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January 26, 2016

Rebound in Oil and Strong Corporate Earnings Boost Risk Sentiment

Bucking the global overnight price action, US stocks are rallying today while Treasuries and swaps are trading largely unchanged amid a rebound in oil prices and strong corporate earnings.  Stocks continue to be highly influenced by crude price action, which caught a bid on optimism that OPEC and non-OPEC producers could reach an agreement to curb supply.  OPEC has resisted calls to cut production for over a year in an effort to maintain market share versus rival producers.  Iraqi Oil Minister Adel Abdel Mahdi, however, said he sees “some flexibility” for a deal a day after senior OPEC...

January 25, 2016

Stocks and Oil Resume Declines After Two-Day Rally

The two-day rally in stocks ran out of steam while Treasuries richened marginally across the curve after pressure on oil prices resumed.  After surging over 20% in the past two days, WTI and Brent crude fell 4% and 3.5% respectively, off the back of record output from Iraq.  The losses came despite news that OPEC was considering holding an extraordinary meeting to discuss the global supply glut at the request of Venezuela.  Venezuela’s economy depends heavily on oil income and they lack the capacity to make up for revenue declines by pumping more when prices are depressed.  Meanwhile, OPEC...

January 22, 2016

Equities Grind Higher with Oil on Foreign Central Bank Stimulus Hopes

US equities joined the rally in global stock markets while Treasuries sold off across the curve on foreign central bank intervention speculation and a bounce in oil prices.  Yesterday’s dovish comments by ECB President Draghi were followed up by a story out of Tokyo that indicated the Bank of Japan is “taking a serious look” at expanding its stimulus program when it meets next week.  The BoJ’s biggest concern is falling oil prices, which are weighing heavily on the central bank’s 2% inflation target.  The strengthening yen and heavy selling of equities are also likely to be key topics of...

January 21, 2016

Markets Stabilize After Dovish Comments from Central Bankers

Stocks rebounded with oil while Treasuries sold off 1-4 bps across the curve after dovish comments from ECB President Mario Draghi and Chinese Vice President Li Yuanchao.  The ECB kept monetary policy unchanged at record lows, and indicated that additional stimulus measures are very much on the table for the March meeting.  Already in the midst of a 1.5 trillion euro bond purchasing program, Draghi stated “the credibility of the ECB would be harmed if we weren’t ready to revise the monetary-policy stance” in light of increasing downside risks to the global economy.  During the press...

January 20, 2016

Plunge in Crude Sparks Renewed Global Stock Sell-off and Flight to Treasuries

Returning to an all-too familiar pattern, the intensifying collapse in oil prices dragged down global stock markets and boosted demand for the safety of Treasuries.  WTI crude cheapened to $27.05, hovering at the 12-year lows.  Both WTI crude and Brent are currently trading down almost 5% and 4% per barrel respectively, with WTI approaching the $27 mark.  The renewed selling comes off the back of an International Energy Agency report stating the oil market could “drown in over-supply” in 2016.  The IEA report acknowledges that non-OPEC producers will continue to be driven out of the market...

January 19, 2016

Slight Risk On Tone as China and Oil Continue to Dictate Market Sentiment

After the MLK-extended weekend, US markets opened with a better tone to risk assets, while Treasuries have sold off marginally as Chinese economic data was soft, but not as weak as feared by investors and additional PBoC economic stimulus remained a possibility.  Data released indicate China’s economy grew at 6.9% in 2015, its slowest pace in a quarter of a century, but roughly in line with the government’s official 7.0% target.  A breakdown of the underlying numbers showed growth in the services sector outpaced industrial growth, suggesting China’s transformation to a more consumer-led...

January 15, 2016

Flight to Quality Trade in Full Force as Oil Plunges Below $30/barrel

Global equities plunged once again while Treasuries and swaps rallied strongly across the curve as falling oil prices and disappointing economic data spooked investors.  Heavy selling pushed both WTI and Brent crude firmly below $30/barrel off the back of ongoing supply concerns, soon to be exacerbated by Iranian exports.  $30/barrel seemed to be acting as a resistance level, and many fear the move below may now trigger an even bigger sell-off.  Crude oil has already fallen 20% since the start of the year.  Even government-sponsored buying couldn’t prevent China’s Shanghai Composite from...

January 14, 2016

US Stocks Rebound Off the Back of Higher Oil and Dovish Fed Comments

US stocks rebounded from a 3-month low buoyed by strong corporate earnings and firmer oil prices, while terror concerns kept Treasuries better bid.  A terrorist attack in Jakarta as well as evacuations at a Sydney opera house and Christchurch airport overshowed a firmer yuan and uptick in German GDP during the overnight session.  At one point WTI crude fell to as low as $29.73/barrel, its lowest level since February 2004, before climbing back above $31.  The UN is expected to confirm that Iran has curtailed its nuclear program as per its agreement with world powers, which would pave the...

January 13, 2016

Oil Unable to Hold Gains After Disappointing Inventories Data

US stocks turned negative while Treasuries fluctuated after pressure on oil overshadowed better-than-expected Chinese trade data.  Some of last week’s market volatility has died down since Chinese policy makers stepped in to stabilize the yuan, but pressure on oil has made it difficult for risk assets to pick up any momentum.  The PBoC held the yuan firm for the fourth consecutive day, quelling fears of a rapid depreciation of the currency in the near term.  Chinese trade data showed both imports and exports fell less than expected in December, boosting China’s trade surplus to $60.09...

January 12, 2016

Volatile Day for Oil Overshadows Stronger Yuan

US financial markets seesawed during the US trading day after the PBoC took aggressive steps overnight to stabilize the yuan.  China’s central bank set the yuan higher for the second consecutive day backed by massive offshore buying by state-owned banks.  The suspected intervention by the PBoC drained liquidity from the system and caused yuan borrowing rates in Hong Kong (HIBOR) to surge up to 66.82%, more than five times the previous high registered Monday.  Market pundits believe Beijing’s aggressive action was an effort to deter speculators who have been betting against the currency...

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