Morning Briefing: Crude oil and equities surged on the restart of global economies

Posted on April 29, 2020July 3, 2020 by Vrasidas Neofytou

Crude oil and global financial markets surged on Wednesday amid the growing optimism amongst investors that the restart of the global economies might increase the business and industrial activity and improve crude oil demand. Many global governments have announced a partial re-opening of their economies which helped to improve the risk market sentiment.

Coronavirus Update:

Global cases: At least 3,113,447.
Global deaths: At least 216,930.
Most cases reported: United States (1,011,877), Spain (232,128), Italy (201,505), France (169,053), and United Kingdom (162,350).

Market Reaction:

US stock markets fell slightly during Tuesday’s session, erasing earlier gains as investors weighed up mixed earnings. The Dow Jones index closed at 24.100 or -0.1%, coming off session highs of 24.600. The S&P and Nasdaq indices settled lower by -0.5% and -1.4% on big losses in tech companies after mixed earnings.

However, the US futures surged by 1.5% this morning, ahead of the Federal Reserve’s monetary policy later today. Investors would be focused on the Fed’s guidance, for the future path of interest rates with a gradual reopening of the economy in sight.

Asian Pacific stock markets rose in morning trade following the re-opening of some major Asian economies. Kospi and Australian indices led the gains with 1% while the markets in Japan are closed for holidays.

Crude Oil:

WTI crude oil prices rallied by 15% this morning, breaking above $14 per barrel while Brent crude added 4% to reach $21.20. The oil prices have received some support amid the optimism amongst energy traders that the gradually easing restrictions will increase business activity, recovering oil demand which eventually might reduce the oversupply conditions and give a relief to the storage facilities.

Oil prices erased yesterday’s early deep losses of 15% where WTI dropped near $11, after data from the American Petroleum Institute showed that U.S. crude inventories jumped by 10 million barrels in the week to April 24 , which was lower than analysts’ expectations of a build of 10.6 million barrels.

Forex Market:

The Australian and New Zealand dollars extended their recent rally by gaining another 1% against the US dollar and Japanese Yen. Both currencies have been receiving support from investors who bet on global recovery after the pandemic.

AUD/USD had a significant 6% rally for April, climbing up to 0.653, recovering all the pandemic-related losses since it bottomed in mid-March (total of 18% gains).

The US dollar fell across the board this morning on improved risk sentiment and as investors are awaiting the decision of the Federal Reserve on interest rates. The DXY-dollar index extended downwards below 100 to the key level of 99.60.

The USD/JPY pair lost 0.3%, dropping to 6-weeks low at 106.50 while EUR/USD rose above 1.085. In addition, the greenback lost ground against commodity-related currencies such as the Australian, New Zealand, Canadian dollar and against crude oil-sensitive currencies such as the Mexican Peso and Norwegian Crone.

Economic Calendar for April 29, 2020 (GMT+ 3:00):

Morning Briefing: Crude oil has lost 40% since Monday on storage and demand fears

Posted on April 28, 2020May 27, 2020 by Vrasidas Neofytou

The crude oil markets lost 15% this morning, extending Monday’s 25% decline amid ongoing fears for record low oil demand, oversupplied conditions and lack of storage space. WTI price dropped near $11 per barrel, while Brent crude broke below $19.

Coronavirus Update:

Global cases: More than 3 million
Global deaths: More than 210,800
Most cases reported: United States (987,022), Spain (229,422), Italy (199,414), France (165,962), and Germany (158,434).

Crude oil:

The WTI June contract extended yesterday’s massive declines, after the United States Oil Fund, which trades under the ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favour for longer-term contracts. The fund wants to avoid similar massive losses as it had experienced last Monday-Tuesday during the expiration of the WTI May contract when the price dropped as low as negative $40.

The WTI price has lost nearly 50% since it bounced last week after President Trump’s tweeted on the Persian Gulf’s tension, indicating how ugly are the fundamentals of the energy market right now. WTI and Brent are both on pace for their fourth straight month of losses for the first time since 2017.

Global Equities:

US stock markets surged on Monday on plans for partial re-opening of the economy. The risk sentiment has been improved after many US States showed a willingness to allow some economic activities to come back online.

The Dow Jones index gained 1.7%, closing above 24.000, while the S&P 500 and Nasdaq advanced by 1.5% and 1.1%, respectively.

Asian markets were higher this morning, following the overnight gains on Wall Street coupled with the prospect of further stimulus from the Bank of Japan. The Chinese indices led the gains by 1% while Kospi and Nikkei moved slightly higher.

Safe Havens:

Gold and Bonds fell during Monday’s session as investors were moving to riskier assets and thus reducing the demand for safe havens. Gold price broke below the key support level of $1.700 per ounce, losing more than $50/oz since it had recently topped this month.

