Article / 29 September 2016 at 11:44 GMT

Mid-session Europe: Opec deal electrifies energy stocks

Saxo Markets
Denmark

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Foreign exchange

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European equities climbed higher today with the energy sector rallying after oil prices surged overnight following the agreement by Opec members to cut oil production. The deal aims to limit oil production to 32.5-33.0 million barrels/day, effective in November but final details of which countries will cut output and by how much remain to be worked out.

Elsewhere, German jobless claims rose unexpectedly in September but the unemployment rate stayed at a record low as demand for labour remained high. Eurozone business confidence rose in September to its highest level this year.


Watchlist (GMT)

  • US Initial Jobless Claims (260K exp.) (1230)
  • US August Adv.Goods Trade Balance (1230)
  • US August Prelim. Wholesale Inventories (1230)
  • US Q2 Final GDP Annualized (1.3% q/q exp.) (1230)
  • US August Pending Home Sales (1400)

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Forex developments

The Japanese yen is in focus today after yesterday's Opec meeting saw the currency weaken as oil ripped higher and raised the spectre of inflationary pressure. USDJPY managed to break the 101.10 area which had been a nice technical resistance as it's a small Fibonacci level from the drop that started September 2 to the lows of September 22. The USDJPY rally hit the next technical resistance where it was rejected at around 101.10 (38% Fibonacci level from the same drop). 102.20 is 50% level from same move, which should be decent technical resistance.  

EURUSD looks confused and has almost the same candle pattern as yesterday. Technical support is at 1.1210 (21-day moving average and also 38% Fibonacci level roughly from the rally starting July 25 to the highs of Aug 18). As we approach the weekend, EURUSD is again dancing around the 100-week moving average which is now at the 1.1220 zone.

Commodity currencies are losing some of yesterday's gains on the Opec move. AUDUSD has almost eliminated the sympathy move with CAD and sees the first tech support around the 0.7646 area, which is Fibonacci level and also around lows of yesterday. 0.77 is key tech resistance at the moment, and risk sentiment possibly need to improve for this to be taken out.

FX Options volatilities
 
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EURUSD vol is trading a bit softer, with spot stuck in a tight range and realised vol in EURUSD weekly is just 5.2. 1month JPY marked 0.7 vol higher today, as expiry has rolled to the next Bank of Japan event. Not much is expected on the next BoJ meeting and 0.7 vol higher is also a relatively small correction compared to last BoJ meeting where 1month was marked up by 3-4 vols. MXN rate decision is tonight 50 basis points hike is expected and o/n vol is at 25vols.

Fixed income

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Commodities

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Equities

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European equities climbed higher today with the energy sector rallying after oil prices surged overnight following the deal by Opec members to cut oil production. FTSE 100 rose 1.13% to 6,926 while Dax 30 advanced 0.74% to 10,515, CAC 40 gained 1.21% to 4,486 and IBEX 35 rose 1.01% to 8,828.

Crude oil jumped 5.3% on Wednesday, its biggest one-day rise since April. Oil-related companies in Europe are the major gainers today. Shares of Saipem SpA jumped 8.1%, Amec Foster Wheeler PLC rose 7.7% and Technip SA jumped 7.3%.

Among oil producers, Tullow Oil PLC rallied 7.2%, Total SA 4.50% and Royal Dutch Shell PLC added 5.30%

Others movers: Capita PLC sank 28% after the support-services company issued a profit warning and shares of Novo Nordisk AS fell more than 1% after the insulin maker said it would cut around 1,000 jobs in a response to increased competition.

On the economic news front, German jobless claims rose unexpectedly in September but the unemployment rate stayed at record low as demand for labour remained high and Eurozone business confidence rose in September to its highest level this year.

Read more

Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

US:        US Market Wrap:  Oil gushes on Opec deal

Asia:      Morning Report APAC:   Energy shares rip in Asia

Europe: Morning Markets:  Iran calls Saudi's bluff on oil

Europe: From the Floor: Risk riding high on Opec deal

electric

Positively electric. Energy stocks responded well to Opec's surprising deal. Pic: iStock

— Edited by Clare MacCarthy

The Global sales Trading desk is a multi-asset team providing customised trading solutions
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