The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Oil bears likely celebrated last night as we saw prices being pushed past support levels briefly. For WTI futures, this dip extended past the $43.43 per barrel (bbl) support, which had been tested before the OPEC agreement was first established in November 2016. For those who favour volatility, black gold certainly seems the place to be.
Prices were seen trading just below $43.50/bbl levels when last checked at 8am (Singapore time). A greater-than-expected slide in private API crude inventories helped to see some reversal, but all eyes are likely to shift to the official DoE report today, expected with a 1.2 million barrel decline. I do not imagine the market would be too shocked at another disappointment after the past two weeks, but a further slide in oil prices would be an undeniable challenge for many US producers moving forward.
Equities market responded in kind with energy shares slumping 1.25% in the S&P 500 index. This slide had a contagion effect as the S&P 500 index saw broad declines on Tuesday. After printing the biggest 1-day percentage gain in nearly 2-months, the index reversed with the worst drop since 17 May. As things stand, both the Dow and the S&P 500 index remain on elevated levels and may not spark greater concerns. The same may not be said for equity performance for Asian markets today.
After mixed performances yesterday, Asian markets are expected to find a wider slide in prices. Early movers in the region have generally came online in red, despite positive news of MSCI Inc.’s decision to include 222 A shares in its Emerging Market Index. The weight from the crude slide are expected to find investors taking some off the table for Asian markets and shifting towards safer assets in the day.
MSCI A shares
Notably, A shares’ inclusion had been the key focus overnight and the pleasing result marks a step towards longer term benefit for China’s domestic markets. Chinese authorities have been garnering for this positive decision and this recognition of the country’s efforts in opening up the financial market could really encourage more to be done that could lead to greater capital inflows.
For regional markets, including the local Singapore market, the impact may be second-order and likely only be felt in the longer term. In the near-term, the inclusion could really been seen as symbolic at best with the implementation due only in 12-months.
Watch for Malaysia’s inflation figures and Japan’s all industry activity index in the day. US existing home sales data update will be watched post-Asian hours ahead of a packed Thursday.