The yield on the benchmark 10-year Treasury note rose to 0.62% while the yield on the 30-year Treasury bond was up at 1.19%.

Forex Market:

The Australian dollar was stronger across the board yesterday, in response to the risk-on sentiment in the forex market. The AUD/USD climbed to a 1 month high at 0.6450 as the government would ease social distancing rules this week.

The US dollar has lost some ground against major currencies since last week as more investors have been moving into riskier currencies. The DXY-dollar index struggles to hold above the key support level of 100, EUR/USD rose near 1.0830, while USD/JPY traded near monthly lows.

Economic Calendar for April 28, 2020 (GMT+ 3:00):

Morning Briefing: Markets higher as global economies re-open

Posted on April 27, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets surged on the first day of the week on improved risk sentiment. Markets were supported from the global government plans to re-open their economies after the pandemic outbreak, while the Central Bank of Japan announced new monetary policies to combat the pandemic’s economic impact.

The New York Gov. Andrew Cuomo said that Sunday the state plans to re-open its economy in phases, starting with construction and manufacturing sectors, followed by the business sector. In addition, many European countries announced that they will re-open their economies after May 4th, improving the market sentiment.

According to Reuters, the Bank of Japan expanded monetary stimulus on Monday and pledged to buy unlimited amount of bonds to keep borrowing costs low as the government tries to spend its way out of the deepening economic pain from the coronavirus pandemic.

Coronavirus Update:

Global cases: More than 2.9 million
Global deaths: At least 206,265
Most cases reported: United States (963,379), Spain (226,629), Italy (197,675), France (162,220), and Germany (157,495).

Market Reaction:

US markets higher 1% on improved virus sentiment

US futures moved higher by more than 1% on Monday morning on improved risk sentiment after New York Governor Andrew Cuomo said that the state, plans to re-open its economy in phases. Dow Jones futures were up 1.3%, implying an opening above 24.000 points.

With Monday’s gains, the US markets recovered last week’s losses amid the crude oil sell-off and failed virus drug treatment from Gilead.

Asian stock markets surged by more than 2% on Monday morning, celebrating Japan’s monetary stimulus plans. Nikkei index led the gains by 3%, while Kospi and Hang Seng followed with 2% in profits.

Crude oil fell 12% on storage & demand concerns

Crude oil prices fell this morning on concerns for rising oil inventories and weaker demand. WTI price plunged by 12% at $15 per barrel, while Brent crude followed by in 6% losses at $20.60.

*Fig.2: WTI crude oil price, 30-minutes chart*

Last week was one of the most extremely volatile weeks ever recorded for crude oil prices. Last Monday, WTI ended in negative territory for the first time since 1983, while the price recovered by more than 80% at the end of the week on geopolitical risk in the Persian Gulf.

Gold slightly lower but holds recent gains

Gold price traded slightly lower at $1.722/oz on Asian hours as global stock markets rose on the backdrop of more risk appetite. However, the yellow metal holds last week’s gains and trades near recent highs of $1.750/oz, supported from continuous economic stimulus plans rolled out by central banks and low interest rates.

Forex Market: Aussie & Kiwi dollars higher across the board

The Australian and New Zealand dollars were the strongest currencies across the board this morning on improved sentiment. Both currencies hit fresh monthly highs against the safe havens US dollar and Japanese Yen.

The AUD/USD pair is testing the key resistance level of 0.645 this morning, recovering most of its virus-related losses and following the Asian stock market gains.

DXY-dollar index softened this morning, moving below the key support level of 100, as investors prefer more risky currencies on the backdrop of trade optimism and plans for re-opening global economies.

Economic Calendar for April 27, 2020 (GMT+ 3:00):

Crude Oil Commentary

Posted on April 23, 2020June 16, 2020 by Exclusive Capital Research Team

The recent global economic situation has experienced drastic changes, with Crude Oil becoming the center of attention recently, amid the high impact of the Coronavirus pandemic. Our Head of Investment Research, Vrasidas Neofytou, will analyze the latest developments in the Crude Oil market on RIK1 and Sigma this week.

Morning Briefing: Brent oil dropped below $16 to its lowest level since 1999

Posted on April 22, 2020May 27, 2020 by Vrasidas Neofytou

The crude oil prices lost another 20% on Wednesday morning, extending the oil market sell-off into a third day. The WTI price collapsed by 40% on Tuesday on oversupply concerns and lack of demand, while Brent oil price dropped below $16 per barrel, to its lowest level since 1999.

Coronavirus Update:

Global cases: At least 2,561,044.
Global deaths: At least 176,984.
Most cases reported: United States (823,786), Spain (204,178), Italy (183,957), France (159,297), and Germany (148,291).

