Global rally extends on Draghi's comments

Tuesday, August 26, 2014

Equity markets around the world rallied higher on Monday as comments by ECB president Mario Draghi struck a dovish tone at Jackson Hole. Citing the weak eurozone labour market conditions and lacklustre economic performance, Mr Draghi stressed that governments must do more to boost demand while also suggesting additional monetary stimulus as a likely course of action if weaker markets prevail.

The prospect of further monetary easing in Europe was magnified by the surprise dismissal of top ministers in France as President Francois Hollande sought to hush criticism of his austerity plans. Recent data out of France compounded worries of slowing growth after Q2 GDP data released earlier this month missed expectations and with unemployment reaching record levels it seems there is a long road to recovery.

Front month WTI prices traded near a seven month low yesterday, skirting around $93/bbl for much of the day as investors anticipate further clarity regarding the fundamental picture. With US durable goods and new orders data due out later today, market participants will gain an insight into the demand outlook while tomorrow’s release of EIA inventory statistics will offer some clarity of the supply side. Market participants expect crude stocks to decline by 1.8m barrels w/w to 360.7m barrels but investors will be paying close attention to the flows at Cushing, OK. Last week’s significant build in crude stocks at Cushing put considerable pressure on front month WTI prices and any subsequent building of stocks here could keep downward pressure on crude oil prices throughout the week.

Three month LME aluminium prices continue to climb higher this morning following the brief price correction late last week after aluminium touched a seventeen month high. Prices rallied to $2,083.75/tonne last week before pulling back towards $2,050/tonne on short term profit taking, however, the metal still managed to add 3% throughout the week, the largest weekly gains since April. Activity this morning has seen prices gain higher, finding firm support at Friday’s close ahead of today’s release of US durable goods data.

WTI prices under pressure ahead of EIA data

CL1 Comdty Generic 1St CL Fut 2014 08 26 08 04 44

Aluminium prices post early gains as traders anticipate durable goods data

LMAHDS03 Comdty LME ALUMINUM 3 2014 08 26 08 11 20

Events for today

1330

US

Jul

Durable Gds & New Orders

1400

US

Jun

Monhtly Home Prices

1500

US

Aug

Richmond Fed

1530

US

Aug

Dallas Fed

Topics: Aluminium, Crude oil, WTI, LME
More from: Kash Kamal