An escalation of hopes that a meaningful agreement could be brokered between most of the major oil producing nations helped drive equity markets on in the early session. These hopes however were quickly given a reality check when they managed to agree not to increase production above January’s already high levels. This agreement did not involve the likes of Iran and, as such, triggered a sell-off in oil prices.
The security investors felt from European Central Bank president Mario Draghi’s comments yesterday was only able to partially hold up markets. This morning’s German ZEW economic sentiment data might have been better-than-expected, but still hit 16-month lows. This shows how much more work is required to garner European business optimism.
US traders have come late to this week’s party and have struggled to regain the optimism of last Friday’s trading. Part of this reluctance to take a stand must be due to the fact Wednesday evening will see the release of last month’s FOMC minutes. If the capitulation of interest rate rising expectations over the last month is any sort of barometer the minutes could make for uncomfortable reading.
Considering the Saudi oil minister was not the driving force behind today’s meeting it should not come as too much of a surprise that results have underwhelmed expectations. An agreement – that doesn’t involve Iran – to limit production to last month’s record high levels has seen oil prices tumble as the template of oversupply and struggling demand remains firmly in place. With this being the case it is tough making a case for oil prices to remain above $30 for too much longer.
Currency markets continue to enjoy an overabundance of volatility. GBP/USD is having its biggest one-day move in over a month, touching intraday lows of $1.4276, while EUR/USD has sold off for the fourth day in a row taking it down to €1.1124.