Oil slump weighing on markets : 03.02.2016
US stocks ended sharply lower on Tuesday as oil slide continued and investors sold off energy and financial stocks. The dollar weakened on falling risk appetite. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.2% to 99.821. The S&P 500 dropped 1.9% to 1903.03, with energy and financial stocks leading the decliners, down 3.3% and 2.6% respectively. The Dow Jones Industrial lost 1.8% and the Nasdaq Composite closed 2.2% lower. Developments in energy sector have been a major determinant of market sentiment recently. Investors are concerned the prolonged slump in oil prices is an indicator of global economic slowdown. Exxon Mobil fell 2.2% after the major US oil company reported a 58% drop in fourth-quarter profits, announced plans to cut capital spending by 25% compared with 2015 levels and suspended share repurchases. Meanwhile Alphabet shares rose 1.3% on better-than-expected quarterly earnings report, propelling the Google parent company past Apple as the world’s most valuable company: Alphabet’s market capitalization reached $531 billion compared with Apple’s $524 billion. Today at 13:00 CET Mortgage applications will be released in US. At 14:15 CET January Employment Change will be published by ADP. The tentative outlook is negative. At 15:45 CET January final Services PMI will be released by Markit. And at 16:00 CET January ISM Services PMI will be published. The tentative outlook is positive.
European stock indexes closed sharply lower on Tuesday dragged down by commodity and financial shares. The euro strengthened against the dollar trading at $1.0922 late Tuesday compared with $1.0924 Monday. The Stoxx Europe 600 index dropped 2.1%. Germany’s DAX 30 fell 1.8% to 9581.04, and France’s CAC 40 lost 2.2%. Markets shrugged off positive economic data indicating Germany’s unemployment rate slipped to 6.2% from 6.3% in December, the lowest since 1992. BP shares sank 8.7% after the company posted a $2.2 billion loss in the fourth quarter, though kept its quarterly dividend of 10 cents a share. Today from 09:45 - 9:55 CET January Services PMIs for Italy, France and Germany will be released. The tentative outlook is positive. At 10:00 CET January final Services PMI will be published in euro-zone. The tentative outlook is neutral. At 10:30 CET January Service PMI will be released in UK. The tentative outlook is positive.
Nikkei dropped 3.2% today as market sentiment was undermined by declining oil prices, and increased demand for heaven assets resulted in stronger yen. Investors sold off risky assets despite Bank of Japan Governor Kuroda’s remarks today that the central bank has “ample room” to expand the program of asset purchases from the current annual pace of 80 trillion yen.
Chinese stocks are falling today with the CSI300 index of 300 stocks on Shanghai or Shenzhen Stock Exchanges down 0.43%. Investors sold off equities notwithstanding new mortgage rules aimed at supporting property prices: China said it would reduce the minimum down payment required for first and second-time home buyers in most cities.
Oil futures prices are edging higher today after recording another sharp drop on Tuesday on fading hopes of cooperation between Russia and OPEC to cut output. March WTI fell 5.5% to $29.88 a barrel on the New York Mercantile Exchange following a 6% loss the previous day. US official Crude Oil Inventories will be released today at 16:30 CET by the Energy Information Administration. Traders anticipate a build-up in inventories as the report from American Petroleum Institute, an industry group, indicated US crude stocks rose by 3.8 million barrels to 500.4 million.
Gold prices stabilized today near a three-month high at $1,128.12 an ounce for spot gold. A weaker dollar and prospect of lower interest rates for longer period on the back of concerns for global economic slowdown support higher demand for the safe-haven metal.