Risk off sentiment has gripped markets globally as the much anticipated Doha meeting failed to produce the desired affect and attendees were left frustrated as they could not agree on an output freeze, resulting in an oil prices slump. Oil price dropped over 6% overnight as OPEC and Non-Opec members could not come to a suitable arrangement after Iran refused to attend the meeting which caused other members to grumble siting the potential for a majority vote above a unanimous vote for output freezes in the future.
The risk off sentiment saw equities in the Asia-Pacific region slide with the Nikkei 225 losing 2.75, the ASX 200 lost 0.3% and the Shanghai Composite shed 1.3% despite improved Home Price data. The region was also weighed down by severe earthquakes in Japan, which have left several dead and thousands injured.
Overnight currency movements supported the risk off sentiment and we saw several pair open with gaps as the Doha outcome filters through markets with commodity linked currencies the hardest hit. The AUDUSD dropped below 0.7700 and the USDCAD advanced further to retest 1.3000. The wide spread risk aversion has also seen gains in safe haven currencies, specifically the USDJPY which has printed new 2016 lows.
The EU and the UK continue to be driven by their own independent and common issues as the ECB was quick to add that it would not fight a strengthening EUR despite it not being an ideal scenario for their inflation target. The UK markets continue to remain sensitive to BREXIT talks and polls, with the GBP sliding in early trade as polls over the weekend show Britons are in favour of leaving the EU.
Today is expected to see continued volatility as we expect headline risk from Opec and Non-Opec members to filter through and markets try to price in the new information. An increasing oil price will see risk appetite return and the recent market moves reversed.
Expected data today comes in the form of CAD Foreign Securities Purchases (exp. 7.52B), US FOMC Member Dudley’s speech and the AUS Monetary Policy Meeting Minutes.