Big change with oil’s movers and shakers, whilst Draghi talks to Europe

The world markets heaved under the pressure of Japan’s recession news this afternoon; based on the dire economic news worldwide, it is unsurprising that the US markets all dropped slightly at open today. The Dow Jones opened 0.12% lower at 17622.5, whilst the NASDAQ was down 0.17% to 4217, and the S&P dropped 0.2% to 2035.1. Whilst the news from Japan played a big part in these figures, as well as allowing the USD/JPY to hit 116.876, the US also had their own fair share of bad news.

Their three big figures of the day, the Empire State manufacturing index, the USD capacity utilisation and the USD industrial output all came in lower than expected. The manufacturing index came in at 10.2; 2 points lower than forecast, but up from the disappointing 6.2 last month. Capacity utilisation was 78.9% instead of the predicted 79.3, and most damningly, the month by month industrial output was -0.1%, less than the 0.2% growth expected. With the Dow et al. reacting poorly to this news, traders will be watching carefully to see if the US markets can pull a Houdini and escape from these weak figures to continue to reach its record highs, a skill it has had plenty of practice at recently.

The other big news from the US came on the oil fields. Halliburton and Baker Hughes announced today that the former was buying the latter for $35 billion. The move comes as an attempt to form an un-challengeable beast in the US oil sector in order to combat the leaky ship that is Brent Crude oil. Looking to the markets, the news of the merger did nothing to stall oil’s descent, with the commodity dropping 87 points to 7875, well below the $80 per barrel level that was previously seen as a resistance line. The markets also had a clear idea of the winners and losers of the Halliburton/Baker Hughes deal, with the former trading 8.8% lower at 5006.5, and the latter jumping almost the same amount, up 9.2% to 6548. The disparity in market reactions reflects the difference in risk for the two companies in this venture.

After a soft open this morning, the FTSE rallied somewhat as we entered Monday afternoon, increasing 40 points to 6658. This comes after a day where British stocks MITIE, Sainsbury’s and Standard Chartered all dropped. MITIE Group, the outsourcing company, announced a first half loss of £1.3 million, falling 5% to 277.3, whilst Sainsbury’s continued to suffer at the hands of bearish sentiment towards supermarkets, falling 2.6% to 263.1. Standard Chartered was damaged by a $60 million loan it had issued to London Mining PLC, the mining company filing for bankruptcy last month, meaning a loss of profitability on the loan for the bank. This was felt on the markets, as Standard Chartered fell 2.7% to 931.9.

Finally, Europe was once again at the mercy of ECB President Draghi, as the Eurozone looked to him for more guidance on the bank’s approach to stimulating the European economy. After the DAX opened lower at 9175.8 this morning, much like the FTSE it rallied to hit an intraday high of 9304.3. This was despite the Bundesbank stating that the German economy looks set to lack momentum for the rest of the year. The minor boost the DAX has received may come from European trading figures released today. The Eurozone’s trade in goods with rest of the world reached €18.5 billion this month, from €8.6 billion in August and €10.8 billion in September.

Yet as mentioned, all eyes were on Draghi, who reiterated the fact that the ECB have tasked the relevant staff and committees with the timely preparation of further measures to be implemented, if and when the time requires, options that include the buying of government bonds. Whilst these comments are positive, without any firm action the Eurozone will soon grow bored with Draghi’s attempts at calming comments.