This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Among those to watch are oil prices. Brent crude has been drifting lower over the past few months and falling to two-year lows.
It’s lost nearly 15% since its recent high of $115 per barrel in June. The move was partly catalysed by a slew of data from China suggesting a slowdown in its economy.
This morning, another set of Chinese data came in below expectations. Foreign direct investment in August fell by 14%, below the market consensus forecast of a 0.8% rise.
This was on the back of a 16.9% drop in the prior month, marking the first back-to-back drop of more than 10% since 2009 and the lowest in four years.
The week had already kicked off with an overall weaker market sentiment on the back of a round of soft Chinese data over the weekend. Industrial production and retail sales figures were both disappointing, with factory output at its slowest pace in six years.
The bleaker outlook has also been a drag on energy related equities. The global energy sector has been the worst performer over the past month, particularly the oil and gas companies.
We could see a further downside ahead as the FOMC meeting gets underway. Any signs of an earlier-than-expected rate hike could lend to more downwards pressure.
The FOMC interest rate decision will be announced on Thursday morning (02:00 SGT), and we could start to see investors positioning themselves ahead of this.
The subsiding of geopolitical risks, at least out of the headlines, could also mean some pressure on oil-related plays such as Santos and Oil Search.
Brent crude currently is on a downtrend and we can see some support at the $97 level. Over the next few days, this level could be tested and is likely to make a strong move once the FOMC releases its statement.