Stronger US data prompts relief rally in Asia

Friday, December 19, 2014

Asian equity markets extended gains during the overnight session, as investors continued the surge into risk assets in the wake of the Yellen’s encouraging comments following the FOMC rates decision and on encouraging US macroeconomic data released yesterday. The majority of benchmark indices in the region posted strong gains with Japanese equities leading the charge higher, tracking gains on Wall Street. Japanese investors reacted with renewed optimism to the Bank of Japan’s decision to hold monetary policy steady, two months after the central bank unexpectedly decided to boost stimulus, with investors taking further encouragement from the US Fed’s loose monetary policy outlook. Markets gained further buoyancy from a weaker yen, which lost ground against the dollar for a third straight session, trading back above 119.00.

Both WTI and Brent front month futures failed to hold on to yesterday’s early gains despite an increase in risk appetite, as global crude benchmark prices traded back towards recent lows. Intraday gains in Brent tested levels towards $63.70/bbl early on in the European session before the bulls gave way to selling pressure as futures targeted a close at $59.27/bbl, losing 2.76% throughout the day. Front month WTI prices experienced a similar sell-off after rallying to $58.73/bbl early on before selling off back down to $54.05/bbl and ending the session not far off at $54.11/bbl.

Volatility in oil futures has increased in recent weeks with the most recent comments from Saudi’s oil minister outlining his optimism for future global demand, seeing volatility rise to levels not seen since 2011. Al Al-Naimi, the outspoken oil minister for OPEC’s largest producing member further reinforced the gulf state’s commitment to preserve market share and said that it would be “difficult, if not impossible” to give up market share by cutting supply. A stronger dollar also contributed to the downward pressure seen in crude markets yesterday with the dollar index finding firm support around Wednesday’s close, as it tested levels towards 89.40 before eventually ending the session at 89.235.

Today’s session will provide investors with further insight into the health of the global economy with German PPI and consumer confidence data kicking off the session. German factory gate prices set a positive tone for the start of the European session, with m/m PPI unchanged in November against expectations prices would fall by 0.2%. Gfk consumer confidence also surprised on the upside, with the leading figure coming in at 9.0 for January against expectations of 8.8 which improved prospects for the region. Eurozone trade data is still to come later on this morning while in the afternoon investors will have the Kansas City Fed manufacturing activity index to look forward to. 

JPY loses further ground against the dollar

JPY Curncy Japanese Yen Spot 2014 12 19 07 59 10

Brent futures reverse on recent comments from OPEC members

CO1 Comdty Generic 1St CO Fut 2014 12 19 07 45 55

DXY extends gainst against major currencies

DXY Curncy DOLLAR INDEX SPOT 2014 12 19 07 46 03

Events for today




PPI Final Demand




GfK Consumer Confidence




ECB Current Account








Kansas City Fed manufacturing




BoJ Annual Rise in Monetary Base




BoJ Monetary Policy Statement


Dec FTSE 100 Index 


Dec  FTSE 100 Index & Equity (LIFFE)  

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