Mild improvements in Asian markets overnight were not enough to support US and European equity indices, as oil price declines set the tone. Despite promising policy support from the ECB, markets remain wary of weak demand from China and falling oil prices. Early signs of an equity market rebound appear pre-mature, as the FTSE100 dropped 0.4% along with a 0.3% decline in the DAX. US markets fared no better with the S&P 500 and DJIA falling 1.56% and 1.29% respectively.
Oil resumed its decline overnight, after its largest rally in more than seven years. After hitting a high of 32.74 earlier yesterday, WTI is back trading around the $29.66/bbl. This drop comes amid reports of unwavering supply out of the Middle East. Iraq output reached a record high last month, with fields in central and southern regions producing as much as 4.13 million barrels a day. Supply out of Saudi Arabia is also set to continue as low oil prices will not reduce the world’s biggest crude exporter’s expenditure on energy projects. On the demand side, China’s diesel demand has fallen for a fourth consecutive month, adding to the bearish market sentiment.
For the week ahead, FOMC, RBNZ and BOJ meetings are under the spotlight. The FOMC is likely to announce no change in monetary stance on Wednesday, following its rate hike last December. Despite weak inflation, RBNZ is expected to leave the OCR unchanged at 2.5%, despite risks to further rate cuts increasing. Friday’s BoJ announcement will be accompanied with a series of macroeconomic data, providing a future outlook for inflation, unemployment rates and industrial production.
Quote of the day: Be fearful when others are greedy and greedy when others are fearful. Warren Buffet
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