Crude oil has been the talk of the town again overnight and could remain active right through the day today. Adding to chatter about potential talks between OPEC and Russia and the potential reduced exploration spending could lead to lower US production, the supply demand situation continues to improve.
Rallies in emerging market currencies like Malaysia, Indonesia and Turkey indicate that fears of a China-led economic meltdown continue to subside enabling demand prospects to rebound. Meanwhile, a surprise drawdown in US API inventories suggests and easing supply overhang. WTI is trading near $50.00 and today’s DOE inventories may indicate if WTI could move through or falter around that level in the near term.
In addition to energy contracts, other commodities also continue to rebound as China fears ease particularly copper. Rallying commodity prices have lit a fire under resource currencies with NZD, AUD, NOK, CAD, RUB and ZAR all posting strong gains overnight. SEK has been lagging behind its peers in the wake of dovish Riksbank comments. GBP has been outperforming EUR as UK industrial production beat the street while Germany disappointed. Gold continues to climb as USD keeps softening.
Stock markets continue to steadily climb, confirming yesterday’s corrections were a common pause within an emerging uptrend as we move through the transition from a seasonally weak period for stocks to a seasonally stronger one. The Bank of Japan kept interest rates and QQE steady and indicated inflation expectations are rising but could be impacted by swings
in the oil price. Although it plans to review inflation expectations at its next meeting it didn’t give any indication it is thinking about further stimulus, instead calling on the government to do more from the fiscal side.
This further indicates that the current cycle of global monetary easing may be nearing its limits. The longer we go without the collapses that had been feared in the summer actually occurring, the more confidence can rebound.
Bombardier press reports circulating suggest that it is in early stage talks to sell a controlling interest in the C-Series jet program to Airbus. Airbus, however, indicated the talks “are no longer being pursued”
Monsanto ($0.19) vs street ($0.02) sales $2.3B vs street $2.8B, guides full year to $5.10-$5.60 below street $6.25 blaming currency, lower selling prices and higher corn costs announces restructuring plans.
Yum! Brands $1.00 vs street $1.06 same store sales for China 2% and India (18%) both well below street, indicated earnings growth to be well below 10% target, but raises dividend 12%.
Constellation Brands $1.56 vs street $1.32, raises full year guidance to $5.00-$5.20 from $4.80-$5.00.
Significant announcements released overnight include:
Bank of Japan decision no change to interest rates or QQE as expected
US API crude oil inventories (1.2 mmbbls) vs street 2.0 mmbbls
UK BRC shop prices (1.9%) vs previous (1.4%)
UK industrial production 1.9% vs street 1.2%
UK manufacturing production (0.8%) vs street (0 2%)
Canada building permits (3.7%) vs street 0.3%
Japan leading index 103.5 vs street 103.4
Germany industrial production 2.3% vs street 3.3%
Spain industrial output 2.7% vs street 4.7%
Norway industrial production 3.1% vs previous 2.8%
Upcoming significant announcements include:
3:00 pm BST UK NIESR GDP estimate previous 0.5%
10:30 am EDT US crude oil inventories street 2.0 mmbbls
10:30 am EDT US gasoline inventories street 0mmbbls
2:00 pm EDT FOMC Williams speaking
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