Daily Outlook

Equity markets posted strong gains overnight as risk-sentiment improved. US equity markets posted gains across most segments with the DJIA and S&P500 up 2.11% and 2.39% respectively. Eurozone markets followed suit with the DAX closing 2.34% in the green while the FTSE posted a modest 0.92% gain.

Global recession fears continue to subside as markets digest recent US data while responding positively to Chinas central bank decisions. Stronger than expected ISM Manufacturing data has traders looking to non-farm payrolls on Friday to determine future USD strength. On Monday, the People’s Bank of China (PBOC) cut banks’ reserve requirement ratios (RRR) by 0.5%, aiming to boost consumer spending and capital investment through the increase in liquidity. As uncertainty and downward pressure remains on China’s growth, markets reacted positively to the move. JPY crosses performed strongly overnight, indicating the shift in risk-sentiment with the USDJPY pair rallying, currently sitting at 114.111.

WTI and Brent Oil prices rose to their highest levels since early January. These gains come amid comments from Russia’s minister Novak stating that the effectiveness of capping oil production would not depend on Iran’s involvement. Novak claims that countries producing 73% of the world’s oil have agreed to the potential supply freeze deal. Broader meetings are planned for mid-march with members planning on expanding the agreement. Mehran Amirmoeini of the Institute for International Energy Studies expects production to increase by another 500 thousand barrels per day by August as Iran remains opposed to the production freeze.

WTI and Brent prices peaked at $34.74/bbl and $37.22/bbl respectively, since then retracing to the $33.84/bbl and  $36.55/bbl level as Oil inventory figures from API indicated a climb in crude supplies by 9.9 million barrels for the week ending Feb. Volatility in oil price movements will remain until strong commitments from OPEC and non-OPEC members are upheld.