Financial market research and analysis

The hectic moves in the financial markets give little visibility to investors who clearly prefer to sit on cash positions. According to the BAML February Fund Manager Survey, investor cash balances reached the highest since 2001.

After a two-day rally, Japanese stocks traded south in Tokyo; the Nikkei and Topix lost 1.36% and 1.13% respectively. The European stocks opened higher this morning. The FTSE tested 5900 as Glencore (+8.94%) and Anglo American (+5.59%) lead gains.
The 6000 mark should shelter solid offers before the Brexit summit scheduled on February 18th.

Mixed labour data triggered a swing in the pound in London. The jobless claims slumped by 14,800 in January and last month’s figure has been revised to -15,200. The unemployment rate remained unchanged at 5.1% yet the average wage growth slightly slowed to 1.9% y/y. At this point, it is not only about the size but also about the quality of jobs added that matters. The wages growth is a solid indicator of inflation and inflation expectations. Nowadays the wages growth in the UK falls short of the Bank of England’s objective, giving them little reason to consider any hike in interest rates in 2016.

On the other hand, there are mounting views that central bank policies lose their efficiency and that adding extra cash may not help to revive appetites in the market. The cheap money appears to be losing its attractiveness in an environment of too-low, and increasingly negative interest rates.

The FOMC meeting minutes will be on the wires today. The slippery macro-economic fundamentals and the considerable shift toward the monetary easing policies will certainly prevent from the Fed running too far ahead of the game. The probability of a rate hike by December has fallen to 35% while the chances of a rate hike in March are almost in-existent.


A quick take on the oil agreement

The leading oil producers’ agreement to freeze production at January levels, rather than cutting the output, did not satisfy the bulls. The global oil production is at all-time record highs and freezing the production at these levels is certainly a worthless effort. The world will continue be inundated. On the other hand, Iran is unlikely to start negotiating before it has even started to play.

WTI failed to surpass the $32 (4-month downtrend channel top) as latest news were insufficient to hint at a narrowing gap between demand and supply in the oil market. Failure to break above $32 keeps the WTI within the down-trending channel, paving the way toward $25.