Inventory rise knocks oil down amid mixed data and a flurry of central bank speeches
22:00, 04 November 2015
· By Colin Cieszynski
It’s been a mixed day for trading in Europe and North America with the FTSE and many continental indices rising moderately while the Dax and US indices fell moderately. The Dax and the Dow took runs at big round numbers but failed to get through as overbought RSI’s highlighted the need for trading corrections of recent gains.
The biggest correction of the day was seen in WTI crude oil which started the day with a rally then reversed sharply downward on higher than expected US inventories. CAD and NOK fell significantly in tandem with NOK getting hit harder as continental currencies broadly underperformed their peers elsewhere.
With news flowing out through the day, US declines came in a series of waves. Stocks were active but mixed with earnings still having a big impact on trading action. Groupon plunged 27% after cutting guidance and replacing its CEO. Media companies were also under pressure with Time Warner, 21st Century Fox and Viacom all falling 7% on weak earnings reports out of the group. In particular Fox posted a 10% revenue declined dragged by the Fantastic Four flop while Warner cut guidance.
Tesla Motors on the other hand, gained 11.2% as the street responded positively to its earnings and forecasts. Video game companies continue to attract interest with Activision Blizzard and Electronic Arts both gaining on the day.
FOMC Chair Yellen indicated in answers to questions following testimony on banking to congress that December remains a live meeting for a potential interest rate hike as long as data still points to a strong economy and the potential for rising inflation toward the 2% target. She also indicates that moving earlier would enable the Fed to tighten rates at a more gradual pace. Meanwhile New York Fed President Dudley suggested the central bank should consider the impact of a rate hike on individual Americans but confirmed he also sees December as a live meeting depending on the data. At this point, it would seem that unless incoming data is really really bad the Fed is looking at a December rate hike.
Economic data from the US was mixed today. ADP payrolls slipped a bit but not enough to change Fed expectations, while ISM non-manufacturing PMI shot much higher, confirming the big increase we saw in Chicago PMI indicating an upturn in the US economy last month.
There’s no major economic news due from Asia Pacific countries so we may see trading driven by ongoing questions about the health of economies in China and Japan, and key supplier countries like Australia. Comments from Fed Governor Stanley Fischer during Asia Pacific hours may also have an influence on trading.
The focus of new tomorrow remains squarely on central banks with several speakers out in both the US and Europe plus interest rate decisions in the UK and Norway, with no change expected from either of them this time out. Prior to this, the Bank of England has been leaning toward rate liftoff in early 2016, while Norges Bank has cut rates three times in the last 12 months.
Facebook $0.57 vs street $0.52, advertising $4.30B vs street $4.18B, over 1 billion daily users
Qualcomm $0.91 vs street $0.86
MetLife $0.62 vs street $0.76
Significant announcements released overnight include:
US ADP payrolls 182K vs street 180K
US ADP payrolls prior month revised down to 190K from previous 200K
US trade balance ($40.8B) vs street ($41.0B)
Canada trade balance ($1.73B) vs street ($1.75B)
US Markit service PMI 54.8 vs street 54.5
US ISM non-manuf PMI 59.1 vs street 56.5
US DOE crude oil inventories 2.8 mmbbls vs street 2.25 mmbbls
US DOE gasoline inventories (3.3 mmbbls) vs street (1.1125 mmbbls)
US DOE implied oil demand 15,696 mmbbls vs previous 15,662 mmbbls
Upcoming significant economic announcements include:
7:00 am GMT Germany factory orders street 1.9%
8:00 am GMT UK Halifax house prices street 9.5%
8:30 am GMT Sweden industrial production street 3.3%
9:00 am GMT Norway interest rate 0.75% no change expected
9:30 am GMT Norway Norges Bank Olsen speaking
10:00 am GMT Eurozone retail sales street 3.0%
10:45 am GMT ECB Draghi speaking
12:00 pm GMT UK interest rate and QE 0.50% and £375B no change expected
8:30 am EST IMF Lagarde, FOMC Harker, Dudley, Fischer speaking
8:30 am EST US jobless claims street 262K
8:30 am EST US continuing claims street 2,140K
10:00 am EST Canada Ivey PMI street 54.0 vs previous 53.7
1:30 pm EST FOMC Lockhart speaking
TBA FOMC Tarullo speaking