PVM Midday Report 13 June 2016
Headlines
OPEC hints at tighter oil balance in 2H 2016; output down 100,000 bpd in May
Chinese implied oil demand falls by 380,000 bpd in May y/y to 10.24 mbpd
Iran’s biggest oil…
The softer tone across energy markets weighed on global equities which also saw their recent run of gains grind to a halt as growth concerns returned to the fore. Underpinning these jitters was downbeat Chinese inflation data pointing to a less-than-expected 2% y/y rise in May. Evidence of waning inflationary pressures was also on display in the eurozone as figures revealed that Ireland and Greece remained stuck in deflation in May. Underwhelming German trade data showing that exports stagnated in April further sapped risk appetite. This all came as Mario Draghi once again berated euro-area governments for not pushing through structural reforms in his latest attempt to deflect attention away from the so far limited success of monetary stimulus.
The resulting risk-off environment triggered a flight to safety as investors sought refuge. Highly-rated sovereign bonds attracted particularly strong demand as the yield on 10-year UK and German paper dipped to historic lows while equivalent Treasuries fell to their lowest since February. Encouraging data revealing an unexpected drop in US jobless claims and a forecast-beating increase in US whole investors failed to overcome the cautionary mood. Shares on Wall St subsequently ended the session slightly down though still within striking distance of historic highs and many still see the S&P 500 ending the week in record territory as a distinct possibly.
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