Stocks fragile ahead of FOMC; Oil looks to recover after EIA

Summary:

• US stocks open lower

• Are Equities waking up to potential risks

• Oil extends recovery after smaller EIA build

• Top 3 charts of the week: EURUSD, Gold, US500

• FOMC minutes due at 7PM GMT

This afternoon we had a relatively rare occurrence when the opening bell rang out on Wall Street, with all 3 major US indices trading in the red. The declines were only in the range of 0.2-0.3% but after the recent run-up there is finally some potential signs of interest for bears looking to short. Sentiment seems to have soured a little after the US Senate passed a bill supporting protestors in Hong Kong and even though there have been reports since that this will not damage US-Sino relations at a particularly fragile time, there is a concern that it will have an adverse impact. Price has recovered as the cash session wears on with the markets now trading pretty much flat on the day. 

Just under 24 hours ago everything looked rosey for equity markets with European benchmarks hitting multi-year highs and US futures pointing to yet another record open on Wall Street. However, sentiment has changed quite markedly in the past day and now it looks like yesterday’s session may have been a turnaround Tuesday. On this front tonight’s closing levels could be key, with the price action in the next few hours potentially decisive going forward. 

There’s been a further recovery in the Oil price after the weekly crude oil inventories with a smaller than expected rise sending the market up to its highest level of the day.  

The breakdown of the data was as follows:

• Crude Oil inventories: +1.4M vs +1.5M exp. +2.2M prior (API: +6.0M)

• Gasoline: +1.8M vs +0.8M exp. +1.9M prior

• Distillates: -1.0M vs -1.0M exp. -2.5M prior

• US production: 12.8M bpd - unchanged

While the headline build was pretty much in keeping with the expected and prior, it is significantly less than last night’s API reading and this has likely caused the move higher in the immediate reaction. The other components of the report could be described as fairly mixed. Oil has moved back above the $61 handle after the release with the market up 160 ticks from the overnight lows and filling the gap down.

Our 3 charts to watch this week focuses on EURUSD, Gold and US500 and can be viewed in full here. 

Finally the minutes from the last FOMC meeting will be released at 7PM GMT in what could be a market moving event.