Oil Slipping As Traders Question The OPEC Deal

Originally published by AxiTrader h2 Quick Recap /h2

An interesting night with the US dollar pressing higher but reversing, stocks slipping, commodities and gold rallying, and more signs that the German and even French economies may be lifting.

• US stocks are dipping back from two week highs overnight as earnings are a little disappointing in some sectors. But the important thing to note is that most sectors in the S&P 500 are actually higher and as I write only 3 sectors are down with the S&P off 8 points or 0.4% to 2143. The Dow Jones Industrial Average is off 0.3% and the Nasdaq 100 has dropped 0.5%.

• Yesterday the Fed’s Charles Evans said a hike this year is on the cards and three hikes by the end of 2017 – he votes next year and he’s a dove so rates are going to move higher but that’s hardly a scary scenario.

• A Reuters survey showed that traders believe the Bank of England will hold rates steady at its November meeting. Last night speaking to the Lords BoE governor Carney said he’d assess his future by the year’s end and whatever he decided wasn’t related to the government or any comments Teresa May made recently about the bank.

• Mario Draghi hinted that maybe no more accommodation is coming from the ECB when he said he understood the pain that low rates can cause. But he also said that the current policy settings were necessary to get the economy going again and at the end of the day returns on assets were the result of overall growth in the economy. That’s a good point savers! But Germany’s finance minister Wolfgang Schaeble weighed in saying that monetary policy has reached the limits of its effectiveness.

• On EU data German business confidence hit a two and a half year high of 110.5 (exp 109.5) Ifo said overnight. Across the border in France the number of jobless had their steepest fall ever in September.

• One word - REFLATION

• The Australian stock market is certainly in the thrall of short term traders at the moment. The price action over the past few days, where the SPI futures moves overnight have been essentially useless guides to the day’s trade. Yesterday’s 34 move fed from positive AGM commentary according to my pal Henry Jennings but the big bounce in Dalian iron ore noted by Henry and my Business Insider colleague David Scutt yesterday certainly helped the resource stocks. That rally continued overnight with copper up more than 2% amid a broad based industrial metals rally.

• So the question for traders today is whether the SPI futures loss of 10 points overnight is a true indication of where the S&P/ASX 200 will be today or not.

• I’m doing a lot of work with some of the traders I’m mentoring at the moment on what the candle charts reveal and the one thing that jumps out of the chart below when it comes to the SPI is that traders remain relatively uncertain with multiple days with long tails – both on the top and bottom side. It also suggests the short term, day trade, nature of the market. On the day 5350 in the SPI and 5375/80 on the physical ASX remain key supports.

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• Today is CPI day here in Australia and the market is expecting a rise of 0.4% and 1.1% for the headline CPI release. Economists will be focussing on the trimmed mean measure of inflation which is expected to print 0.4% and 1.7% respectively for the qoq and yoy outcomes. But headline is the more important focus for me because of the feedback loop into consumer inflation expectations, wage outcomes, and so on. Because of that linkage it is also the headline number I think the RBA will be watching a little more closely this quarter as well. 1% or below in headline yoy opens the door for another RBA cut.