Europe
Rising tensions over the incredulous new Greek leadership and its potential influence over the political climate in the rest of the European periphery overpowered the market’s enthusiasm for the ECB stimulus leaving a sea of red on Monday.
The Markit Eurozone manufacturing PMI was confirmed at 51 in January in line with expectations. Solid growth in Spain, the Netherlands and Ireland outweighed a poor performance for manufacturing in France, Italy and Greece but overall Eurozone growth remains sanguine.
UK
The recovery in oil prices helped energy shares top the FTSE 100 on Monday with Tullow Oil Plc (LONDON:TLW) leading the grid on speculation Royal Dutch Shell A (LONDON:RDSa) is preparing a bid for its smaller rival while easyJet Plc (LONDON:EZJ) was propping up the index as a read-through for Ryanair Hldgs (LONDON:RYA)’s mismanaged Oil price hedge.
Airline stocks including Ryan Air have been pushing higher in the past few months on the premise they stand to benefit from lower oil prices. If the airline has hedged its exposure to fluctuating oil prices at a much higher level, it actually stands to lose out from the oil price drop as it’s forced to price-match other carriers which have no or lower oil price hedges.
Tullow Oil’s share price has taken a battering alongside the price of oil so if there’s a belief that oil prices are close to a bottom and that Tullow’s assets have value, now is the best time for Shell to make a bid. Shell is in the process of trimming its assets and reducing capital expenditure in response to falling oil prices so a bid would be somewhat counter to those aims.
Shares in CRH got a lift from the company’s winning bid for assets being cast off from the merger of Holcim and Lafarge.
US
US markets started the new week the way they finished the last after disappointing manufacturing and personal spending data weighed on the major indices despite rallying oil prices giving an uplift to energy shares.
Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) topped the Dow Jones Industrial Average thanks to the jump in oil prices as the latter beat profit estimates despite a 21% drop in fourth quarter earnings and a cut to its share buyback program.
The ISM Manufacturing PMI came in at 53.5 against expectations of 54.5. US manufacturing remains in expansion but if the US is expected to be the growth engine of the world in 2015, a slowing rate of expansion isn’t quite going to cut the mustard.
FX
The US Dollar was down across the board on Monday as economic data disappointed elevated expectations that the US economy will drive economic growth in 2015.
UK manufacturing showed another month of expansion and a at a rate slightly higher than expected but that wasn’t enough to give GBP/USD a bid leading into the Bank of England meeting later this week.
EUR/GBP continued its recovery off 0.74 after European manufacturing PMI held expectations.
Canadian dollars benefitted from the recent oil price jump as USD/CAD fell through 1.26 engulfing all of Friday’s gains.
Commodities
Crude oil prices saw big gains for a second session after a strike in US oil refineries drove speculation that production may be affected. Today’s move in oil comes after prices gushed off the lows on Friday when data from Baker Hughes showed a drop in the US rig-count.
Crude had been ranging at the lows and this news on US rigs triggered a technical break out towards $55 per barrel in Brent and $50 in WTI.
Gold slipped below $1,270 per oz showing relative weakness in the face of a falling US dollar and dipping equity prices which should really trigger gold buying.
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