Oil takes another hit

There was another step lower in oil prices on Friday night with Brent down another $1.69/bbl to $61.09 and WTI $-2.14 to $57.81. No surprise then that US consumers are rejoicing at the prospect of lower gasoline prices.

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There was another step lower in oil prices on Friday night with Brent down another $1.69/bbl to $61.09 and WTI $-2.14 to $57.81. No surprise then that US consumers are rejoicing at the prospect of lower gasoline prices. The UoM’s early December survey of US Consumer Sentiment printed a 93.8 preliminary reading (89.5E, 88.8P), a fresh post-GFC high. Oil was not helped Friday by the release of the International Energy Agency’s monthly report, cutting its forecast for global crude oil demand for the fourth time in five months. Much of this month’s cut stems from projected weakness in Russia demand for oil.

No joy for US equity investors Friday though as wire coverage reports pointed to what plunging oil prices might mean for global demand ahead, the Dow losing more than 300 points, down 1.8%. Mind you, Dr. Copper rose 0.4% Friday on the LME and in NY. Closer to home spot iron ore eased another 0.6% to $68.99. The VIX rose to 21.08, +1.00, up 4.98% with the AUD losing 0.3% Friday night.

US Treasury yields eased further, the US 10 yield within sight of 2%, down 10 bps Friday to 2.08%, a fresh low for this year, the bond market pricing in lower inflation ahead. In the currency world, the USD was mixed, rising against commodity-linked currencies, but losing against the CHF and EUR. The Bloomberg Dollar Spot Index edged 0.2% lower. Not even the bumper US consumer confidence read made an impression. The NOK and CAD sat at the bottom of the major-currency leader board, down 0.8% and 0.5% respectively. The NZD and AUD were close behind, losing 0.5% and 0.3%. The CHF and EUR posted 0.4% gains against the USD. The yen has opened this morning a little weaker in the wake of yesterday’s snap election in Japan with Prime Minister Abe returned to power. USD/JPY is currently trading at 118.8, within Friday night’s trading range.

Finally, local weekend real estate markets showed Sydney unchanged w/w and +12.1% ytd, Melbourne +0.5% w/w, +6.5% ytd.

Coming up today/tonight/this week

The BoJ’s Tankan survey is out at 10.50 this morning with little to no change expected in the main indexes.

Locally, the Government is releasing its MYEFO today. Naturally the Budget projections of a larger deficit and the track toward surplus will get a lot of wore coverage. But for us, for the markets, it will be important to focus on the Treasury’s growth forecasts and its drivers, including a much steeper fall in the terms of trade. The Treasurer is holding press conference at 12.30 when the document will be made public. The Underlying Cash Deficit is likely to revised higher from $A9.8bn at Budget time to $A40bn-plus. NAB’s forecasts for growth for 2014/15 are 2.5% (also the Budget forecast and unlikely to change, but nominal GDP, the terms of trade and possibly domestic demand forecasts will be cut, cuts that keep the door open to further monetary easing in 2015, should the RBA Board take that decision. Also out this week is the RBA Minutes tomorrow, though unlikely to reveal too much further given Stevens’ extensive AFR interview last week.

New Zealand has its Q3 GDP (Thu). It’s a big data/event week in the US culminating in the FOMC statement, projections and Yell Press conference early Thursday our time. China has its HSBC flash PMI (Tue), Euro-zone has manufacturing flash PMIs (Tue), along with the Germ ZEW (Tue) and IFO surveys (Thu).

Overnight

Oil takes another leg down : Eurostoxx 600 -2.6%, Dax -2.7%, CAC -2.8%, FTSE -2.5%.  Dow -316 points to 17,281, -1.8%, S&P 500 -1.8%, Nasdaq -1.6%, VIX 21.08 +5.0%.  Shanghai +0.7%, Mumbai +0.4%, Nikkei 225 -1.2% and ASX 200 -0.9%; ASX SPI futures this morning -1.2%.  US bond yields: 2s at 0.54% (-6), 10s at 2.08% (-8).  WTI oil at $57.81 (-3.6%), Brent at $61.85 (-2.9%), Malaysian Tapis (yesterday) $65.55 (-2.9%).  Gold at $1222.50/oz (-0.3%). Base metals: LME copper +0.4%, nickel +2.4%, aluminium -0.6%. Iron ore $69.0/t -0.6% Chinese steel rebar futures +0.1%. Soft commodities spot futures: wheat +1.4%, sugar -1.1%, cotton +0.1%, coffee -1.4%. Euro Dec 14 CO2 emissions at €6.66/t (-1.2%). The AUD/USD is 0.8235 now.

  • China Industrial production (Nov) 7.2% (L: 7.7%; E: 7.5%); Retail sales 11.7% (L: 11.5%; E: 11.5%); Fixed asset investment 15.8% ytd (L 15.9%; E: 15.8%); New Yuan loans (Nov) 852.7B (L: 548.3B; E: 655B); Aggregate financing (Nov) 1150B (L: 662.7B; E: 895B)
  • India CPI (Nov) 4.38% (L: 5.52%; E: 4.39%); Industrial production (Oct) -4.2% (L: 2.8%; 2.3%)
  • US UoM Consumer sentiment (Dec, P) strong 93.8 (L: 88.8; E: 89.5); PPI (Nov) -0.2%/1.4% (L: 0.2%/1.5%; E: -0.1%/1.4%)

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