OIL
Brent oil prices softened during early Tuesday trading but remain close to the $89 per barrel touched during the previous session. Despite the easing of prices seen this morning, the markets remain unsettled by the situation in Israel, which could still lead to further instability and push the price of the barrel back to levels not seen since last year. From the perspective of oil traders, the big question mark lies over the potential involvement of Iran and how such a development could affect the supply of crude and drive an escalation in prices. The US has relaxed its enforcement of the oil sanctions imposed against Iran, but should there be confirmation of Tehran’s involvement in the Hamas attack, the American stance would almost certainly become stricter, resulting in lower availability of crude and higher prices in the global markets.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equity markets surged higher in Europe on Monday as investors welcomed a surprising change of tone from Fed officials, offsetting the recent risk-off stance brought from the geopolitical front.
Shares climbed significantly in Europe on Monday, with benchmarks led higher by all sectors, with consumer non-cyclicals and real estate registering the best performances, while energy shares were muted, holding gains from yesterday’s jump.
This shift to risk-on sentiment occurred after investors witnessed a significant and surprising change of tone regarding monetary policy in the US. Fed officials Philip Jefferson and Lorie Logan provided some dovish hints that the recent surge in treasury yields may mean less monetary tightening to come.
This had an immediate bullish effect towards equity markets, positively surprising most investors who were still anticipating higher borrowing rates before year-end.
While this change of tone can be seen as a significant shift in market drivers towards stock markets, it will be interesting to see how long this sentiment lasts, considering that geopolitical uncertainties keep rising from the Middle East. There is a high chance that the current bullish stance on equities may be tempered in the coming days if the military conflict between Israel and Hamas escalates to another dimension with the potential involvement of other nations.
Meanwhile, investor focus will also be drawn towards macro data with today’s BoE minutes of its policy meeting, the IMF’s release of its world economic outlook, and the US wholesale inventories.
Things are starting to look good on the technical front as well for EU shares after the STOXX-50 index confirmed a bullish break-out of its short-term bullish trendline, opening the way to higher prices, with the 4,194 pts and 4,223 pts resistances now in sight.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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