Market commentary: Oil falls, US minutes Released

The FED

The Federal Reserve signalled its willingness to keep interest rates near zero for longer, surprising investors betting that a resurgent labour market would prompt an increase as early as June.

The risks warranting this cautious stance were ranging from a stronger dollar to the crisis in Greece, which “had inclined them toward” keeping rates near zero “for a longer time,” according to excerpts of the minutes.

The minutes show an extended discussion of the causes and consequences of an inflation rate that has lingered below the Fed’s 2 percent target for 32 months. Several participants saw “the continuing weakness of core inflation measures as a concern,” with a few suggesting that weakness in wage growth could delay a return to the Fed’s target.

The more dovish stance resulted in a weaker dollar, increasing to USD 1.145 per euro from USD 1.134 per euro (1%) prior to the news. US treasuries also rose marginally, yields on two-year bonds fell six basis points, or 0.06 percentage point, to 0.60 percent.

Oil

Oil fell for a second day after a report that showed crude stockpiles in the US expanded to a record level. Crude supplies probably rose by 3 million barrels to 420.9 million. That would be the highest in weekly records compiled by the EIA since August 1982. Industry data Wednesday showed inventories climbed by 14.3 million barrels, according to reports on Twitter.

Rising U.S. crude stockpiles contributed to a global glut that drove prices almost 50 percent lower in 2014. Marathon Oil Corp. will cut an additional 20 percent from its spending plan for this year, as companies including Royal Dutch Shell Plc and Chevron Corp. reduce investments in response to the collapse.

According to historical data U.S. crude stockpiles have surged above the five-year average for this time of the year. Production climbed to 9.23 million barrels a day through Feb. 6, the most in weekly data compiled since January 1983 by the EIA, the Energy Department’s statistical arm.

WTI Crude is currently trading at around USD 50.10 a barrel whilst Brent Crude is trading at USD 58.95.

Greece

Greece came under renewed pressure as U.S. and European officials called on the government to reach a deal with its creditors and the European Central Bank granted the nation’s cash-strapped banks only a small increase in emergency funds.

Reports indicate ECB policy makers on Wednesday raised the limit on Emergency Liquidity Assistance for Greek banks to 68.3 billion euros from 65 billion euros.

The small move sends a signal that a political deal is needed to halt deposit outflows at Greek banks and it is intended to cover the temporary liquidity needs of Greek lenders, and not to provide cash that can be used to finance the government through purchases of treasury bills.

Uncertainty over the outcome of Greece’s dispute with euro area member states has triggered deposit withdrawals of about 20 billion euros from Greek banks since December.

European Equities

European equity markets opened lower this morning, under pressure due to negative performance from energy shares and the negative interpretation of the news from Greece.

BAE Systems Plc is among stocks moving on corporate news. Europe’s largest defence company declined 3 percent after saying full-year earnings fell 12 percent. Centrica Plc tumbled 9.1 percent after cutting its dividend as it swung to a loss.

Rexam Plc rallied 4.3 percent as Ball Corp. offered to buy its rival beverage-can maker for 628 pence a share in cash and stock. The London-based company also reported 2014 pre-tax profit that beat analysts’ projections. Randstad Holding NV rose 4.9 percent after saying organic sales growth accelerated in January.

Swiss Re AG gained 1.4 percent after the world’s second- largest reinsurer said it will buy back shares for as much as 1 billion Swiss francs.

This article was issued by Mr. Simon Psaila Trader/ Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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