Crude oil extended losses by 20% for third day in row

Brent oil price fell below $16 per barrel this morning hitting its lowest level since 1999. The international index has lost almost 80% of its value since it peaked at $72 during the Middle East tension at the beginning of 2020.

The WTI oil price hit $10 intraday low this morning as investors worry for the oversupply condition in the US energy market while the local storage tanks are running our of space.

Global Equities:

US stock markets experienced sharp declines, falling more than 3% on Tuesday. The massive losses in the energy stocks triggered a risk aversion sentiment across the board for a second day in row. Dow Jones index closed at 23.018, -2.7%, while the S&P 500 and Nasdaq lost more than 3%.

However, the Dow Jones futures bounced up 1% this morning, implying an opening near 23.250, after Senates passed a $484 billion coronavirus relief package for small businesses and hospitals.

Asian stock markets fell on Wednesday morning on a risk-off sentiment, following the overnight losses from Wall Street. Nikkei index led the losses with 2%, while Kospi and Hang Seng followed with 1% losses.

Safe Havens:

The US Treasury Bills rallied to 1-month highs after investors turned away from risky stocks and jumped into the safety of bonds. The U.S. 10-year rate fell to 0.52%, hitting its lowest level since March, while the 30-year bond yielded 1.13%.

However, the Gold price failed to surge yesterday, losing its role as a safe-haven asset. The stronger dollar and rising bonds weighted on the price of the yellow metal which settled at $1.685/oz. It is worth mentioning that despite the ugly market developments and sell-off in energy and equities, the precious metals prices were unable to attract safety bids.

Forex Market:

The DXY-dollar index rose near monthly highs of 100.30 against a basket of currencies getting support from safe haven flows. The EUR/USD remained below 108.5 while USD/JPY traded near 107.60.

Investors fled from crude oil related currencies such as the Canadian dollar, Russian Rubble, Mexican Peso and Norwegian Crone to the safety of the greenback. USD/CAD rose to monthly highs of 1.43 as Canadian economy has been suffering from the collapse of energy and industrial metal prices.

Economic Calendar for April 22, 2020 (GMT+ 3:00):

Morning Briefing: WTI oil price dropped below zero for the first time ever

Posted on April 21, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices had their worst day in history on Monday, as the WTI futures for May delivery collapsed to negative $37 per barrel or down by 300% ahead of its expiry later today. It was the first time that an oil future contract turned negative, highlighting just how much demand has collapsed due to the pandemic. However, the more actively traded June oil contract rebounded by 5% at $22 per barrel, which is giving a better reflection of the reality in the oil market.

Coronavirus Update:

Global cases: More than 2.4 million
Global deaths: More than 169,986
Most cases reported: United States (784,326), Spain (200,210), Italy (181,228), France (156,480), and Germany (147,065).

WTI collapsed to -37$, its worst day in history

It was the first time in history that a crude oil future contract dropped into the negative territory. The May WTI delivery contract fell as much as 300% last night to settle at $37.63 per barrel. However, the international benchmark, Brent crude, fell only 8% at $25.57 per barrel, as it had already rolled to the June contract.

*Fig. 1: Brent crude price, Daily chart*

The negative prices mean that the oil producers would pay traders to take the barrels off their hands as the physical demand has already collapsed due to the pandemic combined with non-available storage capacity in the USA.

Global Equities: US markets fell 2% following the crude oil plunge

The US stock markets fell 2% on Monday following the plunge of crude prices into negative territory. Furthermore, the sentiment deteriorated after the Senate failed to reach a deal on the next package to rescue an economy and health care system ravaged by the global pandemic. However, a vote is set up as soon as Tuesday afternoon.

US futures fell 1% in the early European session, extending their overnight losses after President Trump tweeted that “he would sign an executive order to temporarily suspend immigration to the United States to protect jobs “in light of the attack from the Invisible Enemy.” Millions of Americans have filed for unemployment benefits as the coronavirus pandemic shuts down economic activity in much of the country”. The Dow Jones futures are pointing to an opening near 23.420.

Asian Pacific stock markets dropped 2% this morning on risk aversion sentiment after unconfirmed reports saying that the North Korean leader Kim Jong Un is in grave danger after undergoing a cardiovascular procedure.

Forex Market: US dollar and Yen higher on safety flows

The US dollar and the Japanese Yen were stronger across the board yesterday on safe haven bids. Both currencies have also received support this morning on concerns about the health of the North Korean leader.

The DXY-dollar index broke higher from the key resistance level of 100, as the EUR/USD softened towards 1.082, while the USD/JPY

Crude oil-sensitive Canadian dollar was hit hard yesterday on the back of the aggressive sell-off in the crude market. The USD/CAD price climbed near 1.41 as the Canadian oil sand companies have been exposed in the low crude prices, pushing many of them into bankruptcy.

Economic Calendar for April 21, 2020 (GMT+ 3:00):