Oil slides despite DOE draw; US small caps push higher

3:42 PM September 11, 2019

Summary:

  • Oil lower despite inventory drawdown (-6.9M)

  • US2000 extends higher

  • FTSE attempts to catch peers

  • Crypto newsletter

  • ECB preview

 

There’s been a bit of a sell-off in the energy compley this afternoon with both Oil and Oil.WTI sliding in excess of 1% despite the latest inventory release showing a sizable draw down. The weekly DOE figure came in at -6.9M, similar to last night’s API reading of -7.2M and well below the consensus forecast of -2.7M. This is now the 4th weekly drop in a row and the level of crude inventories has fallen below its 5-year average. 

 

For the past couple of months, crude oil inventories have been trending lower with the current level back below the 5-year average. Source: XTB Macrobond

 

While the attention for US indices often falls on the large cap benchmarks (US500, US100, US30), the small caps (US2000) can provide further insight and are seen by some as a better proxy on the domestic economy. Yesterday was a mixed day for the large cap markets, with some early weakness subsiding and a bid into the close on more hopes of an improvement in the US-China trade relationship saw the benchmarks end the day little changed. The small caps however were stronger throughout and managed to post an impressive daily gain, and in doing so cleared the prior resistance level around 1534.

 

The FTSE 100 is trading higher by almost 1% as the leading UK stock benchmark attempts to catch up with its peers across the Channel and the Atlantic. The index has failed to join in the broad based rally seen across European and US stock markets, with the recovery in the pound on the diminishing prospects of a no-deal Brexit weighing on the significant component of benchmark that generates it revenue in non-sterling terms. However, with the pound now stabilising and the chances of any major market moving news on the Brexit front receding a little for the foreseeable future the index may now look to join in the global rally.

 

Since our latest newsletter released in the past week, we have seen a mixed picture in the cryptocurrency market. While major digital coins like Litcoin, Ethereum or Dash have witnessed some price rises, Bitcoin has gone in the opposite direction and has lost some of its mojo. In terms of interesting reports concerning the crypto industry it is worth looking at what Facebook has recently announced. Namely, the US company is going to seek a Swiss payment system license for its lately born project called Libra. 

 

Tomorrow’s ECB rate decision and the final press conference of president Mario Draghi could be a major event for not only the Euro but also European indices and bonds. The bar is set high, with the expectation for additional stimulus seemingly priced in. Read our full preview here.

 

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