Market volatility cools, oil turns lower
Volatility was low in stock markets today, as a bit of bargain hunting pushed up equities in Europe and the US. Given the relatively small recovery from Tuesday’s losses, it appears that buying appetite is not in great supply. Dealers remain a little concerned for the health of the global economy. The DAX and the FTSEMIB closed higher, but questions still hang over continental Europe’s energy prices and future supply levels. The S&P 500 is up even though the US 10-year yield hit 3.11% - highest in eight weeks. Recently, rises in bond yields have prompted a sell-off in equities, but not today, perhaps, the fears of rising yields are no longer having the impact they once had.
The US dollar index plunged going into “the fix” - the official close at 4pm in London – but the currency has somewhat recovered, and it is now flat on the day. EUR/USD remains in focus as it is still below parity, but it is comfortably above the 20-year low that was printed yesterday. It has been a tough few days for the euro as high wholesale gas prices and downbeat services and manufacturing data have hurt the single currency, but some of the losses have been recouped today.
Oil was higher until a few hours ago as worries about supply were still in circulation. The EIA report showed that US oil inventories fell by 3.3 million barrels, which might be a sign of high demand. WTI and Brent crude have swung into the red as Iran confirmed it is assessing the US’s reply to its nuclear deal. Should Iran come to an agreement with westerns governments in relation to its unclear scheme, that could help bring the country in from the cold, and therefore lead to Iran boosting is exporting capability, hence the weakness in oil. There are a lot of ifs and buts involved, but for now traders are booking their profits on oil as it has hit a three-month high this morning. Gold has been at the mercy of the US dollar, and now that the greenback’s volatility has faded, the metal is back in positive territory.