Energy stocks pushed up Asian markets

29 September, 2016

Energy stocks pushed up Asian markets

European Outlook: Energy stocks pushed up Asian markets after OPEC agreed to cut oil production and limit daily output to 32.5-33 million barrels. The front end WTI future is currently trading above USD 47 per barrel and U.S. and U.K. stock futures are also celebrating the deal, which will see European stocks extending yesterday’s gains and is likely to weigh on bond futures. The European data calendar is very busy today, with preliminary inflation data for September for Spain and Germany, as well as German unemployment and the Eurozone ESI economic confidence indicator. The U.K. has BoE mortgage approvals, consumer credit and money supply data.

Oil headlines from Algeria: Oil prices surged following the surprise OPEC agreement on production cuts. USOil rallied 5% to $47.46 and UK Oil was up to highs over $49.00.  The production cut was between 240k and 740k barrels per day, which will limit supply to between 32.5 mln and 33 mln barrels per day. It was a surprise because Saudi Arabia had dampened market expectations for a deal ahead of the meeting in Algiers. This is the first coordinated action to lift crude prices in eight years, and marks a shift in strategy of the group to maintain market share and put pressure on high-cost producers such as shale field drillers. Markets will be paying close attention to the implementation of the production cut, particularly given the lack of information about how much each producer will curtail output. OPEC next meets officially at the end of November.

ECB’s Draghi: ECB countered threat of new “great depression”. Defending the ECB’s policies to German parliamentarians Draghi said after a visit to the lower house that other policies must contribute much more decisively while the ECB must allow its measures to develop for full impact. The central bank president stressed that the ECB doesn’t see overheating in the Eurozone or German economies although he admitted that low rates for long may risk asset-overvaluation risk and that ECB policy is not the main factor in low bank profitability.

Fedspeak: Governor Yellen: The rate hike outlook said that in the event of economic overheating the Fed is prepared to adjust policy accordingly, as the jobless rate could fall farther and continued job creation at the current pace could lead to overheating. There’s no meaningful upward pressure on inflation, however, and she’s pleasantly surprised that the jobless rate has not fallen of late and there’s “no fixed time table for interest rate moves”.Later Loretta Mester noted the risks in waiting too long to raise rates and worried that further delays may force a steeper trajectory in the future. She explained her dissent at the September 20, 21 FOMC, saying the underlying fundamentals supporting the economy are sound, which has been “demonstrated by the resiliency it has shown through a numbers of bumps along the road of expansion.” Some of those bumps are, the gyrations in the financial markets at the start of the year, the slowing in China, economic weakness in Europe, the large appreciation in the dollar between mid 2014 and the start of 2016, and the uncertainties over Brexit. And the economy is expected to continue to show strength too. She reiterated the maxim that monetary policy works with a lag, so policy actions need to be taken before the goals are met. Earlier Neel Kashkari had stated just how much slack remains in the labor market is the critical question, while the economy should have continued moderate growth of about 2%, while global investors near-term see Treasuries as a safe haven. While the U.S. long-term needs to get its fiscal house in order, it’s not appropriate for the Fed to hold back in order to force the hand of fiscal authorities. Kashkari also found it “alarming” that issues at Wells Fargo could have been going on for years and no one was aware. Finally, CharlesEvans reiterated the likelihood that rates remain lower for longer, in his prepared remarks to community bankers. Policy will be normalized at a very gradual pace. The low rate scenario means the Fed will have less room to respond to downside shocks. The dovishly inclined Evans is not a voter this year but rotates into that position in 2017.

Main Macro Events Today        

US GDP  – The third release on Q2 GDP is out today and should reveal an upward revision for the headline to 1.5% from 1.1% in the second release, 1.2% in the first release and 0.8% in Q1 of this year. Among the revisions there is likely to be upward revisions for construction of $8 bln, consumption up $4 bln, net exports up $4 bln and intellectual property up $2 bln. Looking ahead to Q3, the headline could be stronger at 2.2%.

Governor Yellen  – Following her testimony in front of the Committee on Financial Services in Washington regarding Supervision and Regulation yesterday, the FED chair is in Kanas City speaking at the Minority Bankers Forum.


Source link  
Stock market recovery continued

Still, U.K. and U.S. futures are also moving higher, indicating that abating fears over North Korea are keeping markets underpinned, while earnings optimism...

NZDJPY beneficiary of Asian session

With a the NZD is overvalued on one side and Sabre rattling between North Korea and the US continuing overnight there was really only...

Euro above 1.18 against the dollar

Asian stock markets moved higher, with a rally in banks underpinned by earnings reports and helping to offset pressure on exporters and automakers...


Gold support at 1258 but rolled over 15m

Gold remains bullish having posted at high over 1265 yesterday. My bias remains long and I entered again at 1258 last night. However, the intraday...

FOMC held rates steady

The Fed’s reluctance to commit to a time for QT beyond “relatively soon” and the fact that the Fed appeared to be moderately more concerned...

FOMC decision to outline its balance

U.S. markets will have a lot on their plates this week as they continue to assess the June jobs data, global developments in the aftermath of the G20 meeting...


Dollar majors have been challenged

EURUSD has settled around 1.1350, modestly above the five-session low posted yesterday at 1.1336. USDJPY has been trading on either side of 113.00...

Yen crosses keep ascending

The yen is coming under pressure across-the-board, with the 0% yielding yen converting back to the funding currency of choice in the forex market...

Oil prices hold above USD 44 per barrel

Asian stock markets mostly headed south, with Australia’s ASX a notable exception. Elsewhere markets followed Wall Street lower...

  


Share: