WTI Crude Oil have dropped to nearly 13.5% in 10 trading days, thanks to the Energy Information Administrator’s largest build in U.S. inventories since 1982.
The domestic crude supplies rose by 14.4 million barrels last week, according to the recent U.S. EIA report.
OPEC reached in September a preliminary agreement in order to cut production, probably by 200,000 to 700,000 barrels per day. The main reason was to pump up prices by removing the unwanted barrels from the market. According to the OPEC, the details of the plan will be completed until its official Nov. 30 meeting.
U.S. equities fell on Tuesday, the first trading day of November, after the release of mixed economic data.
Earnings have been better than expected, but S&P 500 and DJIA fell on Tuesday as recent election news. The Markit manufacturing PMI rose to 53.4, from 51,5 in September. The ISM manufacturing index for October met expectations at 51.9, while construction spending data for September missed consensus.
"Trump's chances of being elected president increased, after FBI director James Comey announced fresh inquiries into Clinton’s potentially illegal use of a private email server”, said Marius Ghisea, president and CEO of MS Capital Consulting.
Investors have been keeping a close eye on economic data, as they assess the likelihood of the Federal Reserve tightening monetary policy. The Fed scheduled a two-day meeting for announcing its latest decision on monetary policy.
Crude oil prices fell and USD declined on profit-taking, as the market lost confidence of an OPEC output cut. The front-month WTI crude contract fell -4.23%, losing for the first time in 7 weeks. The Brent crude contract also plunged -4%. Both benchmarks settled below US$50/bbl for the week.
Precious metals were higher during the week, Gold and Silver accumulating gains of 2.15% and +2.52% respectively. A prolonged period of negative real yields should remain supportive for all precious metals.
OPEC and non-OPEC are gathering, hoping for a deal to be reached. OPEC proposed to achieve a production range of 32.5 – 33M bpd. If exemptions are granted for Iran, Libya, Nigeria (and Iraq?), countries such as Saudi Arabia, Qatar and Russia would have to cut output for achieving the production goal. The countries required to cut more may eventually refuse to collaborate.
The recent economic data showed good news for Eurozone. According to the European Commission in Brussels, an index of executive and consumer sentiment in the region rose to 106.3 from 104.9 last month.
Eurozone economic confidence rose to a 10-month high this month after French growth rebounded and Spain powered ahead. Good news also from Germany. Inflation in Germany rose to its highest level in two years in October, in the latest sign of strength in Europe's largest economy. Prices rose 0.7% Y/Y in October. This has been the fastest rate of increase since October 2014.
The USD/JPY currency pair has jumped to the highest level since late July. Today’s economic data indicated a drop in weekly jobless claims. The pending home sales data showed a better-than-expected rebound in September. The data reaffirmed the strength of the US economy.
The USD/JPY currency pair has been in a consolidative phase since the start of October.
A further rate hike by the Fed would allow the ECB and the Bank of Japan some opportunities to introduce new forms of easing fiscal policy. The BOJ’s easing policy was recently criticized by Toshiro Muto, a former deputy governor, who warned against further monetary stimulus. He said that this policy made unclear the boundary between fiscal and monetary policy. The US reminded Japan that the G-20 members must avoid any currency manipulations. The markets remain confident, but it's unlikely that the FED will press the rate trigger before the US presidential election.
According to the 8 hour chart, the USD/JPY pair may rise around 106.68 (0.61 Fibo), in the next period. Otherwise, the USD/JPY currency pair will be in a retracement around 105.29.
European shares reveal the worries about the energy producers who have suffered from declines in oil prices. Companies as Bayer AG and Vinci SA reported disappointing earnings. Bayer retreated 2.9 percent after reporting a slide in profits. Vinci lost 1.7 percent as its revenue fell. Also, the energy producers - BP Plc and Royal Dutch Shell Plc slipped with oil.
“These losses of the companies worsened in the Stoxx Europe 600 Index. The investors didn’t see new fundamental reasons for a rally in the third quarter. European shares are still down 6.9 percent this year”, said Marius Ghisea, CEO and president of MS Capital Consulting.
In the next days, European shares may continue to fall. For example, according to the 1 hour chart, German Dax Index is into a downtrend for short term. Dax index may reach 0.50 Fibo (10500).
The Bank of Japan (BOJ) has expanded their purchase of YEN, hoping to overtun the deflation. As a consequence, the Yen is devalued.
The exports have boosted, but in the same time prices of imports have increased, especially for commodities.
A simple look at US equity markets indicates a possibility for further price increase. According to the Bank of Japan chief, Haruhiko Kuroda, the BOJ will continue easing to achieve 2% price target.
The Dow Jones Industrial gains more than 100 points after the US market open.
Three main corporate news lead to this increase.
The first is that AT&T has reached an agreement to buy Time Warner, a global leader in media and entertainment, for $85.4 billion. This deal would transform the phone company into a media giant. Time Warner’s media lineup includes networks such as CNN, TNT, HBO and Warner Bros. film and TV studio.
TD Ameritrade, the largest U.S. discount brokerage by trade executions, announced it’s buying Scottrade for $4 billion in a two-step deal with TD Bank. TD Ameritrade said it would pay $2.7 billion for Scottrade's brokerage business. Toronto-Dominion Bank, TD's largest shareholder, is acquiring Scottrade Bank for $1.3 billion.
B/E Aerospace, the airplane interior maker, also announced today that it has been bought by Rockwell Collins for $6.4 billion. After this news, its stock has increased about 16 percent.