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Spreadex Market Update

Monday, January 12, 2015 - Morning Market Update
Connor Campbell - Market Analyst at Spreadex

Oil suffers sinking feeling, markets positive on QE hopes

Oil was once more was the recipient of dismal data as Goldman Sachs downgraded its forecasts for the commodity, from an average price of $83 per barrel in 2015 to $50. Brent Crude greeted this news by dropping to new 5 and a half year lows of $48.50 per barrel; the confirmation of a bleak future for the commodity will see these prices linger for a long time yet.

Considering the FTSE’s usual reaction to oil’s new lows, the UK index managed to have a strong open to the week as investors were able to factor in the commodity’s plunge for a relatively stable Monday morning. One of the upsides to oil’s collapse was the return of 99p per litre oil in the UK, for the first time since 2009. Whilst this price has only been seen locally in Birmingham, with the supermarkets using petrol as its latest battle grown it shouldn’t be too long before this price spreads around the country.

The FTSE was seemingly aided by further reports from the Eurozone that Draghi and the ECB are increasingly close to implementing QE. With news that the majority of ECB members are in favour of sovereign bond buying, the Eurozone was able to overcome a flat open to edge into the green as the morning went on. The Eurozone may want to relish the relatively quiet few days ahead, as next week sees the double-hit of an ECB meeting with weighty expectation hanging over it alongside a Greek election that has the region tense over the outcome. At the moment, hopes of QE are overriding any other fears, much to the joy of the Eurozone indices; the euro, on the other hand, is continuing to reach new lows against a dollar that is attempting to regain its losses from last week.

The USA’s decent non-farm figures were marred last week by a fall in wage growth that drew unfavourable attention to a potential interest rate rise and what such a rise would mean for the average America. Futures are pointing to slight gains for the US markets this afternoon; however, this afternoon sees another member of the Fed speak. It will be interesting to see what the US Federal Reserve has to say about this wage growth fall after being so positive about the USA’s economic recovery last week.

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