The price of Brent crude has moved down to its lowest level in a fortnight this morning following last night’s build in API inventories. This afternoon sees the more widely-followed DOE number released, and a further rise could see a greater portion of the gains seen this month erased - after a rally based on hopes of OPEC curbing their output at the September meeting appears to be fading.
Rising buck weighs on crude
As well as several fundamental developments that suggest that the supply overhang in the oil market continues to persist, a rise in the US dollar has also weighed on the price of crude. Rising expectations for Fed hikes this year has seen the greenback appreciate, with the USD/JPY reaching its highest level of August this morning.
As well as the release of the latest US weekly oil stockpiles later on in the session, the ADP employment number is also a potentially major data point, as this exhibits a relatively high level of correlation with Friday’s non-farm payrolls report. Additional signs of strength in the US labour market would ratchet up expectations of further tightening from the Fed and could see a hike as soon as September become a very real possibility.
Elsewhere in FX the pound has been gaining during this morning’s European session as UK PM Theresa May is set to chair a meeting of her cabinet to discuss the country’s approach to leaving the EU.
FTSE remains in a narrow range
It’s been a quiet start to the week for the FTSE 100, with the benchmark index trading in a narrow range ahead of several key data releases. UK manufacturing and construction surveys for August are the biggest purely from a UK perspective, but developments across the Atlantic in the ADP and NFP releases also have the potential to move UK stocks.
With the index down 8 points at the time of writing, mining stocks continue to suffer from the rising US dollar, with BHP Billiton (LON:BLT), Anglo American (LON:AAL) and Rio Tinto (LON:RIO) the worst-performing three.
Berkeley Group (LON:BKGH) leads the gainers so far this morning as the housebuilder fights to retain its membership on the FTSE 100. After plunging over 30% in the wake of the EU referendum, the firm has recouped some of its losses, but judging by yesterday’s prices this still meant the London-listed company was only the 112th biggest by market capitalisation.
It would take a pretty remarkable recovery today to stave off the threat of moving out of the blue-chip index and into the mid-caps.