Crude oil prices rose to nearly 12-week high – Saxo Bank MENA Weekly Market Report
- Charu Chanana and Redmond Wong, Market Strategists, Saxo Bank
Summary: US PCE inflation data for December continued to support the notion of a disinflation trend. Despite reaching an intra-day record high at 4,907, the S&P 500 pulled back, closing the Friday session at 4,891, down 0.1%, primarily due to weakness in the information technology sector. The Nasdaq 100 declined by 0.6%, with Intel having a 13% drop on a downbeat outlook. On a positive note, LVMH saw a surge in stock value after reporting sales that exceeded estimates. Crude oil prices rose to nearly 12-week highs amid suspected Iran-backed drone attacks, resulting in the death of three US soldiers in Jordan, indicating a potential escalation in the Middle East conflict.
Commodities: Crude oil prices rose to near 12-week highs, breaking out of the recent range, with drone attacks suspected to be Iran-backed killing three US soldiers in Jordan. This could spell a significant escalation in the Mideast conflict. The decline in US inventories last week (although probably weather-led), as well as the resilient US economy and China’s stimulus measures, could also push oil prices higher. Gold also got a safety bid at the open this morning in Asia but could not sustain the gains. Metals ended the week stronger on China optimism, and the focus this week will be on any further measures.
US Equities: The S&P 500 pulled back after making an intra-day record high at 4,907 to finish the Friday session at 4,891, down 0.1%. The loss in the market benchmark was driven by weakness in the information technology sector. The tech-heavy Nasdaq 100 slid 0.6%. Intel, suffering from a 13% decline on a downbeat outlook, was the worst performer. Intel’s slide impacted other semiconductor stocks, dragging KLA, AMD, Lam Research, Marvell, Qualcomm, Nvidia, and Micron Technology lower. The ADR of LVMH Moët Hennessy Louis Vuitton surged 7.1% after the European luxury goods company reported sales beating estimates.
This week is characterised by earnings releases from five of the ‘magnificent seven” stocks: Microsoft (Tuesday after market close), Alphabet (Tuesday after market close), Apple (Thursday after market close), Amazon (Thursday after market close), and Meta (Thursday, after market close)
FX: Choppy price action was seen in the dollar on Friday, but it was another week of gains, albeit mild. This week could bring a lot more volatility with Fed and BOE decisions on tap, along with key data from jobs to ISM manufacturing. CHF was the outperformer as USDCHF reversed to 0.8640, and SNB’s Jordan will be speaking on Tuesday. CAD and NOK were supported by firmer oil prices on escalating Middle East risks. EURNOK tested a break below 11.30, and a break may expose December lows of 11.18. Yen weakness returned, with Tokyo CPI for January coming in below 2% on headline and core measures and a jump higher in Treasury yields. USDJPY is back above 148, although watch for any safety bid as worsening geopolitics underpin, and oil and gold are running higher this morning in response. EUSUSD is unable to move back above 1.09, but GBP could remain supported this week if the BOE stays hawkish.
Last Updated on 4 weeks by Middle East News 247