On 24 February, 2016 – Crude prices continue to drive stock indices

Europe and the Asia Pacific indices retreated while in the US, stocks staged a rally in afternoon trading. 
United States
US stocks recovered from early losses, thanks in part to a pickup in the price of crude oil. However, much of the market is still weighed down by declines in banks, which remain under pressure because of economic unease and worries about the amount of loans on their books to struggling oil and gas companies. Concern that China’s slowdown will hurt global growth and that lenders will suffer as some energy producers struggle to stay solvent amid low oil prices, has weighed on shares this year. The Dow Jones industrials were up 0.3 percent, the S&P gained 0.4 percent and the Nasdaq added 0.9 percent. Nasdaq was boosted by gains in Apple and Facebook.
Prices of both West Texas Intermediate and Brent rebounded from steep losses earlier in the day. Crude turned higher after the US government reported that while oil storage hit another record last week, the amount was less than some traders had expected. Oil had dropped on Tuesday after Saudi Arabia’s oil minister, Ali Al-Naimi, told a meeting of energy leaders in Houston that production cuts aimed at supporting falling crude prices won’t work. He said that the market should instead let some operators go out of business.
Chesapeake Energy advanced after the company reported a $14.9 billion loss for 2015 as it wrote down the value of its oil producing properties. The company said it was selling off assets to pay down debt. Boeing declined after a broker cut its price target on the stock. Ford and General Motors also were lower after a broker said it is a “poor time” to own auto stocks.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$29.40 to US$1,250.75. Copper futures were up 0.5 percent to US$2.12. WTI spot crude was up 41 US cents to US$32.28. Dated Brent spot crude was up US$1.26 to US$34.53. The US dollar was up against the pound and the Australian dollar. However, it declined against the yen, Swiss franc and the Canadian dollar. It was unchanged against the euro. The Dollar Index was up 0.1 percent. The yield on US Treasury 30 year bond was up 2 basis points to 2.60 percent while the yield on the 10 year note was up 3 basis points to 1.75 percent.
Europe
European stocks retreated once again on Wednesday. Crude oil prices weakened further after Saudi Arabia’s oil minister Ali al-Naimi downplayed chances for a deal to curb oil production on Tuesday. Concerns over the possibility of a British exit from the EU also continued to weigh on investors. The FTSE declined 1.6 percent, the CAC was down 2.0 percent, the DAX dropped 2.6 percent and the SMI lost 1.5 percent.
According to the President of the Bundesbank and ECB governing council member Jens Weidmann, a gradual economic recovery in the euro area is set to continue, but it will be too dangerous for the ECB to ignore the long terms risks of more stimulus. The euro area’s gradual economic recovery is likely to continue in the rest of this year and in 2017 according to Weidmann. Further he said that the German economy remains in good shape overall and brisk domestic demand may fuel economic activity, which looks set to remain on a clear upward trajectory in 2016 despite the slight upturn in risk. Regarding the ongoing speculation that the ECB may add more stimulus to tackle the very low inflation in the region, Weidmann warned that this could entail longer term risks and side effects “that it would be dangerous to simply ignore.”
Hugo Boss sank after a profit warning, citing weaker than expected sales in the US and China. Fresenius gained after the healthcare firm increased its dividend after reporting higher FY15 profit. Both Deutsche Bank and Commerzbank retreated. Volkswagen, Daimler and BMW were down. Peugeot advanced after the car maker swung to a full-year net profit in 2015 and announced it would pay a dividend for 2016 after reaching its medium-term targets. In Paris, Airbus Group was lower after the company confirmed its stable earnings view for fiscal 2016 after reporting a 15 percent increase in 2015 profit, in line with estimates. Suez fell after reporting a decline in 2015 earnings.
Hedge fund firm Man Group sank after its 2015 profit missed estimates. Barratt Developments climbed after it reported pretax profit of £295.0 million for the half year ended 31 December 2015, up from £210.2 million in the same period last year. Mining stocks were under pressure after a broker downgrade on the sector to “Neutral.” Glencore, Anglo American, BHP Billiton, Rio Tinto and Antofagasta tumbled. Standard Chartered was down after brokers downgraded their price targets on the Asia-exposed bank, which posted its first loss in 26 years on Tuesday. Burberry dropped as the luxury sector continued to come under pressure following a poorly received update from sector peer Hugo Boss.
Asia Pacific
Most Asian shares were down Wednesday as hopes for a coordinated production cut by OPEC faded and investors fretted over additional pressures on bank earnings in 2016. Trading sentiment remained sluggish after the major US averages fell over 1 percent overnight.
The Shanghai Composite erased early losses to close 0.9 percent higher on hopes that the upcoming meeting by China’s legislature starting March 5 will result in more stimulus.
The Hang Seng however, was down 1.1 percent. Hong Kong’s economic growth is forecast to ease this year, largely due to the weak global outlook, the lull in foreign trade and slowdown in inbound tourism according to Financial Secretary John Tsang.
The Nikkei was 0.8 percent lower with sentiment dampened by a stronger yen, weaker US and European data and a decline in oil after both Iran and Saudi Arabia ruled out a deal by major producers to cut oil output. Canon, Sony, Suzuki Motor and Mazda retreated. Honda slid after announcing the retirement of 10 top managers. Sharp declined ahead of its two-day board meeting beginning Wednesday to decide if it should accept Foxconn Technology’s nearly ¥700 billion takeover bid. Energy explorer Inpex and Japan Petroleum were lower. Mitsubishi Heavy Industries slumped after the Nikkei business daily reported the heavy equipment manufacturer plans to sell about ¥200 billion worth of assets in the next two fiscal years.
The S&P/ASX and All Ordinaries were down 2.1 percent and 1.9 percent respectively after oil prices tumbled on API inventory data and China’s yuan fell for a fourth day. Economic reports also disappointed investors, with wage growth hitting a record low last quarter while the amount of construction work done in the country fell more than forecast in the December quarter. Miners declined along with the four big banks. The Kospi edged down 0.1 percent on foreign fund selling amid a fresh fall in the price of oil and growing concerns surrounding the outcome of Britain’s European Union referendum. The Sensex tumbled 1.4 percent on fading hopes for a coordinated move to limit production and investors started to consider possible contagion effects of a “Brexit”.
Global Stock Markets

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The Eurozone posts January M3 money supply and harmonized index of consumer prices. The US posts January durable goods orders, February Kansas City Fed manufacturing index and the weekly jobless claims, money supply and Fed balance sheet.
*Note — all releases are listed in local time.