Originally published by Rivkin Securities
Oil prices slumped on Wednesday following an unexpected rise in gasoline inventories. Both WTI and Brent crude dropped -3.49% and -3.30% respectively shown on the first chart below, as did gasoline futures (-2.88%) as gasoline inventories rose by +1.542 million barrels compared with estimates for a -2 million barrel draw. Crude oil inventories decreased by -1.034 million compared with expectations for a -1.4 million barrel decrease. The US has now entered a seasonal period in which stockpiles are reduced during the summer driving season, hence the unexpected miss weighed heavily on prices.
The energy sector weighed on the S&P 500 index overnight with the sector down -1.41%. That weighed on the S&P 500 which declined -0.17% despite the energy sector only accounting for approximately 6% of the total market capitalisation. Elsewhere the Nasdaq 100 rose +0.15% and overall 13% of S&P 500 companies have reported Q1 earnings with 75% of those topping earnings estimates and expectations remain for +10.9% earnings growth for the index.
The US Dollar Index rose +0.31% with treasury yields as both the two and 10-year yields rose +1.2 and +3.7 basis points respectively. The euro weakened -0.21% as Euro-zone inflation remained stable with the headline figure remaining at +1.5% (YoY Mar) as forecast and the core measure at +0.7% as expected. The second chart below shows the changes in core prices for the Euro-zone, which remains well below the ECB’s target of just below 2% highlighting the continuing need for the ECB to press on with the current QE program through until at least December 2017.
European equity markets were generally higher, led by the Euro STOXX 600 (+0.24%), DAX (+0.13%) and CAC 40 (+0.27) while the FTSE 100 declined -0.46% despite a -0.46% decline in the pound with the upcoming UK election in June expected to result in a stronger pound. The next seven weeks will see heavy campaigning throughout the UK with a particular focus likely to be on the upcoming Brexit negotiations. This should provide the market with a bellwether for the upcoming negotiations which are also expected to kick off in June and a particular focus on how the Scottish National Party polls as they look to hold a second referendum on independence.
Locally the S&P/ASX 200 finished -0.56% weaker extending a three day decline and this morning we can expect trade to start on a weaker note with ASX SPI200 futures down -13 points in overnight trading.
Data releases:
· Japanese Trade Balance (MoM Yen) 9:50am AEDT
· Australian NAB Business Confidence (QoQ Q1) 11:30am AEDT
· German Producer Prices (MoM & YoY Mar) 4:00pm AEDT
· Bank of England’s Carney Speaks 8:30pm & 9:30pm AEDT
· Fed’s Powell Speaks 10:00pm AEDT
· Euro-zone Consumer Confidence (MoM Apr) 12:00am AEDT
Chart 1 – Brent (Blue) & WTI (Purple) Crude Oil
Chart 2 – EU Core Inflation
Source: Rivkin, RivkinTrader, Tradingeconomics.com
