Oil prices take another lashing

Oil prices have again been the stand out story overnight with Brent now clearly below $50/bbl, having tested below $50 last week, and both WTI and Brent down 5-5½% overnight to below $46 for WTI and currently $46.66 for Brent.

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Oil prices have again been the stand out story overnight with Brent now clearly below $50/bbl, having tested below $50 last week, and both WTI and Brent down 5-5½% overnight to below $46 for WTI and currently $46.66 for Brent.

Nothing new fundamentally seems to have triggered the further step lower so far this week other than the absence of any break in the growing deadlock between OPEC and US shale producers on who is going to blink first and cut production. Goldman Sachs and Societe Generale both took the knife to their oil price forecasts, following spot lower, adding to the bearish mood as far oil prices were concerned.

US energy stocks have fallen over 3% overnight with consumer stocks also lower despite what lower energy prices mean for the US consumer’s spending power.

Yesterday’s sign of a rally in the AUD/USD to above 0.8240 was interrupted overnight, the Aussie giving up some of this ground to be back around 0.8165/70 in early local trade. The pull-back came with some deterioration in global risk sentiment, the VIX index being back above 20, LME copper off 1.2% and spot iron ore down 1.24% to $US70.30/t. Gold prices though made some gains, up 1.57% to $US1235.30/oz.

With oil prices under pressure, the NOK (-0.8%) and CAD (-0.6%) were among the worst performing G10 currencies overnight, while the safe-haven JPY (+0.3%) topping the leader board, the Japanese economy also getting an lower energy price induced improvement in its terms of trade. Bond yields have drifted lower. The USD made some modest net gains in a choppy night for currencies.

Not too much as far as economic data is concerned overnight. The Fed’s composite Labour Market Conditions Index improved further in December, rising by 6.1 after an upwardly revised 5.5, the bulk of the index components having contributed, average earnings the outlier last month.

Atlanta Fed President Denis Lockhart (a FOMC voter in 2015 and a balanced-dovish on the policy scale) has been speaking overnight, expressing some caution and the need to be conservative on rate lift-off timing. He notes that wages will be a swing factor going forward and offered his outlook saying that he believes lift-of will be justified by the middle of 2015, believing inflation will rise gradually after a weak 2015 start.

Coming up today/tonight

The AUD market will be paying close attention to Chinese trade report for December set for release at 13.00 AEDT. Annual export growth is tipped improve only somewhat with imports expected to decline by over 6% again.

First up this morning is the weekly ANZ-Roy Morgan Consumer Confidence index that’s staged a mini recovery through year end and which continues to hold up better than the monthly Westpac-Melb Institute measure that weakened into year end. (That monthly reading for November is out tomorrow.)

Japan has its non-market sensitive Nov current account and Dec bank lending data at 10.50am AEDT with its Dec Economy Watcher’s Survey out at 16.00

The UK CPI will initially be the centrepiece of initial G7 data attention tonight with headline CPI tipped to ease to 0.7% from 1.0% and core CPI up a tenth to 1.3% from 1.2%, still continuing to under-shoot the BoE’s 2% inflation target. UK PPI data is also due as are ONS House prices for Nov.

The US NFIB Small Business Optimism index will be under the spotlight tonight, not only for what it says about the confidence of this employment-generating sector but evidence to date of some overall pick-up in labour compensation, a contrast to the subdued growth in payrolls average hourly compensation.

Overnight

Oil lower again; AUD back below 0.82: Eurostoxx 600 +0.6%, Dax +1.4%, CAC +1.2%, FTSE +0.0%. Dow -109 points to 17,628, -0.6%, S&P 500 -0.6%, Nasdaq -0.9%, VIX 19.74 +12.5%. Shanghai -1.7%, Mumbai -1.7%, Nikkei 225 -0.9% and ASX 200 +0.5%; ASX SPI futures this morning -0.8%. US bond yields: 2s at 0.55% (-1), 10s at 1.91% (-3). WTI oil at $45.97 (-4.9%), Brent at $47.33 (-5.5%), Malaysian Tapis (yesterday) $50.33 (-3.2%). Gold at $1234.20/oz (+1.5%). Base metals: LME copper -1.2%, nickel -1.3%, aluminium +0.0%. Iron ore $70.3/t -1.2% Chinese steel rebar futures -1.3%. Soft commodities spot futures: wheat -1.4%, sugar -1.0%, cotton -1.7%, coffee -1.8%. Euro Dec 14 CO2 emissions at €6.80/t (0.0%).

US Fed’s Labor Markets Conditions Index change (Dec) +6.1 after +5.5 revised from 2.9

Indian Industrial production (Nov) +3.8% yy (L: -4.2%; E: +2.6%); CPI (Dec) 5.00% (L: 4.38%; E: 5.33%)

 

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