OIL
After touching the $90 level for the first time this year on Tuesday, Brent crude oil prices receded slightly this morning. The price of the barrel rose as Russia and Saudi Arabia announced an extension to their production cuts, which now look set to last until the end of the year. This scenario adds pressure to the supply side and could lead to further price increases. However, judging by this morning's reaction, traders don’t seem, at least for now, to expect the return to last summer's heights, when the barrel was sold at almost $140. There are several factors capping the upside for oil prices, including Iran’s increase in output, which is expected to reach 3.4 million barrels per day soon. At the same time, China’s sluggish economic recovery is denting demand forecasts, with the strengthening dollar also adding resistance to further price increases.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Bearish sentiment prevailed in Europe on Wednesday as most benchmarks opened lower following disappointing macro data in the region, while fears of further monetary tightening resurged.
The STOXX-50 index opened significantly lower, led by poor performances across all sectors, with the top movers found among consumer cyclicals and financials shares.
Investors have been disappointed by this morning's German factory orders data, which highlighted lingering recovery problems in the Eurozone’s biggest economy, adding pressure to riskier assets from the region.
Moreover, European shares are under pressure from the stronger EUR currency following its jump against the US dollar and other majors boosted by the hawkish announcement of ECB official Klaas Knot, who suggested more rate hikes could be on the way in the Eurozone.
In addition, rising energy prices, especially in oil markets, are also adding to the case of higher inflation, increasing fears of stagflation and more monetary tightening to come.
The sentiment may change throughout the day as investors await more EU data and ECB official speeches, alongside the US service PMI data, in the afternoon, even if the technical landscape towards EU indices remains bearish.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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