Current market analysis 02/10/16

Current market analysis 02/10/16

The previous week saw the release of much economic data, which in turn affected financial markets, including speeches from multiple central banks and the outcome if the OPEC meeting. That being said, the US dollar had shown little signs of strength, with no significant price action against major currencies. Both the Bank of Japan and the U.S. Federal Reserve published their respective rate statements within a 24 Hour window. The status quo was maintained with very little in the way of changes to their monetary policy. Markets were, for the most part, prepared and had priced in this cautious approach from monetary policy makers. The BoJ was under more pressure, subsequently deciding on a 2 year goal for its inflation target. The Fed however, seems to once again be putting all its policy eggs in the December Federal Open Market Committee basket. 

The crisis at Deutche Bank had a considerable effect on financial markets. Markets slumped on the back of the banks systemic risk, largely caused by mounting concerns over their legal penalties and the fact that the German government will not consider a bail out. On the bright side, we saw a slight rally in share price towards the end of the week, solely due to an announcement that their fines will be substantially reduced.

Much volatility has been seen within the world’s oil markets over the past two years, though current oil prices do seem to be holding at their current level, vastly due to the comments between the Organization of the Petroleum Exporting Countries (OPEC) members and other major producers, about the possibility of a freeze in oil production. The first attempt at a freeze, at the Doha summit in March, was a failure but now it appears that the meeting in Algiers has been successful. An agreement has been made, but a delay, until November’s meeting in Vienna, is expected to finalise the deal. . Oil prices have increased as a result of this news, but sentiment is still negative due to the lack of cooperation between Saudi Arabia, Iran and Russia.

One of the biggest events in the markets, the US non-farm payrolls will be released this week. Economist forecasts are of a gain of 171,000, with the previous being 151,000 jobs last month. This data will be crucial to the Feds decision making. The market has reduced the impact of political risk from the first presidential debate between Hilary Clinton and Donald Trump, as both candidates consider employment as an important topic in their agenda of their respective on-going campaigns.

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