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US stocks trade lower in volatile session – Europe closes higher; USD surge knocks risk- EURUSD 112 lower; Oil thumped after inventories report

Feb 8, 2018 | Daily Market Outlook

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US markets – closed lower on Wednesday reversing gains. The Dow Jones finished 19.42 lower, the S&P500 lost 13.48 and the NASDAQ closed 63.90 points lower. The S&P500 gained as much as 1.2 during the session before reversing to finish 0.5% lower, making its biggest single-day reversal since February 2016. The Dow gained as much as 381 points during Wednesday’s session and fell as low as 127 points making is largest single-day reversal since August 2015.

The indexes began losing steam in afternoon trade shortly after a rise in the 10-year Treasury yield, rekindling the worry that sparked this cascading market plunge last Friday. “That’s probably the biggest thing happening here,” said Dave Lutz, head of ETF trading at JonesTrading, referring to the rise in yields. He also noted the rise — which followed a lacklustre auction — pressured stocks earlier in the session. The 10-year yield traded at 2.845 percent as of 4:02 p.m. ET. Yields saw further gains after Senate Majority Leader Mitch McConnell said leaders have reached a two-year budget deal which would increase current spending caps by roughly $300 billion. Stocks are still extremely jittery due to yields. Volatility will continue until rises settle down or traders start to factor it in.

Oil broke lower overnight, as official government figures showed U.S. crude stockpiles rose last week, contradicting an earlier report showing a drop. U.S. commercial crude inventories rose by 1.9 million barrels to 420.3 million in the week through Feb. 2, the U.S. Energy Information Administration reported. Gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 459,000-barrel gain. Distillate stockpiles, which include diesel and heating oil, were up by 3.9 million barrels, versus expectations for a 1.4 million-barrel drop, the EIA data showed. As can be clearly seen this data shocked the market, price fell by 210 cents to close below $62. Oil prices look set to make their second weekly loss. Price closed at $61.45 this is a Jan previous low/consolidation point. “The strong growth that is expected in U.S. production supports our more bearish outlook for the oil market,” Hamza Khan, head of ING commodities strategy, said in a note.

European markets – finished higher on Wednesday, the FTSE jumped by 138.02, the DAX added 197.77 and the CAC added 94.09, in strong performances. European markets mainly ignored the wild session seen in the US. Oil and gas stocks were among the top performers, up more than 2.43 percent amid corporate earnings news. Swedish industrial technology firm Hexagon closed top of the European benchmark. The company said like-for-like sales in the final three months of 2017 had increased sharply from the previous quarter.

Forex – last night saw a USD surge as it traded in its best session for three months. Much of the dollar’s advance stemmed from euro’s weakness in the wake of reports that the leader of Germany’s Social Democrats (SPD), Martin Schulz, would not be taking over as finance minister for Europe’s biggest economy. The euro’s fall accelerated after European Central Bank policymaker Ewald Nowotny told the German Wiener Zeitung newspaper the United States is deliberately weakening the dollar. “So you have an ECB governing member who’s discussing U.S. manipulation of the dollar weaker, and the ECB does not approve of that,” said Douglas Borthwick, head of FX at Chapdelaine Foreign Exchange in New York. No surprises we saw a solid drop in the EURUSD, as it lost 112 pips breaking below 1.2330.

The stronger USD also returned pressure to the AUDUSD as it resumed its decline losing 85 pip to close below .7850. The NZDUSD also took a solid hit dropping 105 pips. The GBPUSD fared the best to the USD losing 63 pips. It’s a Bank of England heavy news session tonight that includes funds rate, it’s expected to remain on hold at .50%. The Japanese Yen picked up last in yesterday’s session sending the EUR, AUD, GBP and USD lower. The USDCAD jumped by 76 pips making a new weekly high at 1.2577. The Loonie has seen a 300 pip increase since the 2nd of February.

Gold – is in its own world atm. In the selloff, we saw it return to safe haven status, but last night it returned to risk status, giving up early gains to finish $5.40 lower to a stronger USD. Stocks were far from stable in the US last night, if it was retaining its safe haven status we would have thought it would have held out a lot better. Price did finish off lows after testing $1311.37. We still see price trading in a demand zone which could be bullish but due to current price movements, confirmation is defiantly required at this point.

EURUSD – broke it’s short-term trend line overnight. Price has returned to an area that could offer supply with two levels of possible support. Confirmation is required as the market is no trading in a short-term downtrend.

Good trading from Eightcap.

 

Sources; CNBC.  All times are AEDST

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