Crude oil prices dropped more than 2% to below $44/barrel in yesterday’s trading sessions, triggering risk-off flows in the financial markets. The Dow 30 index fell 140.25 points to 17,750.91 (-0.78%), the S&P 500 index retreated 18.06 points to 2,063.37 (-0.87%) and the Nasdaq was down 54.37 points to 4,763.22 (-1.13%).
The S&P 500 VIX edged 0.92 points up to 15.60 (+6.27%) to indicate a return in risk aversion. In New Zealand, the Global Dairy Trade auction showed a 1.4% drop in dairy prices, capping off consecutive bi-weekly gains. Earlier in the day, the Chinese Caixin manufacturing PMI fell from 49.7 to 49.4 instead of improving to the estimated 49.8 reading. The Reserve Bank of Australia cut interest rates by 0.25% in response to a weaker inflation outlook.
The American Petroleum Institute reported a buildup of 1.3 million barrels in stockpiles, reviving fears of an oversupply. US crude oil inventories data from the Energy Information Administration is up for release today and an increase of 0.6 million barrels is eyed.
European markets give in to risk aversion
The London FTSE fell 56.30 points to 6,185.59 (-0.90%) when the UK manufacturing PMI slid from 50.7 to 49.7 instead of improving to the estimated 51.3 figure. Other European markets also ended in the red, with the German DAX down 196.50 points to 9,926.77 (-1.94%), the French CAC 40 down 70.77 points to 4,371.98 (-1.80%) and the Euro Stoxx 50 down 54.55 points to 2,978.05 (-1.80%).
Up ahead, the UK construction PMI is due and a fall from 54.2 to 54.1 is eyed. Final services PMI readings are up for release from the euro zone, along with the Spanish unemployment change and the region’s retail sales figure.
US jobs indicators to come in focus
Investors are likely to turn their attention to the upcoming US non-farm payrolls release due on Friday as a number of leading indicators are lined up for today. The ADP non-farm employment change could post a 205K gain, slightly higher than the earlier 200K increase, while the ISM non-manufacturing PMI is also up for release.
Japanese banks are still closed for the holiday today until tomorrow so additional volatility could be seen during the Asian session on lower liquidity. In addition, European banks are closed tomorrow so profit-taking activity could also come in play, triggering corrections from the strong moves earlier in the week.
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