Oil Rally And Softer Tones From Greece Sooth Markets

Europe

A renewed sense of optimism surrounding Greece’s debt negotiations brought on by softer tones from the Greek finance minister Yanis Varoufakis who is on a European whistle-stop tour of creditors and is offering the idea of a debt swap instead of a haircut or default that many had feared.

Athens' benchmark index Athens General-Composite sawed over 9% with the Greek banking sector undoing a good amount of the losses seen in recent weeks as National Bank of Greece SA (NYSE:NBG), Alpha Bank (AT:ACBr) and Eurobank Ergasias SA (AT:EURBr) rallied by as much as 21%.

The Spanish IBEX 35 was another top European peripheral performer after Banco Santander (LONDON:SANq) reported an almost 70% jump in fourth-quarter profit thanks to increased lending.

Commerzbank AG O.N. (LONDON:CZB) and Deutsche Bank AG NA O.N. (NYSE:DB) were amongst top performers in German markets that helped push the benchmark DAX to new all-time highs beyond 10,900.

UK

The FTSE 100 had a commodity-based rally on Tuesday when miners and energy companies led the charge thanks to a surprise Aussie rate-cut and rallying oil prices with the index now seemingly setting up for another run at its multi-year ceiling of 6,900.

Mining companies including BHP Billiton and Rio Tinto with large Australian operations benefited from an overnight rate cut from the Reserve Bank of Australia which sent production costs tumbling alongside the Australian dollar.

In a repeat from Monday’s report from Exxon Mobil Corporation (NYSE:XOM), BP Plc (LONDON:BP) also saw sharp losses over the year thanks to the falling oil prices that weren’t quite as bad as analysts had forecasted. BP will also slash its production budget for 2015 by $4-6bn to reduce costs and avoid unprofitable projects at the lower price per barrel of oil.

Economic data was supportive of the move higher in UK equities with the UK construction PMI showing a surprise turnaround from a 17-month low in December to 59.1.

BG Group was bucking the trend as shares fell after reporting an adjusted net profit that was below expectations, down 19% year-on-year.

US

US markets rallied on the open building on momentum from yesterday’s session as oil prices continue to rise lifting energy shares and hopes are raised of a resolution to the Greek debt negotiations in Europe, a major trading region.

Factory orders dropped more than expected with a huge 3.4% drop against the 2.4% expected but US equities were putting aside the disappointing economic data given the increase in oil prices.

United Parcel Service Inc (NYSE:UPS) matched profit estimates while beating on revenues but the delivery company forecasted full-year results below forecasts.

FX

The US Dollar was mostly lower today on the back of a string of poor US economic data that points to a further growth slowdown into the first quarter of 2015. Rallying commodity prices also meant US dollars were being sold in exchange.

AUD/USD dropped to new 5 1/2 year lows when the Reserve Bank of Australia introduced a surprise rate cut to fend off lower inflation from dropping oil prices as well as a domestic slowdown on the back of falling metal and mineral demand.

The wider issue raised by the RBA cut is the renewed bout of currency wars by central banks across the globe seeking to artificially create growth via exports by loose monetary policy which lowers the value of the national currency.

Currency wars 1.0 was a response to quantitative easing by the Federal Reserve, 2.0 is because of the ECB introducing QE in January.

Commodities

After falling for seven months, oil prices have seen the first sign of a bottom being put in place as increasing numbers of US shale producers throw in the towel as OPEC holds pat at current production levels.

Gold and Silver prices tracked the Australian dollar lower on Tuesday while copper rallied alongside oil prices

CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original Post