Crude oil plunges again, Alcoa kicks off earnings season
Brent and WTI crude oil have managed to steal the spotlight away from China to start the week, plunging 6%. It’s been one of those rare cases where no news is being seen as bad news. In particular, there have been no signs to suggest that tensions between major producers Iran and Saudi Arabia have eased in any way. With OPEC’s two heavyweights still at each other’s throats and with the Saudis indicating plans to hunker down for a long haul low oil environment (rumours of budget cuts and partial privitization of Saudi Aramco) it’s unlikely OPEC is going to come to an agreement on how to stabilize the production and the market any time soon, let along agree on how to deal with non-OPEC producers like the US and Russia.
Oil has been getting really oversold technically but could get more oversold with the $30.00 round number test getting closer. At some point we could see a big snap back relief rally but when and what could sauce a reversal remain unknown.
Stock markets in Europe and North America started off the week in the green but have drifted back into the red into the afternoon. Declines, however, have been small so far. Falling oil may be dragging on stocks along ongoing uncertainty about China. This suggests that we could see some weakness in Asia Pacific markets this morning, particularly in Japan which returns to trading from a holiday. China trade figures are due tomorrow so we could also see some positioning ahead of that. Traders may also continue to focus on the CNY posting and the CNY-CNH spread.
Alcoa has kicked off earnings season with a mixed report. Earnings beat the street while sales missed a bit. Expectations are very low for mining and energy companies this quarter so it may be seen as not too bad overall. US indices have been flat since the report so far.
Alcoa $0.04 vs street $0.02, sales $5.25B below street $5.32B, forecasts aluminium demand to grow 6% in 2016. Industry growth tracking ahead of forecast path to double between 2010 and 2020.
Significant announcements released overnight include:
Canada housing starts 173K vs street 200K
Canada Bloomberg Confidence 53.8 unchanged
Canada business outlook 16.0 vs street 10.0
Norway consumer prices 2.3% vs street 2.6%
Norway producer prices (10.8%) vs previous (6.4%)
Spain industrial production 4.2% vs street 3.8%
Eurozone investor confidence 9.6 vs street 11.4 and previous 15.7
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)
11:00 am AEDT NZ ANZ commodity prices previous (5.6%)
4:00 pm AEDT Japan consumer confidence street 46.6
12:00 am GMT UK same store sales street 0.5% vs previous (0.4%)
9:30 am GMT UK industrial production street 1.7%
9:30 am GMT UK manufacturing production street (0 8%)
3:00 pm GMT UK NIESR GDP estimate previous 0.6%
7:50 pm EST Mon FOMC Kaplan speaking
3:15 pm EST Tue FOMC Lacker speaking
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