Tuesday Morning Briefing: Oil Rally Fizzles, Asian Stocks Swing
A rally in global equities led by a surge in oil lost steam as the focus shifted to the two-day meeting of the U.S. Federal Reserve, scheduled to start later in the day. Asian markets opened on a quiet note, after crude snapped a three-day rally and traded below the $53 per barrel mark.
Mainland China stocks are poised for further losses after seeing their worst slide since June this year amidst a crackdown on speculative activities by insurance companies. The dollar declined for the second consecutive session, while yen and gold maintained gains.
Fed To Pull The Trigger?
Bonds in the U.S. rallied as investors anticipate an interest rate hike from the U.S. central bank. The odds for at least a quarter percentage point hike in benchmark lending rates are locked at 100 percent. Two out of three traders also expect further tightening from Janet Yellen before June 2017, according to futures rates tracked by Bloomberg.
U.S. equity markets ended the Monday session on a mixed note, due to a decline in financial stocks. The Dow Jones Industrial Average gained 0.2 percent to register its 15th record high since Donald Trump’s election victory on November 8. The S&P 500 Index and the NASDAQ Composite Index snapped their six-day winning streak, losing 0.1 and 0.6 percent respectively.
Oil Rally Halts
Oil fell from its highest level since July 2015 as U.S. shale production was poised to rise for the first time in six months. Production could top 4.54 million barrels per day, according to the Energy Information Administration.
Oil has rallied almost 20 percent since November 30 after members of the OPEC (Organization of Petroleum Exporting Countries) agreed to cut output for the first time in eight years. OPEC’s deal received a further boost after non-members led by Russia decided to reduce production by as much as 558,000 barrels per day.
The SGX Nifty Index was trading unchanged at 8,187 as of 7:05 a.m., indicating a quiet start for Indian equities. Benchmark indices snapped a two-day gaining streak on Monday amidst the rally in oil coupled with disappointing factory output data.
Investors will keep an eye out for retail inflation for the month of November, which is scheduled to be released at 5:30 p.m.