Cautious optimism ahead of monthly budget statement

Thursday, November 13, 2014

Brent futures spent much of the European session extending losses below $80/bbl as warnings of a slowing demand outlook from OPEC gained momentum after Chinese data showed further signs of a slowdown. October data for year-to-date fixed asset investment showed a slight slowdown to 15.9% y/y from 16.1% y/y the previous month while retail sales and industrial production data also narrowly missed their marks, coming in at 11.5% y/y and 7.7% y/y against expectations of 11.6% and 8.0% respectively.

With investment growth reaching a thirteen year low concerns that the world’s second largest economy will see its weakest growth for almost 24 years this year were widely felt in the wider market with a general tone of risk aversion extending across European equity markets for a second day. After both the DJIA and S&P 500 closed marginally lower yesterday, ending a five session streak of higher closes, European stocks started the penultimate session of the week on the back foot with London’s benchmark index, the CAC and the DAX dipping during the morning but indices have since recovered as a robust start to the US session buoyed the general mood.

US data released today came in mixed as the session started off with initial weekly jobless claims which increase to 290K this week from 278K the previous week, outstripping expectations by 10,000 claims. However, markets soon gained some confidence from a better than expected Bloomberg consumer comfort reading which showed a slight improvement to 38.2 from 38.1 previously. Investors remain cautiously optimistic ahead of the monthly budget statement later on this evening which is expected to show a $122bn deficit for October. Subsequently, market participants will be keeping a keen eye on any significant deviations which could offer some insight into the macroeconomic backdrop. 

Chinese fixed asset investment slows

CNFAYOY Index China Fixed Asset 2014 11 13 13 12 44

Front month Brent prices drop for a fourth straight session

CO1 Comdty Generic 1St CO Fut 2014 11 13 15 43 48

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