Oil tumbles as inventories post surprise build; Precious metal surge

Summary:

• Oil drops further on unexpected EIA build

• Indices move lower in choppy trade

• More central bank cuts; NZD plunges

The recent declines seen in the crude complex have seen both Brent and WTI fall below key prior support levels with the former falling to its lowest level since the start of the year in recent trade. A large part of these declines has already occurred today before the weekly DOE numbers hit, and when they did they didn’t offer much help to longs. The headline showed its first build in 8 weeks, unexpectedly rising against both the consensus forecast and the guideline from last night’s API.  Oil has made a potentially key break lower in recent trade after dropping below the 59.15 level yesterday. As long as price remains below here then more downside is possible with little by the way of swing support until 50.55. 

After a decent morning session for equities the familiar vulnerabilities have returned this afternoon with major benchmarks in the red at the time of writing. It’s been a fairly volatile session and the trade into the closing bell on Wall Street could be telling, but for now it looks like the markets have failed to build on Tuesday’s recovery. This indecision has seen further gains in precious metals with Silver surging over 3% to trade above the 17 handle and Gold hitting a new 6-year high above $1500/oz. 

While there’s plenty going on at the macro level and indices, it’s also worth considering individual stocks with Fedex and Tesla both in the headlines. First up Fedex has ended its relationship with Amazon as the giant ecommerce firm continues to expand into the delivery business. According to a statement, the ground delivery contract with Amazon won’t be renewed upon expiration at the end of the month and the decision looks like another step apart coming just a couple months after it  announced the Express unit wouldn’t extend an agreement to fly packages for the largest online retailer. 

Tesla is no stranger to adverse publicity and the electric carmaker is once more in the news for unwanted reasons after receiving a cease-and-desist letter over misleading statements about its Model 3’s safety rating. The main issue appears to relate to claims in a blog post last October that the US National HIghway Traffic Safety Administration (NHTSA) showed the Model 3 to have the “lowest probability of injury of all cars the safety agency has ever tested.” The NHTSA stated this is not the first time Tesla has disregarded their guidelines and that the claims may lead to consumer confusion and give Tesla and “unfair market advantage.” 

 No fewer than three central banks have seemingly succeeded where their more recognisable peers at the Fed and ECB failed recently, in delivering a more dovish than expected message on monetary policy. The Reserve Bank of New Zealand cut the base rate by 50 bps (0.5%) to its lowest ever level at 1.0% in a move that surprised markets and sent the Kiwi dollar tumbling by almost 3% to trade at levels not seen since the start of 2016. Elsewhere the Indian and Thai central banks have also caught traders off guard with bigger than expected cuts of 35 bps (0.35%) and 25 bps (0.25%) respectively with the latter’s decision the first such move in 4 years. The Thai Baht has dropped in response although the Rupee is little changed on the day.