Oil Rises Amid Falling Inventories

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At the end of Wednesday, the Dow Jones Index (US30) rose by 1.09%, and the S&P 500 Index (US500) gained 1.02%. The Nasdaq Technology Index (US100) closed yesterday 1.18% positive. The S&P 500 and Nasdaq 100 indices hit new all-time highs, while the Dow Jones Industrials Index hit a 7-week high. The strength in chip maker stocks led tech stocks and the broader market higher Wednesday after Taiwan Semiconductor Manufacturing Co (TSM), the sole supplier of cutting-edge chips to Nvidia and Apple, reported better-than-expected second-quarter sales. In addition, Apple shares rose to a record high on news that the company intends to ship 10% more new iPhones this year.

Today, the US will release its inflation report for June. Economists expect consumer inflation to rise 0.1% month-over-month and fall slightly to 3.1% from 3.3% year-over-year. The core rate, which excludes food and energy prices, is expected to be unchanged at 3.4% year-on-year. Economists note that if the June CPI report meets expectations, the Fed will likely start a rate cut cycle in December. This could give the US dollar temporary confidence. At the same time, economists note that any downward deviation of the index (especially the core index) by more than 0.2% will sharply increase the probability of the first rate cut in September, especially given the recent weak economic data. A further slowdown in inflation could convince more market participants to bet on two Fed rate cuts by December. Such a situation would pressure the US dollar but send a green signal for precious metals and stock indices.

Equity markets in Europe were mostly down on Wednesday. Germany's DAX (DE40) rose by 0.94%, France's CAC 40 (FR40) closed higher by 0.86%, Spain's IBEX 35 (ES35) climbed 1.59%, and the UK's FTSE 100 (UK100) closed positive 0.66%.

Germany's annualized inflation rate for June 2024 eased to 2.2%, down from 2.4% in the previous month, in line with preliminary estimates. Commodity prices slowed (0.8% vs. 1% in May), while energy costs declined faster (-2.1% vs. -1.1%). Looking at the consumer price index harmonized across EU countries, the annual rate fell to 2.5% from 2.8%, and the monthly rate was 0.2%, unchanged from May.

The UK economy grew by 0.4% month-on-month in May 2024 after stagnating in April. Construction grew at the fastest pace in almost a year. UK industrial production rose by 0.2% month-on-month in May 2024, recovering from a 0.9% fall in the previous month and matching market expectations. Manufacturing output rebounded (0.4% vs. -1.4% in April).

WTI crude oil prices rose to 82.7 dollars per barrel on Thursday, rising for the second consecutive session thanks to a larger-than-expected decline in US crude inventories. According to the EIA, the US crude oil inventories fell by 3.444 million barrels in the week ended July 5, a larger-than-expected decline of 3.0 million barrels. Gasoline inventories also fell more than expected. In addition, OPEC reaffirmed its forecast for strong growth in global oil demand in 2024. The EIA forecasts global oil demand to reach 104.7 million bpd by 2025, slightly higher than the projected supply of 104.6 million bpd, indicating a future deficit.

Asian markets were predominantly down yesterday. Japan's Nikkei 225 (JP225) was up 0.61%, China's FTSE China A50 (CHA50) was down 0.51%, Hong Kong's Hang Seng (HK50) was down 0.29% for the day, and Australia's ASX 200 (AU200) was negative 0.16%.

The Australian dollar exchange rate surpassed $0.675, hitting its highest level in six months amid growing expectations that the Reserve Bank of Australia (RBA) may raise interest rate again if inflation picks up. Markets still see a 20% chance of further RBA policy tightening in August while ruling out the possibility of a rate cut this year.

  • S&P 500 (US500) 5,633.91 +56.93 (+1.02%)
  • Dow Jones (US30) 39,721.36 +429.39 (+1.09%)
  • DAX (DE40) 18,407.22 +171.03 (+0.94%)
  • FTSE 100 (UK100) 8,193.51 +53.70 (+0.66%)
  • USD Index 105.01 -0.12 (-0.11%)

Important events today:

  • UK GDP (m/m) at 09:00 (GMT+3);
  • UK Industrial Production (m/m) at 09:00 (GMT+3);
  • UK Manufacturing Production (m/m) at 09:00 (GMT+3);
  • UK Trade Balance (m/m) at 09:00 (GMT+3);
  • US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • US Consumer Price Index (m/m) at 15:30 (GMT+3);
  • US Natural Gas Storage (w/w) at 17:30 (GMT+3);
  • US FOMC Member Bostic Speaks at 18:30 (GMT+3).

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Disclosure: This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, ...

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