Oil price also continues to weigh on global risk sentiment

Market Movers

There are no significant economic releases for the euro area today apart from France consumer confidence.
In the US non-manufacturing PMI is due for release. In terms of the housing market, new home sales numbers are released and we look for a decline to 513,000.

Selected Market News

Global risk sentiment continues to be fragile with another drop in Asian equities overnight. The Nikkei index fell 1.1%, while the Chinese Shenzhen index is down 1.3% and the Hang Seng index declined 1.8%. US equities also declined yesterday with the Dow Jones falling 1.1%. The JPY strengthened further against the USD. The sour sentiment follows weak economic numbers released in the US and Europe, which again raises the question of the strength of global demand: US consumer confidence was weaker than expected and the German IFO number fell short of expectations. The weakness in global demand draws attention to this weekend’s meeting of G20 finance ministers and central bank chiefs and whether they will signal a willingness to support the world economy in some form.

The further fall in the oil price also continues to weigh on global risk sentiment. Brent crude oil retreated 1.4% overnight to USD32.81 per barrel. The oil price remains under pressure after Iran’s oil minister yesterday called a proposal by Saudi Arabia and Russia to freeze oil production ‘ridiculous’. We think this shows the difficulties of OPEC countries finding a common line on cutting back on production to stimulate the oil price. Other commodity prices also fell (copper and aluminium down 1% and 1.65%, respectively) with gold the only exception.

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