Daily Stocks Update: Crude Oil Slump Drags Equities Down – Feb 24, 2016

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Daily Stocks Update: Crude Oil Slump Drags Equities Down - Feb 24, 2016

US equity indices ended the day lower, as risk aversion returned to the financial markets after crude oil prices resumed their slide. As it turns out, Iran is calling the plans to freeze production “unrealistic” and “laughable” while Saudi Arabia’s oil minister reiterated that they don’t intent on cutting output. Based on the latest report from the American Petroleum Institute, stockpiles rose by 7.1 million barrels, reminding investors of the existing supply glut.

The Dow 30 index fell  188.88 points to 16,431.78 (-1.14%), the S&P 500 index fell 24.23 points to 1,921.27 (-1.27%), and the Nasdaq fell 67.0 points to 4,503.6 (-1.47%). The S&P 500 VIX, which is considered a gauge of market fear, rose 1.60 points to 20.98 (+8.26%) as traders priced in the uncertainty brought about the oversupply in crude oil.

European markets down on Brexit fears

Earlier in the day, Brexit fears continued to haunt the European markets, following reports that London mayor Boris Johnson is supporting a split from the EU. Outflows from the region led to the FTSE closing 75.42 points down to 5,962.31 (-1.25%), the German DAX falling 156.82 points to 9,416.77 (-1.64%), and the French CAC 40 dropping 60.28 points to 4,238.42 (-1.40%).

Data from the euro zone also came in weaker than expected, with Germany reporting a drop in its Ifo business climate index from 107.3 to 105.7, worse than the projected dip to 107.0. In the UK, the Inflation Report hearings highlighted the downbeat outlook for the economy, although BOE head Carney mentioned that they aren’t likely to implement negative deposit rates.

Asian markets react to oil price tumble

Asian equities are on shaky footing following the recent oil price slide, as this revived fears of a global slowdown led by falling demand from China. The Nikkei 225 index is down 103.74 points to 15,948.31 (-0.65%) and the S&P ASX 200 index is down 80.69 points to 4,898.90 (-1.62%). The China A50 index is down 14.97 points to 9,079.88 (-0.16%).

Data from Australia missed expectations, as construction work done for Q4 2015 fell 3.6% versus the projected 2.1% drop and the wage price index posted a 0.5% gain, short of the estimated 0.6% increase. US crude oil inventories are up for release next and a rise of 2.1 million barrels is eyed, with larger than expected gains likely to result to another leg lower for commodity prices and equities.

 

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.