Russian rumours drive market volatility

Rumours of a Russian-proposed bilateral cut to global oil production saw crude prices up over $3 at one point in today’s trading.

Oil barrels
Source: Bloomberg

However, the glee that rippled through global exchanges soon took a turn for the worse, with rumours of a Saudi denial soon sending oil and stock markets tumbling.

Russian suggestions of rate cuts have been mentioned in the past, to no avail. The notion that a non-OPEC country which is producing at post-Soviet record highs, and is ill-suited to temporary output cuts (many Russian oil fields would freeze over should operations stop) is not lost on many. Saudi Arabia will continue to dominate the global production consensus, and any decision to cut by some would  likely lead to a ramping up by others seeking to gain market share at a higher price.

The US posted a fairly shocking set of manufacturing figures today, highlighting the imbalances within the recovery. The 5.1% drop in durable goods was perhaps less of a surprise, given the highly volatile nature of transportation items as highlighted. However, the 1.2% fall in core durable goods will be a big warning sign to the Federal Reserve given that we have not seen such a bad number since late 2013.

With the ISM manufacturing PMI well within contraction territory, in stark contrast to a buoyant services sector (55.3), it is clear that the economic growth in the US is not being shared by all sectors.

FTSE 100 risers and fallers (as of 4.35pm)
 

Company % change Index points
Anglo American +8.7 +1.12
Tesco +3.23 +1.63
Royal Dutch Shell (B) +2.33 +3.19
Antofagasta +2.29 +0.11
Royal Dutch Shell (A) +2.19 +4.88

 

Company % change Index points
Ashtead Group -7.77 -1.46
Carnival -6.42 -1.64
International Consolidated Airlines Group -4.89 -1.91
Centrica -4.71 -1.9
Shire -4.22 -3.89

 

Key charts to watch
 

Brent

Brent breeched the resistance (December support) line at $36.10 but couldn’t hold onto to it. The momentum is certainly behind the energy today but traders are wondering can it be sustained. An hourly close above $36.10 would be a bullish sign and the resistance (15 December) at $38.25 will be the next level to watch. An hourly close below $36.10 would be a bearish indicator, and $33.36 will be the next major support level. 

GBP/USD

GBP/USD finally broke through resistance at $1.4365 and traders are taking advantage of the soft US dollar. The move high over the week points to additional gains, and $1.4475 is the next major resistance level to watch. A close below $1.4365 would be bearish and $1.1473 is next big support level to key an eye on. 

DAX

The DAX has dropped below trendline support and is currently being supported by the 200-hour simple moving average (SMA), and an hourly close below it will indicate further losses, and the support at 9561 will come into play. Rallies will incur resistance at 9760 and 9800 which coincides with the 50-hour SMA. 

The day ahead: economic data
 

4am – Bank of Japan interest rate decision

6.30am – France GDP (Q4, preliminary): QoQ exp 0.2%, prior 0.3%. YoY exp 1.2%, prior 1.1%

10am – eurozone CPI (January, flash): exp 0.2%, prior 0.4%

1.30pm – US GDP (Q4, first estimate): exp 0.8%, prior 2%

1.30pm - Canada GDP (Q4, advance): QoQ exp 0.3%, prior 0.0%. YoY exp 0.2%, prior -0.2%

3pm – US University of Michigan consumer sentiment (January): exp 93, prior 93.3

Company news
 

UK

29/01/16 Half-year earnings: Sky, Rank Group

29/01/16 Trading statements: Lonmin, Vedanta Resources, AG BARR

US

28/01/16 Quarterly earnings: Visa, Microsoft, Amazon

29/01/16 Quarterly earnings: Honeywell International, Mastercard, Colgate-Palmolive, Sony, American Airlines Group, Honda Motor Co, Chevron, Xerox, Whirlpool Corp, 7262-JP

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