US stocks rise to 1-month highs, Oil dips on inventory draw

Summary:

• US indices build on recent gains; US30 > 24200

• Oil dips on inventory draw but finds buyers

• USDSEK: What’s next for SEK as political outlook clarifies?

• GBP looks through CPI figures; remains focused on Brexit  

• Ethereum developer announce hard fork delay

There’s been a pretty decent move higher in US stock markets this afternoon with the announcement of some stimulus measures from China’s central bank and better than expected earnings results from major US banks improving sentiment. PBOC stated overnight that they would perform a record $84B liquidity injection into the country’s banking system and these measures will go some way to allaying fears surrounding the world’s 2nd largest economy after the dismal trade data earlier this week. While the news from the Far East has helped lift sentiment, better than expected trading updates from Bank of America (BOFA) and Goldman Sachs and have had a more direct impact on US stock benchmarks with both banks seeing sizable gains in pre-market trade. The US30 has moved above 24200 and reached its highest level in a month with gains of around 1%.

There’s been a bit of a pullback in the energy market in the past hour or so, after the weekly crude oil inventories delivered a slightly negative message for bulls. The EIA figure for the headline came in at -2.7M, lower than both the median forecast (-1.4M) and the prior reading (-1.7M). However, against last night’s private API number of -6.1M it still appears relatively high and therefore could be seen as negative for price. Having said that the drop of around 80 cents has promptly been recovered and Brent Oil is back trading close to daily highs around $61 on the European close.  

We earlier posted about the potential for a decline in USDSEk, with the article being summarised by the following bullet points:

• SEK is the most undervalued G10 currency by mid-January

• Riksbank delivers the first rate hike in seven years but the repo rate path was revised down

• Inflation hovers close to the Riksbank objective, core prices keep growing justifying further gradual monetary tightening

• Swedish political chaos has had a limited impact on the local currency so far

• Sweden has significantly improved its general government balance

• Sweden is least exposed to Germany among its peers in terms of exports

• USDSEK trades nearby its strong resistance, abundant room for declines

The latest look at price pressures in the UK has shown the consumer price index pull back to 2.1% year-on-year as was widely expected. The largest downwards contributions from last time out where the equivalent reading was 2.3% were a fall in Petrol prices and airfares. The core figure which strips out volatile aspects such as fuel prices actually rose a little to 1.9% year-on-year, against consensus forecasts for this to remain at 1.8%. The headline reading is now at its lowest in almost 2 years and fears of runaway inflation have been put to bed for the time being. Given the recent developments at Westminster, the market reaction to this release has been understandably muted with the latest twists and turns in the Brexit saga a far bigger driver of the pound in the near term. On this front last night’s reaction to the crushing defeat was interesting with the pound recovering from some pretty heavy declines ahead of the announcement to end the day little changed. It seems to have been a case of sell the rumor buy the fact as far as May’s heavy defeat is concerned and despite all the hyperbole surrounding current events, the consensus now seem to believe that all roads lead to a softer Brexit.

Wednesday’s trading is pretty mixed on the whole for major cryptocurrencies after yesterday’s losses. According to CoinMarketCap, the capitalization of the whole market stands around the $122 billion mark whereas the largest cryptocurrency Bitcoin accounts for roughly 52.5% of this value. The Ethereum Core Developers and the Ethereum Security Community released an announcement concerning the planned Ethereum upgrade. In a document, they explained that the long-awaited Constantinople hard fork would be postponed due to a critical vulnerability discovered by ChainSecurity (a blockchain audit company) in a software upgrade. The message concerning a postponement was released just hours before the planned upgrade called Constantinople. Let us remind that hard fork was planned to take place at block 7,080,000 ( approximately January 16, 2019). Ethereum developers did not reveal an alternative date of the mentioned Ethereum hard fork.