US Futures Rebound, European Stocks Higher As Oil Rises

The summer doldrums continue with another listless overnight session, not helpd by Japan markets which are closed for holiday, as Asian stocks fell fractionally, while European stocks rebounded as oil trimmed losses after the the IEA said pent-up demand would absorb record crude output (something they have said every single month). S&P futures have wiped out almost all of yesterday’s losses and were up over 0.2% in early trading.
Europe’s Stoxx 600 rose 0.4% with miners and energy producers trimming losses, as crude pared a drop of as much as 1.5 percent after the IEA forecast, Bloomberg reports. Asian equities fell. New Zealand’s dollar surged to a one-year high after the country’s central bank cut interest rates and signaled a more gradual easing path than some investors had anticipated. Nickel snapped a four-day advance. Ukraine’s 2019 Eurobond fell the most since June amid signs tension is increasing with Russia.
The modest rebound in oil could not have come at a more important time, just as the black gold was sliding and set to retest the $40 support level, below which JPM believes SWF would resume liquidation. Crude entered a bear market last week and the outlook remains clouded as Saudi Arabia and Iran refuse to give ground in their war for market share, with both boosting output just days after OPEC announced an informal meeting to discuss ways to stabilize falling prices. Exacerbating the problem is global demand, which remains weak even as policy makers from Frankfurt to Tokyo engage in unprecedented stimulus to boost their economies. A strengthening jobs market in the U. S. has yet to convince traders that the world’s biggest economy is strong enough for the Federal Reserve to raise interest rates this year.
“The biggest risk to the market at the moment is a huge drop in oil prices,’ James Woods, strategist at Rivkin Securities in Sydney, said by phone. ‘Recent gains, particularly in U. S. equities, are becoming exhausted. We’ll see some near-term weakness in the coming weeks. Investors are likely to be buying on these dips as central bank policies remain supportive of equities.’

This post was published at Zero Hedge on Aug 11, 2016.