Daily Analysis – Oil Rises Amidst Middle East Tensions
Summary: Oil rose to over $115 a barrel on Friday as Middle East tensions soared. Euro also rose from its recent downfall after Christine Lagarde’s comments at the IMF’s annual meeting in Tokyo. Wall Street on the other hand rose early on the back of a positive unemployment report and later faded down to almost where it started as the day progressed.
The Euro finally rose after four days yesterday as the IMF suggested that the struggling European economies should be given some more time to cut their budget deficits. The oil prices also gained considerably in view of the scaling tensions between Turkey and Syria over a plane carrying ammunitions.
In the west the U.S. shares soared after the country’s labour market indicated signs of improvement in its unemployment report. However, the celebration was short lived, with the joblessness levels dropping lower.
The Eurozone Crisis
In Forex, the Euro showed some significant improvement. It recovered from its week long low run and came back strongly to end the day up at 0.4%. In another turn of events, Christine Lagarde commented on the European economic turmoil by saying that both Greece and Spain need to be given more time to reduce budget deficits owing to the delicate situation in the European nations. The Spanish bonds yielded lower than expected blotting out the earlier rise to a crucial 6% mark owing to Wednesday’s downgrade on the country’s credit worthiness by S&P 500.
The S&P 500 had severely cut Spain’s ratings from +BBB to –BBB just a level greater than the junk status. S&P signalled that the fear of an intense recession and the lack of response from the European policy makers to the current financial crisis had made Spain highly vulnerable.
The bad news from Europe petrified the investors initially. But they were all soon relieved as the credit downgrade meant that Spain would move quickly to request for a bailout from the ECB. The ten-year Spanish yields also declined to 5.4 basis points yesterday having hit 5.96% earlier, which was the highest for the day. The stock markets expect Spain to be among the first of the Europe’s biggest economies to request for a bailout from the ECB.
In another series of events, beverage giant Coca Cola has shifted its base from Greece to Switzerland and its market to London. The event was seen as another blow to the already suffering Greek economy, which is one of the nations surviving on the ECB’s bailout package. If this was not enough the unemployment percentage in Greece rose to 25% which has made matters even worse for the cash trapped Greek economy.
The only positive thing to report from the European markets was the gain of the MSCI global index by 0.4%.
The Middle East tension and the Wall Street flat-line
The benchmark 10-year U.S. Treasury note soared higher at 2/32, yielding 1.673%. The stock market rose initially after the unemployment report was released. The aid for unemployment had decreased to the lowest level since February of 2008 when the financial crisis had just begun. But the market made it way back to where it started as Apple Inc dropped considerably in the noon and the market ended the day slightly lower than where it had started. Dow Jones slipped by 18.58 points to 13,326.39. The NASDAQ also fell 2.40 points to 3,049.38. While the S&P 500 rose slightly by 0.28 points at 1,432.84.
Apple’s shares fell by 2% as it lost a preliminary injunction on the sale of Samsung’s Galaxy Nexus Smartphone in a U.S. appeals court. Sprint Nextel however rose to 14.2% in the NYSE after rumours made rounds about a probable sale was in the making.
The Middle East tension involving Turkey and Syria propelled the Brent crude by $1.38 to gain $115.71 per barrel. The U.S. crude futures cleared up at $92.07. The price was also influenced by the maintenance curbs on the North Sea.
Binary Options for today’s markets
The market trend for the day is a mixed bag, with stocks maintaining a flat-line, oil prices soaring and the Forex also putting up a slightly better show (Euro gained after several months).
The market might just continue the same way for a few days to come. The stock markets however have nothing more in store to soar. The stock prices are likely to go bearish at the end of the week. The oil and commodities however are all set to go bullish with the middle tensions fuelling the rise in oil price, the new regulations by the CFTC and the ICE and CME scrambling to convert all their energy swaps to futures the might just grab the attention of the investors.
The binary options strategies would be to bank in favour of a bearish market in stocks and a bullish market for oil and other commodities.