Stocks pause while oil retrenches
A catch up rally overnight to start the week in Asia Pacific markets hasn’t carried through to US and European indices which are trading down moderately this morning in what looks like normal backing and filling after last week’s big bounces.
It shouldn’t come as a surprise to anyone after Friday’s 8% one day gains that the biggest correction this morning has been in crude oil. Saudi Aramco indicating it intends to maintain current capital investment has been blamed as the excuse for the retrenchment. Considering that Brent and WTI have retraced a little less than half of Friday’s moves up and are holding $30.00, so far this looks like a common retest in an emerging uptrend.
The pullback in risk markets has defensive plays like JPY and gold on the rebound. Copper is also trading moderately higher this morning. This means that we could potentially see a split in Canada stock action today with energy stocks potentially coming under pressure while miners could bounce back. Eldorado Gold may attract attention after 2015 production exceeded guidance but the company guided for production to fall in 2016.
Russia reported a big drop in GDP this morning, a sign of how hard some oil producing economies were hit last year (sanctions didn’t help either). Between that bad news and the oil pullback, RUB has been getting hammered again today while other oil currencies like CAD and NOK are down only slightly, another sign that the market sees today’s oil drop as a normal trading correction not a resumption of the previous downtrend.
There’s not much in the way of economic news due today in North America as the east coast digs out from the weekend storm. Corporate earnings will likely be in focus as we move into the peak weeks of earnings season. Traders may also look ahead to the FOMC meeting and GDP reports due later in the week.
Halliburton $0.31 vs street $0.24
DR Horton $0.42 vs street $0.41, 10,665 homes in backlog and January home sales trends have been positive
Johnson Controls has agreed to merge with Tyco, Johnson shareholders to control 56% of combined company and receive $3.9B in cash. Company to maintain Tyco’s legal domicile in Ireland
Significant announcements released overnight include:
Japan trade balance ¥140B vs street ¥117B
Japan exports (8.0%) vs street (7.0%)
Japan imports (18.0%) vs street (16.4%)
Japan leading index 103.5 vs street 103.9
Singapore consumer prices (0.6%) vs street (0.7%)
Russia GDP (3.7%) vs previous 0.6%
UK CBI orders (15) vs street(10)
UK CBI selling prices 1 vs previous (2)
UK CBI business optimism (4) vs previous (12)
Germany IFO current assessmt 112.5 vs street 112.6
Germany IFO business climate 107.3 vs street 108.4
Germany IFO expectations 102.4 vs street 104.1
Italy retail sales (0.1%) vs previous 1.8
Upcoming significant announcements include:
9:30 am EST US Dallas Fed street (14.0) vs previous (20.1)
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