Crude oil and gasoline crushed while stocks keep sliding
Stock markets in North America and Europe took it on the chin again Wednesday with unsettled market conditions in China still casting a cloud over trading around the world. Positive economic news including better than expected US ADP payrolls and trade numbers was widely ignored. Monetary news which saw Fed Vice Chair Fischer suggest 4 rate hikes this year are “in the ballpark” and FOMC minutes which showed December’s rate increase was a close call for many members didn’t have much of an impact on trading either.
The big action of the day was in energy markets which plunged again. Both WTI and Brent crude broke down to new lows on trend despite a big drop in US DOE oil inventories indicating traders are more concerned that tensions between Saudi Arabia and Iran mean that co-operation among producers to stabilize supply looks unlikely any time soon. Gasoline also plunged on news of a big increase in gas and distillate stockpiles.
Stock markets may also be starting to worry what earnings season could look like. While Chipotle’s bad news can be blamed on operating problems, comments out of Monsanto about the USD impact on business and a very weak holiday selling season for Macy’s suggest that earnings results could be mixed this quarter with the potential for significant negative surprises. Let’s see if any more companies use overseas turmoil to sneak through profit warnings over the next few days.
Capital coming out of risk markets continues to find its way into perceived defensive havens, particularly JPY and gold. The yellow metal broke out of big base today signalling that the dominance of USD in forex markets over the last year may be coming to an end.
Looking forward, trading action in China may once again set the tone for stock market moves as traders prepare for some shareholder selling bans to be lifted even if quickly replaced by new regulations. Australia may also be active on trade and building figures.
Tomorrow, EUR could be active once again on European employment and retail sales data as traders try to figure out how much pressure the ECB could come under to increase stimulus even further after weak inflation data undermined the single currency earlier in the week. It’s a quieter day for US news as traders await Friday’s nonfarm payrolls report. CAD could attract attention around Bank of Canada Governor Poloz’s speech and may remain sensitive to oil price swings which had knocked the Loonie down today.
Macy’s Nov/Dec same store sales (4.7%) to close 40 stores and lay off staff
Chipotle Q4 same store sales (14.6%) worse than street (10.6%), company subpoenaed regarding neovirus incident
Monsanto ($0.58) vs street ($0.23), increases full year estimate for negative headwind from USD on EPS to $0.60-$0.70 from $0.30-$0.40.
Significant announcements released overnight include:
US ADP Payrolls 257K vs street 198K
US ADP revision down to 211K from 217K
US trade balance ($42.3B) vs street ($44.0B)
Canada trade balance ($2.0B) vs street ($2.6B)
US factory orders (0.2%) as expected
US DOE crude oil inventories (5.0 mmbbls) vs street 1.0 mmbbls
US DOE gasoline inventories 10.5 mmbbls vs street 2.1 mmbbls
US Bloomberg implied oil demand 17,455 mmbbls vs previous 16,718 mmbbls
Service PMI reports:
US Markit service PMI 54.3 vs street 54.0
US ISM non-manufacturing PMI 55.3 vs street 56.0
Spain 55.1 vs street 56.6
Italy 55.3 vs street 53.6
France 49.8 vs street 50.0
Germany 56.0 vs street 55.4
UK 55.5 vs street 55.6
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
11:30 am AEDT Australia trade balance street ($3.0B)
11:30 am AEDT Australia building approvals street 3.9%
7:00 am GMT Germany retail sales street 3.7%
7:00 am GMT Germany factory orders street 1.1%
7:30 am GMT Sweden service PMI previous 56.3
8:00 am GMT UK Halifax house prices street 9.0%
9:00 am GMT Italy unemployment rate street 11.5%
10:00 am GMT Eurozone unemployment rate street 10.7%
10:00 am GMT Eurozone retail sales street 2.0%
10:00 am GMT Greece unemployment rate street 24.5%
8:30 am EST US jobless claims street 275K
10:00 am EST Canada Ivey PMI street 55.0 vs previous 63.6
10:30 am EST US natural gas storage street (95 BCF)
8:10 am EST Bank of Canada Poloz speaking
8:45 am EST FOMC Lacker speaking
2:15 pm EST FOMC Evans speaking
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