Oil slumps on prospect of no output cuts : 24.02.2016
US stocks ended lower on Tuesday as the resumption of oil decline once again undermined investor confidence. The dollar was little changed. 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, was flat at 97.43. The S&P 500 closed 1.3% lower at 1921.27. Only utility stocks ended 0.1% higher while remaining nine sectors finished in the negative territory led by energy stocks, down 3.2%. Material and financial stocks were the next worst performers, falling 2.4% and 1.8% respectively. The largest US bank JP Morgan dropped 4.2% on announcement it will increase provisions for expected losses on energy loans by $500 million, or more than 60% of its existing reserves. The Dow Jones Industrial Average lost 1.1%. In economic news sales of existing homes rose 0.4% to a seasonally adjusted annual rate of 5.47 million. Case-Shiller 20-city Home Price Index rose 0.8% after seasonal adjustment. Speaking at an energy industry gathering in Houston, Federal Reserve Vice Chairman Stanley Fischer indicated there was no rush for an interest rate hike. Today at 13:00 CET Mortgage Applications will be released in US. At 15:45 CET February preliminary Services and Composite PMIs will be released by Markit. The tentative outlook is positive. At 16:00 CET January New Home Sales will come out. The tentative outlook is negative. At the same time Richmond Fed’s Manufacturing Index for January will come out.
European stocks retreated on Tuesday from a three-week high as oil fell. The euro hit three-week low of $1.099 against the dollar after the Ifo survey results indicated German business sentiment slumped to the lowest levels in four years. The Stoxx Europe 600 index ended 1.2% lower. Germany’s DAX 30 dropped 1.6% to 9416.77 as the German Ifo business climate index fell to 105.7. France’s CAC 40 ended 1.4% lower. Basic materials stocks were among worst performers with BHP Billiton shares sinking 6.1% after the world’s largest mining company cut its midyear dividend by 74% to preserve cash in a period of prolonged low commodity prices. Today at 10:30 CET January Loans for House Purchases will be released by British Banker’s Association in UK. The tentative outlook is positive for Pound.
Asian stocks are retreating today as investor risk aversion rose with falling oil prices. Chinese shares managed to erase earlier losses with CSI 300 index of 300 largest companies listed on Shanghai or Shenzhen exchanges up 0.65%. Nikkei fell 0.9% today as yen strengthened on the back of higher demand for haven assets.
Oil prices are edging down after closing sharply lower on Tuesday following Saudi Arabia oil minister’s comment that a coordinated production cut by OPEC and non-OPEC exporters was "not going to happen because not many countries are going to deliver". April WTI crude fell 4.6% to $31.87 a barrel on the New York Mercantile Exchange. Iran made clear it will not restrain production. Iran had indicated earlier it planned to increase crude oil output and export after international sanctions were lifted to gain the market share lost due to sanctions. Traders will be watching closely the Energy Information Administration report of US Crude Oil Inventories at 16:30 CET today. Crude stockpiles are expected to rise. The American Petroleum Institute industry group report released on Tuesday estimates crude inventories rose 7.1 million barrels to 506.2 million against a 3.4 million barrels expected rise.
Gold is holding stable after spot gold gained about 1.5% in the previous session as global stocks sold off.