US data to provide interest later with no notable data coming from Europe

US data to provide interest later with no notable data coming from Europe

Good morning,

  • Rebound in oil prices provide a boost ahead of the European open;
  • Technical’s point to further gains in oil but fundamentals suggest otherwise;
  • US data to provide interest later with no notable data coming from Europe;
  • US earnings also in focus, JP Morgan and Wells Fargo disappoint on Wednesday.

Europe looks set for a much more positive open on Thursday, as a rebound in oil prices over the last couple of days provides some reprieve for energy stocks and other sectors continue to be supported by expectations that the ECB will announce its own version of quantitative easing this time next week.

Oil has played such an important role in the markets over the last six months and that is unlikely to change any time soon. The rebound is prices over the last couple of days from the lows hit early on in the session on Tuesday is expected to benefit energy stocks greatly today, as they did overnight in Asia.

The sudden interest in oil has been driven by short covering, with the Brent February contract approaching expiry and the US crude contract expiring. This would suggest that any upside in crude is only temporary despite the technical’s suggesting otherwise. Yesterday’s failure to make new lows, despite some selling pressure earlier in the session followed by a close above Tuesday’s high in WTI and not far from it in Brent – creating a morning star formation in both – is a fairly bullish sign from a technical standpoint.

With the fundamentals remaining weak and contract expiry’s being attributed to the buying, I would be reluctant to act on this at the moment though and would instead like to see further confirmation over the next couple of days. This could come from as much as a weekly close above last week’s open, if I’m being greedy, but at the very least I’d like to see Thursday and Friday’s highs from last week broken. These tend to be providing some resistance in WTI which does not suggest there’s more upside to come.

Once again today, the European session is looking a little quiet with any economic data that is due out unlikely to move the markets very much, if at all. We’ll have to wait for the US data later on for that and even then, we don’t exactly have it in abundance. Weekly jobless claims, the empire state and Philly Fed manufacturing indices may be of interest to the markets, but ultimately I think the biggest moves are likely to continue to be driven by movements in commodities, particularly oil.

That said, we can’t ignore corporate earnings, which unofficially got under way on Monday with Alcoa’s result. JP Morgan and Wells Fargo got things going for the banks yesterday and neither were well received by investors, particularly JP’s after they reported a decline in fourth quarter profit. Today we’ll get results from Citigroup, Bank of America, Blackrock and Intel.

The FTSE is expected to open 83 points higher, the CAC 61 points higher and the DAX 140 points higher.

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