The big day for crude oil approaches as the weekend brings the much anticipated DOHA Oil Summit to the forefront. At the meeting oil producers are to discuss a potential output freeze as recent supply has outweighed demand significantly in an ever slowing global economy. Since the rumours of the announcement began several months ago, crude has gained around 50% in value on pure speculation as markets adhere to the old classic of “buying the rumour”. As it stands, if no significant output freeze is agreed on, one that sees an actual reduction of output and not just a freeze at current levels, we are certain to see the second half of the old classic, namely “sell the fact”.
Equities in the region experienced subdued trading following Wall Street’s lead and consolidating energy sectors. The Nikkei 225 lost 0.5% overall after a weakening JPY pulled the index up from its sessions lows. Chinas Shanghai Composite lost 0.2% despite positive data out of the region as GDP coming in at a 7 years lows dampened sentiment, even though it was expected.
Monday open sees important data out of NZD being released, in the form of the CPI q/q, which markets will be watching closely as they try to decipher whether the RBNZ will cut rate further or not.
The USD Weakened in late trade yesterday as inflation figures disappointed markets, the CPI y/y coming in lower than expected at 0.9% vs 1.10% and the CPI m/m coming in lower at 0.1% vs 0.2%. This prompted Feds Lockhart to favour a more dovish tone than he usually does and him making a statement that he would not be voting for a rate hike in Aprils meeting, which further dampened the sentiment for the USD.
Equities finished flat after initial gains off the back of Bank of America and Wells Fargo posting better than expected earnings were almost whipped out from a lacklustre energy sector. The DJIA finished up 0.1%, the S&P500 finished up 0.2% and the Nasdaq-100 finished down 0.03%.
Today’s data out of the region will be watched closely as markets decide on whether to go into the weekend long or short the USD. The expected data is as follows:
- Empire State Manufacturing Index expected at 2.1
- Capacity Utilization Rate expected at 75.4%
- Industrial Production m/m -0.1%
- Prelim UoM Consumer Sentiment expected at 91.9
- Significant earning data is expected from CitiGroup, Regions Finacnials and Acme United, amongst others
The BOE kept both the official bank Rate and the Asset Purchase Facility unchanged as we widely expected. However, the biggest surprise was that member remained unanimous on the status of both. Markets took this as a sign of half a dozen of the one and six of the other, which saw no real direction being taken in the GBP.
The CAD continued to strengthen this week as rising oil prices overrode any bearish sentiment the BOC may have parted on markets earlier in the week. Though less correlate than before the Cad is beginning to show signs of strength and todays data will be widely watched by CAD bulls as they look for another reason to be bullish. The Manufacturing sales data is expected at -1.4%.