By Margaret Yang, CMC Markets
US corporate earnings continue provide good surprises
A 1.5% rebound in crude oil prices lifted energy stocks, which sent US equity benchmarks higher last night. Sentiment has been improved by better-than- expected US corporate earnings. Netflix, Yahoo, Goldman Sachs and Intel have all posted results outstripping market consensus. Netflix’s share price jumped 19% boosted by strong subscriber growth in the international markets. The streaming-video giant added about 3.6 million new subscribers last quarter, which is 1.3 million more than expectations.
Positive surprises help to alleviate investor’s concerns surrounding an impending Fed rate hike, as more evidence shows that the US economy is strong enough to withstand a 25bps rate rise in the near term. The US dollar remains strong against its major peers.
China’s Q3 GDP data reads 6.7%, which is in line with market consensus. The recent growth in credit helped to cushion the downside of slower exports and industrial production, thus helping to maintain GDP growth at a stable rate of 6.7%. The country’s currency, CNY, has recently hit a six-year low against USD.
Crude oil prices consolidate on climbing OPEC supply and higher US rig counts
Crude oil prices have entered into consolidation phase after hitting 12-month highs last week as the US oil rig count jumped to a seven-week high as more oil fields have resumed operation since oil price climbing back to $50 benchmark.
Higher production output from OPEC members, despite the recent freeze agreement is another driver behind the sell down. Iran has reiterated its ambition to boost production to 4 million barrels a day. Its daily oil production now stands at 3.63 million barrels a day, a substantial increase from 2.80 million barrels a day at the end of 2015. Nigeria also aims to raise output to 2.2 million barrels a day, an increase of 400,000 barrels a day from the current level.
All these contradict with the agreement made by OPEC members and other major oil-producing countries in their recent gathering in Nigeria. Uncertainties about whether the OPEC countries will honor their commitment to reduce production now become the biggest resistance over crude oil prices in the near term. WTI crude oil Nov contract now trades at $50.20 area, with the immediate support and resistance levels at $48.60 and $52.70 respectively.
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.