Soft data ramps up ECB pressure; Oil volatile after large inventory draw

Summary:

• Eurozone PMIs disappoint once more

• EURUSD slides back near 2-year lows

• Oil jumps after large inventory draw

• US stocks edge higher; Facebook dips on $5B fine

• Will the ECB announce a cut tomorrow?

There’s been more bad economic data from the Eurozone this morning with a series of industry surveys from across the bloc setting alarm bells ringing. The PMI readings are seen as a leading indicator of economic health and with a composite from across the EU showing the weakest pace of expansion in 3 months and only 4 worse readings in the past 6 years it is abundantly clear that activity is in danger of grinding to a halt.

Unsurprisingly the Euro has dropped on this news, with the single currency falling to a 2-month low against the US dollar shortly after the release. The $1.11 handle has provided a floor on a couple of occasions in recent months but if the market falls below this level then you have to go back more than 2 years to May 2017 to find a lower exchange rate

The weekly crude oil inventories have shown a big drop in US stockpiles and sent the price of Oil up to its highest level of the week. In fact the print of -10.8M is the 2nd largest negative reading so far in 2019 but given that it is broadly in line with last night’s API equivalent it could be seen as not that much of a surprise. Similar to last night’s price action there has been a failure to follow through on the upside and this could be seen as a worrying sign for bulls with some sharp selling seen just after the European close. 

The S&P500 is trading a little higher today and the market remains not far from its all time peak of 3023. Volumes are typically lower around this time of year and this has caused a bit of chop intraday without the bigger picture changing too much. It is now in fact 21 trading sessions since the S&P500 made a move of 1% or more during the US session. This is a little misleading as volatility hasn’t entirely dropped off, but it is symbolic of a market that has been ranging for the past few weeks.

One stock that could be worth keeping an eye on this afternoon is Facebook after the social media giant settled with the Federal Trade Commission on a $5B fine for the company’s privacy policies. This fine is the largest ever imposed on a tech company and substantially above the prior record of $22.5M against Google back in 2012. The charge relates to the Cambridge Analytica scandal and the fine accounts for just under 10% of the firm’s revenues last year. The stock began around 2% lower this afternoon but buyers have stepped in and the bulk of these losses have been recouped at the time of writing.    

Tomorrow sees what is probably the highlight of the economic calendar this week with the ECB rate decision due at 12:45 BST and Draghi press conference 45 mins later. Our full preview of the event can be found here.