FOMC left the rate unchanged, WTI responds with a hike

February 1, 2016

A decision on federal funds rate was supposed to be taken at yesterday’s FOMC meeting, which was held on a cautious note. The liftoff was postponed as expected. Committee officials are pointing out a need for a more gradual monetary schedule as the tightening access to liquidity may further arrest the recovery of the world’s economy.

The decision has sent the U.S. stocks in the red zone with Dow Jones dropping by 1.38% (222.77 points) at the session’s closing. S&P declined by 20.68 points (1.09%) to 1882.95. Nasdaq Composite suffered the most tumbling by (2.18%) to 4468.17 points with gloomy corporate data from the Silicon Valley. Apple reported that after a 12% drop in revenue in Q4 2015 the growth in sales averaged at 4% in Q1 2016. YoY growth averages only at 2% which raises concerns over further demand for Apple products. Company stocks slid by 6.57% to 93.42 on these news.

Mixed data released yesterday made WTI grow by 3%. However, this was the first time from December when crude’s rally had no positive impact on stock markets. Russian Ministry of Energy reported that they consider an option to cooperate regarding output levels with OPEC members. Meanwhile Saudi Oil Minister Al-Naimi said that the global supply may exceed the demand by 2M barrels daily and market will probably need time to ease the glut and return prices to reasonable levels.

EIA report posted yesterday showed that despite the cold season and the U.S. companies’ dumping price wars, crude inventories rose by 8.4M barrels almost by two times exceeding the estimate of only 3.3M barrels increase. Today’s session started with Crude dropping by 1.19%, currently hovering near the $32 level.

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