See important Research Disclaimer.
For a change, the financial sector was the main driving force behind the rally and it is encouraging to see it strengthen in the stock market, even though oil was down over 1%. The move higher in equities, despite the downturn in the energy market adds weight to the argument that the rally have witnessed recently will be sustained.
Major oil companies managed to drive higher despite the poor performance in the underlying oil market, and suggests the link between the two is weakening. Continental Europe enjoyed a boost too, as worse than anticipated Consumer Price Index numbers from the eurozone make it all the more likely that the European Central Bank will introduce more easing at next month’s meeting. Traders need to remember that Mario Draghi doesn’t always deliver, just look at December’s meeting.
US equity markets are teetering between positive and negative territory, and it seems the high correlation stocks and oil is still high as major commodity related companies like Exxon, Chevron, Caterpillar and Freeport-McMoRan are incurring losses.
Gold has managed to move higher today even though traders have adopted a risk on attitude, and the rally in the gold market in tandem with the strength of the stock markets shows how much the gold buyers are in control. Buying on the dip is still the strategy of choice for traders and buyers, and while it holds above $1217, the outlook will be positive. The next major resistance level in sight is $1253.
Oil is in negative territory again as the usual concerns about oversupply and low demand for the commodity keeps the price under the cosh. Traders are expected to foresee the unforeseeable as oil producing nations will from time to time talk about production cuts, but in reality none have actually been implemented.
A look ahead to tonight
11.30pm – Japan inflation (January): prices expected to rise 0.1% YoY and 0.1% MoM overall, while core prices increase by 0.12%.
There are no major US companies reporting tonight.
A look ahead to tomorrow
There are no major economic announcements expected tomorrow.
US: JC Penney