Crude prices around $46/barrel drag risk assets lower

Monday, January 12, 2015

The sharp sell-off in the oil market continues to dominate global equities and commodity prices. Brent front month futures retreated over 4.4% in today’s trading session heading towards $47 per barrel, while WTI front month futures plunged towards $46 per barrel.

WTI front month futures retest $46/barrel

CLG5 Comdty (WTI CRUDE FUTURE  F 2015-01-12 16-02-27

The US equities remained under pressure as the Dow Jones index has retreated over 100 points (-0.66%) at the time of writing, while the Nasdaq and S&P 500 also extended sharp declines. In Europe, the CAC, DAX and IBEX indices managed to hold on positive territory, while the London equity benchmark index missed the uptrend and declined almost 0.5%.

S&P 500 index

SPX Index (S&P 500 Index )  Daily 2015-01-12 16-04-20

In London, energy stocks retreated sharply. BG Group, Royal Dutch Shell, BP and Tullow oil plunged between 0.65% and 3.6%. Utility stocks also remained under pressure as Centrica, SSE and National Grid declined between 0.7% and 5.5%.   

There was no release of any major macroeconomic indicators from the US and Eurozone, thus the strong US dollar and the ongoing heavy sell-off in crude oil prices dominated investors’ attention. The USD index continued its strong uptrend, holding above the key level of 92.0 against a basket of currencies, while the euro came under further pressure retreating towards 1.18 against the dollar.

USD index holds above 92.0

DXY Curncy (DOLLAR INDEX SPOT)   2015-01-12 16-05-07

Market participants will be keeping an eye on the release of the UK CPI and PPI inflation report tomorrow, while France reports on Wednesday. In the US, the Federal Reserve releases Beige Book details on Wednesday, while the next Fed policy meeting is at the end of the month.

In the meantime, the continuous decline in crude oil prices is likely to continue in the short-term adding further pressure to global markets. In addition, the strong USD is likely to weigh further on market sentiment. 

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