Stocks Rally Following Dovish Fed and Crude Surge

Global stock markets got a boost from the Fed’s decision to put off further hikes for now and the broad gains in Europe followed a move higher in Asia. Among major indices the German DAX adds 1.91% trading at 10,635, US indices futures continue the upward trend after Fed meeting on Wednesday. Oil prices are a key driver of momentum, following Wednesday larger than expected draw in crude oil inventories reported by the Energy Information Administration.  The ECB lowered the Greek ELA ceiling again at the request of the Bank of Greece and French Business Confidence rebounded in September.

 

Oil prices continue to rally and are higher by another 1%, due to a number of reasons including the larger than expected draw reported by the Energy Information Administration on Wednesday. The EIA’s report confirmed the large draw in crude oil inventories, which diverged from the 4-million-barrel draw forecast by analysts.  Additionally, the weaker dollar and the risk-on vibe created by the Fed’s less hawkish than expected stance buoyed crude oil prices. The Brent future benchmark is presently showing a 0.9% gain. The takes the week-on-week gain to 1.4% while month-on-month, oil prices are still down by 5.4%, reflecting bigger-picture markets concerns of the supply glut lasting into 2017.

The ECB Lowers the Greek ELA Ceiling

ECB lowers Greek ELA ceiling again. The ELA was cut to EUR 1.9 billion on request of the Bank of Greece, which said the EUR 0.9 billion reduction “reflects an improvement of the liquidity situation of Greek banks, amid a reduction of uncertainty and the stabilization of private sector deposit flows”.

Sentiment in France rebounded on Wednesday. The French business confidence bounces back as the overall reading improved to 102 from 101, while manufacturing confidence rose to 103 from 101 and the production outlook indicator jumped to 7 from 1 in August, with the latter revised up from 0 reported initially. If confirmed in other confidence indicators, it seems the pattern is a delayed version of developments in the U.K., where business confidence plummeted initially following the Brexit referendum only bounce back more than expected amid the realization that nothing much has changed for now.

In the UK there appears to be some stabilization in industrial trends. The UK CBI industrial trends was reported as expected in September coming in at -5, unchanged from August. The breakdown of the component parts was somewhat mixed. Export orders fell to a -10 reading from -6 in August, missing forecast for an improvement to -2. Selling prices were more benign than expected, dipping to a reading of +5 from +8 and well short of the median forecast for a rise to +10. On a brighter note, the business expectations reading rose to a three-month high of +22 in the September reading, up from +11 in the month prior.

Lending on the other hand appears to have picked up. UK mortgage lending picked up in August, according to Council for Mortgage Lenders data. Gross lending was up 7.0% month over month and 15% year over year, which was accompanied by above-forecast transaction numbers. The CML partly attributes the rebound to the BoE’s stimulus of early August.