Oil fails to maintain rally, as both it and gold remain volatile

The global indices were decidedly mixed this afternoon as they began to retake their own routes after the worldwide downturn following OPEC’s decision last week.

Whilst the UK construction figures released this morning saw construction growth at its slowest for over a year, the FTSE remained bullish today, with a marginal growth of 1.05% to 6729. This price was helped by the continued resurgence of many of the index’s energy companies, alongside the news that Aviva was indeed purchasing Friends Life for £5.6 billion, in the process creating the UK’s biggest insurer.

Share prices for both companies rose today, allowing any potential damage to the FTSE based around Royal Mail’s falling stocks to be minimized. The postal company fell 3% to 406.1 after Ofcom dismissed Royal Mail’s challenge that its competitors should be made to adhere to the same 6-days-a-week at fixed prices laws the company has to comply with.

The FTSE’s positivity may be short lived as tomorrow sees the Autumn Statement, and with the UK firmly entrenched in austerity, there is little chance of any news that will provide a boost to the UK markets.

After a blip yesterday, the Dow Jones, alongside the NASDAQ and S&P, opened marginally higher today as it piggybacked on Cyber Monday’s 16% year on year increase in sales. The dollar also continued to see a dominate performance against the yen, reaching a high of 119.286, its highest price since the Bank of Japan’s OE decision caused the yen to buckle. This run should continue at least until after the Japanese election on December 14th, as the country suffers pre-election jitters.

The DAX saw a run earlier that allowed it to climb above the 10000 mark, only to swiftly regress and continue to spend the afternoon flat at 9943. Despite this minor drop, the DAX is still in a remarkably strong position when compared to its disappointing display around two weeks ago. It will be hoping that the ECB does not rock the boat on Thursday when it is expected to announce more Eurozone stimulus news.

One of the biggest losers of oil’s protracted saga has been Russia, who is being squeezed not only by the plummeting price of the commodity, but by the sanctions arising from its aggressive display in Ukraine. The dual pressures of this economic vice has led to fears of a 2015 recession for the country; unlike Saudi Arabia and the USA, Russia cannot afford to play the long game in regards to a naturally arising oil rally.

After the continual downward trajectory of oil’s past month, the commodity has begun to settle into a more volatile pattern, as it swung between gains and losses today. After a run that led it to briefly breach the $73 per barrel level, this afternoon saw the black stuff swing the other way, falling to a low of $70.5. This volatility is to be expected with oil, as Saudi Arabia and the rest of the OPEC cartel attempt wait to see if the commodity can right itself. With no immediate help in sight, investors are finding it difficult to predict the timing of a possible oil rally, and whether the $65 per barrel level last week was oil truly hitting its bottom.

Finally, gold is currently appearing like oil’s metallic sibling, as it too struggles to escape the bearish sentiment that has plagued its 2014. Gold has spent the day loitering around the $1200 per ounce level that it has become all too familiar with in the second half of 2014. One gets the sense that until gold can maintain levels around $1200, it will unable to significantly rally, and like oil is suffering from a lack of clarity in relation to its short term future.