A summary of money flow and events from last week to help with the trading week ahead.
The oil rout continued, with WTI closing at $30.66 and Brent at $29.46. WTI has since opened and gapped down to $30.11 and now broken below the $30 threshold which does not bode well for Brent when it opens later today. The acceleration of the decline was in anticipation of sanctions being removed on Iran, allowing them to flood the oil market which is already suffering huge declines as stockpiles and production are at record levels.
This saw interest in Gold go up as a safe haven and break above $1100 but when you consider all of the negative sentiment across global markets at present and we see it back below $1100 this week ($1090 time of writing) then the upside has to be questionable.
United States: A week of red figures added further pressure to investor sentiment, which had already seen traders’ flea to safety in light of lower crude prices and Chinese intervention. Initial jobless claims continues to suggest it has seen a trough at multi-year lows, so to see it rise again only adds to concerns the job market may have had its run. Retail sales on Friday and industrial production added to the negative vibe whilst global stocks are dangerously close to breaking to new lows and confirming technical bear markets.
Europe: German industrial production was yet another disappointment form global and domestic manufacturing sectors. Investor confidence also declined to its' lowest since Feb '15 which coincidently was the first time it has been positive since mid-2015.
China: China's trade balance data last week saw imports and exports contract less than forecast. Under usual circumstances this would have provided a risk-on environment but last week was no ordinary week. Falling oil markets continued to weigh on investor sentiment but the intervention of the offshore swap markets by PBoC sent USDCHF sharply lower and suffer its largest 1-day decline since it was semi-floated in 2005.
United Kingdom: UK There were no monetary policy changes from BoE (and the single dissenter remained). However a key driver for recent GBP weakness is the fear of Brexit. Weak manufacturing and industrial production data certainly didn't help either, to send GBPSD down to its lowest since May 2005. Judging from price action early Asia, it won't be too long before this key level is also broken.
Australia: Employment was surprisingly stable (compared with previous, volatile reads which saw 1k jobs contract, compared with the -10k expected and unemployment remain at 5.8%; However as with all risk assets the biggest driver for AUD crosses and their depreciation was risk based, putting domestic news on the back burner. Even before prices tumbled the CFTC data shows specs are increasing their short exposure, and now we back below 70c can expect this trend to continue in the coming week/s. The ASX200 is very close to breaking into bear territory (defined as a 20% decline from the highs) whilst bond yields across the curve have declined to further highlight the flight to safety from investors last week.
Volatility remains elevated across the baord but most noteable for Crude oil, with implied volatility expected to be around 18$ over the next 30 days.