14.11.14 Friday Afternoon

Oil slips in its own slick as Europe breathes a wary sigh of relief.

With US retail figures coming in higher than expected at 0.3%, the Dow received an unneeded boost to open at 17644, its highest open of the week. However, the poor European numbers, the shocking oil plunge and general caution over how tenable this amazing Dow run is, led the index to remain flat in its initial hour after opening. The overall positive sentiment continued into the dollar; though the Nikkei hit a 7 year high of 17520 yesterday, the yen depreciated further to reach an intraday peak of 116.82 for the greenback. There is now a very serious chance the USD/JPY could reach the 120 level, an idea that would have been laughable in the first half of the year.

The FTSE has had an unhappy day, with the mixed message of the European figures combined with poor performances by certain British stocks has caused the FTSE to hover around the 6625 mark after opening at 6639. The two biggest aforementioned slumping stocks were Restaurant Group, owner of Chiquito and Frankie & Benny’s, and Premier Farnell, the tech distributor. The former fell 5% today to a low of 634.5, due to costing pressures derived from a 10.3% increase in total sales this year, whilst the latter’s shares maintained their drop of 10%. This kind of news, combined with Eurozone figures, has resulted in the 0.2% drop for the FTSE. Whilst the European figures were stronger than expected, on a macro-level they were nevertheless disappointing, and Europe is still not completely out of the wood crisis-wise.

In the European markets, the DAX opened at 2964, closing 28 points lower at 2936. Regardless of Germany’s figures causing them to narrowly avoid recession, narrowly avoiding recession is not a healthy economic position to be in, and that has been found on the DAX today. The euro has been fairly flat this week, and the news from Europe this morning did not rock the cradle for the currency. Whilst it dropped 0.57% today, the euro has not really moved from around the $1.24 per euro mark this week, with only slight movements around this figure.

Despite some minor gains today, Brent Crude oil has been unable to claw its way back above the $80 per barrel, following weak industrial data from China yesterday. With industrial production dropping to 7.7% in the world’s second largest economy, oil is fast running out of friends in its search to return to its July highs as OPEC resists talks of cutting production. Oil will be observing the US House’s decision on the Keystone oil pipeline, with Republicans looking to approve the project whilst Obama’s hand hovers over the veto button. Considering overproduction is a major issue for oil at the moment, Keystone approval might not currently be in oil’s best interests. And as ever, oil and Russia’s fates are entwined; the longer this oil-slump continues, the worst for Putin and co, despite Putin’s reassurances that the Russian economy is in a position to deal with this dismal oil prices.

Finally, the G20 summit at the weekend will bring renewed focus on the situation in Ukraine, and the ongoing accusations that Russia is still sending in troops to the area. In the past this conflict has caused a lot of volatility in the markets, in a diverse range of effects. The DAX has been affected due to sanctions on Russia effecting German exporters whilst oil will have an eye on any mentions of the conflict, due to Russia’s significant stake in the commodity. The outcome of this G20 summit is unknown. All we know is that traders should watch the results carefully, as Monday could reflect any changes in Russian sanctions, and therefore the global economy.