Bullard comments ease investor concerns

Friday, October 17, 2014

Global equity markets by and large managed to stem any further precipitous declines yesterday after comments made by St Louis Fed President James Bullard hinted at the prospect of continued QE. US equity benchmark indices managed to recover the majority of early losses after Bullard commented that the Fed should consider delaying the end of its asset purchase programme in a bid to counter the falling inflation expectations. Markets gained further reassurance from better than expected US economic data, with initial weekly jobless claims falling to the lowest level since early 2000 while industrial production rebounded to increase 1.0% m/m in September from a -0.1% decline the previous month as US factory output continued to expand.

Asian markets mostly held steady, following Wall Street’s lead as the flight to safe haven assets eased. The yen traded back above 106.00 against the dollar as it lost 0.4% against the greenback as global growth concerns were eased slightly after better than expected US macro data and comments made by Bullard. The yen has gained over 3.0% against the dollar so far this month as investors sought refuge in the safe haven currency, however, with the outflows in Asian stocks seemingly halted for now we could see further encouraging signs of a return to risk assets which could see the yen ease further against the dollar in the near term.

Spot gold prices are on track to post their second consecutive week of gains marking the yellow metal’s first back to back weekly rally since early July as concerns of slowing global growth continued to improve demand for the safe haven asset. Despite some slight weakness yesterday attributed to a stronger dollar index spot gold prices have added 4.1% over the past two weeks as prices tested levels towards $1,245/oz yesterday. Near term support levels towards $1,235/oz seem to be holding up well and we could see the potential for further upside moves, particularly towards $,1250/oz on any further negative surprises.     

Front month WTI prices recovered some of the week’s hefty losses yesterday with futures trading within a wide range in a session that saw heavy selling pressure early on. WTI prices briefly dipped below $80/bbl on Thursday dipping below the symbolic level for the first time since June 2012. Prices traded lower immediately after the release of EIA crude inventory data which showed crude stock levels increase by a massive 8.92m barrels w/w, significantly over expectations of a 2.26m barrel weekly increase. Stockpiles at Cushing increased by 716K barrels from the previous week’s 1.57m barrel decline while refinery utilisation dropped 1.2% w/w in a further sign that refiners were attempting to address the supply overhang.

US initial jobless claims drop to a 14 year low

INJCJC Index US Initial Jobless 2014 10 16 15 11 09

Yen trades back above 106 against the dollar

JPY Curncy Japanese Yen Spot 2014 10 17 07 52 43

EIA crude oil inventories spike higher

DOEASCRD Index DOE Total Change 2014 10 17 07 25 18

WTI prices trade within a wide range on EIA data and Fed official's comments

CL1 Comdty Generic 1St CL Fut 2014 10 17 07 17 51

Events for today

1330

US

Sep

Housing starts

1330

US

Sep

Building Permits

1455

US

Oct

Michigan Survey

OE: 

Oct  FTSE 100 Index & Equity (LIFFE) 

Topics: Gold, Crude oil, WTI, JPY, DXY
More from: Kash Kamal