Article / 23 August 2016 at 7:00 GMT

Morning Markets: Oil fast losing sight of $50/b

Managing editor, / Saxo Bank



  • Eurozone: Composite PMI (0800 GMT) 
  • UK: CBI Industrial Trends Orders (1000 GMT)
  • US: New Home Sales (1400 GMT) 

Oil's about-turn in the last two days is gathering pace pushing US benchmark below $47/barrel and sending its European counterpart Brent towards $49/b as the $50/b-plus highs of last week disappear over the horizon.

The return of Nigerian barrels, ramped-up production in Iraq and the Saudi-led destruction of the short position in the last week has shown the 20%-plus rise up for what it was — the rallying equivalent of the Emperor's new clothes. With profit-taking prevalent and downside seemingly set for the next few days, analysts have WTI slated for a base somewhere around the $45/b mark.

It's a volte-face in currency markets too after dollar's early strength this week was frittered away amid anxiety heading into the Jackson Hole symposium and the pivotal Janet Yellen speech on Friday. USDJPY was once again coiling just above the 100.0 handle in the hour before the European open, EURUSD had regained its hold above 1.13 and GBPUSD had established a base at 1.3150.

Speculation on a Federal Reserve move on rates has put markets seemingly on hold after the dramatic intervention by Fed vice chairman Stanley Fischer at the weekend continues to reverberate. Nikkei and Hang Seng were both subdued overnight and the Shanghai Composite Index was just into positive territory. The Shenzhen Composite Index meanwhile is still holding above 2,000 as the froth from last week's Stock Connect announcement with Hong Kong starts to dissipate.

Such conditions might seem conducive for gold to return higher but the precious metal has been unable to break the $1,340/oz area.  Bonds likewise are largely static as the holding pattern prevails. Important PMIs are on tap Tuesday in Europe and the US but it might take real outliers to move the needle significantly before Friday.

Finally, shares in Switzerland's chemical giant Syngenta  went on a bit of a tear after the US national security regulator waved through a $43 billon takeover by China National Chemical Corporation (ChemChina). The share price spiked to a 15-month high of $422 on the back of ChemChina's $465 offer where it has held as we go into the European session. The deal is expected to complete by end-2016 if it can overcome other antitrust probes. 

Market signals

Asian session

  • Japan's Flash Manufacturing PMI came in at 49.6 in August (It was 49.3 in July)
  • The net worth of the world's richest person – Bill Gates – has hit $90 billion
  • Australian consumer confidence is at a three-year high, up 3.6% last week
  • Asian markets opened mixed; the Nikkei was down as the yen strengthened
  • Silver saw a big pullback losing 2.3% overnight, but added 0.4% in Asian trade
  • Gold held near a one-week low, zinc advanced as much as 1.2% in London
  • WTI crude oil slid 1.6% to $46.69/b in mid Asian trading
  • Goldman Sachs warns that August's oil price rally "has been overdone"
  • Asian energy shares declined, while the dollar weakened versus major peers
  • The Nikkei 225 was down 135 points at 0514 GMT or 0.81%
  • The Hang Seng was down 0.37% and the Shanghai Composite up 0.2% at 0520 GMT
  • The Mumbai Sensex was flat, down just 0.08% at 0520 GMT
  • At 0542 GMT, the ASX was at 5,553.30, up 38 points or 0.69%

Forex ahead

  • The NZD soared on the RBNZ Governor's speech, rising above US73¢
  • South Korea’s won strengthened 1% versus the greenback to 100.13
  • The Japanese yen rose 0.2% against the USD in mid-Asian trading
  • Strong dollar buying interest of last few days in reverse mode
  • Options market on dollar calls spiking around Jackson Hole

From the Floor

Rate move. "It's a very confusing batch of Fed rhetoric", says Hardy.

Less dovish. ”RBNZ governor Graeme Wheeler has said a series of rate cuts is not justified” says Horchani.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Today’s flash PMI data for the Eurozone will provide more context for deciding if the macro outlook is stabilising after a challenging summer of data updates, writes James Picerno.

NZ go slow
New Zealand central banker Graeme Wheeler will lower interest rates, but says he won't be rushed - comments that pushed the NZD higher, says Saxo's Singapore team

Out of steam
The likely return of Iraqi and Nigerian barrels in tandem with a Saudi-led spent short-covering oil rally is driving the return to the downside on WTI and Brent, says Ole Hansen. [video] 

Actions speak louder
If you want to use Fed rhetoric as a barometer, it is best to ignore what they say and act on what they do, which is almost always nothing, writes Steen Jakobsen.


Oil could be flowing from the Niger Delta to global markets soon. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
Click here
to make sure you're up to date with the latest developments.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail