Markets advance as oil rebounds
Markets rebounded and oil rose on Wednesday. US stocks recorded solid gains, with the S&P 500 index snapping a five-day losing streak and recording its first gain in 2015. Investor optimism was boosted as oil markets stabilized and better than anticipated employment data were released by ADP.
The dollar continued to advance against major currencies with ICE US Dollar Index rising 0.61% to a level slightly below a nine-year high reached earlier in the session. The investor reaction to the minutes of the December meeting of the Federal Reserve was neutral as minutes indicated that low inflation would not prevent the central bank from raising rates, but the central bank was in no hurry to start raising interest rates, not until at least April. Today at 14:30 CET the labor market data will be released in US.
The number of Initial Claims is expected to fall to 290,000 this week compared to 298,000 increase last week. The fall in initial claims should contribute to further strengthening of US dollar. At 21:00 CET the November Consumer Credit number will be released, the tentative outlook is positive for the dollar.
European stocks recorded their first gain of 2015 as investors bet on further stimulus measures from the European Central Bank after consumer price data with first deflationary reading on annual basis since October 2009 were released. Euro fell for a fifth day, trading at nine-year lows against the dollar on the prospect of further monetary stimulus. Today the euro-zone Retail Sales number for November will be reported at 11:00 CET after the German Factory Orders for the same month is released at 08:00 CET. Both indicators are expected to come out below the previous month readings, and lower actual numbers may negatively affect the single European currency.
Japanese stocks are rising today as rising US and European markets and a rebound in oil prices eased investor concerns. The Nikkei added 0.01 percent on Wednesday, just managing to snap a four-day losing streak. The yen also weakened against the dollar trading above 119.00 level, compared to 118.71 Tuesday. The divergent central bank policies of Bank of Japan and the Federal Reserve with the BOJ implementing accomodative policies while the Federal Reserve moves toward raising interest rates constitute the main source of the yen weakness. Yen weakness will continue if no major policy reversals take place.
US crude oil rose Wednesday, snapping a four-session losing streak after a dip below $47 a barrel earlier in the day as a weekly US inventories report showed a surprise drop in crude supplies. WTI for February delivery rose 1.5% to settle at $48.65 a barrel on the New York Mercantile Exchange. There are no signs that the current bearish trend will reverse in short term as analysts from Bank of America Merrill Lynch estimate that Non-OPEC and OPEC producers don’t plan curbing output and it will take time for the global demand to increase with lower prices.
Natural gas for February also retreated – 2.3% to $2.8710 per million British thermal units, the lowest settlement since September 2012. Today at 16:30 CET the EIA Natural Gas Storage Change for the week ended January 2 will be published, with an expected decline of 116 billion cubic feet. A bigger than expected actual number may result in increase in gas prices.
Source: ifcmarkets – Markets advance as oil rebounds
