aggregate drop of 13 million barrels. 

Any concern over rising US production and record high US inventory levels has now been alleviated. OPEC countries are expected to freeze production for an extended period of time, which should also help to stabilise oil prices. US and European equity markets took a boost from their respective energy sectors last night, and a similar reaction could be observed in Asia markets today. Technically, the immediate support and resistance levels for WTI – Cash product could be found around $44.95 and $48.70 respectively.

The performance of Shanghai and Hong Kong shares continued to diverge, resulting in a narrowing valuation gap between the two highly correlated markets. The Hang Seng index has registered a year-to-date return of 17%, marking it out as one of the best performing markets in the world. The Shanghai composite, on the other hand, has slumped over 2% this year. This dive has not been driven so much by the fundamentals as by policymakers’ tightening of financial regulation, and curbing of liquidity. 

Yesterday, Chinese PPI and CPI data showed a weaker inflation outlook and slower growth in PPI as the economy has probably come to the end of its inventory build cycle. PPI fell 1.2% month on month to 6.4%, marking the turning point of a positive PPI trend ongoing since January 2014, partially due to the recent commodity prices slump. This trend could continue, with slower demand from China helping to form a negative feedback loop with commodity import prices. 

Hong Kong 50 - Cash

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