Market Update: Oil Erases Early Losses, Equity Markets Mixed

Bond Market long and wrong

Financial and Economic News Update

Global equity markets mixed after Syriza wins in Greek elections: Stock markets around the globe were struggling for direction as traders digest the implications of the victory of the anti-austerity Syriza part in the Greek general elections. Wall Street was also flat in pre-market trading. Before the opening bell, D.R. Horton, Inc. (NYSE:DHI) reported first quarter earnings that beat the average analysts’ estimate by 5 cents. After the close of trading, Microsoft Corporation (NASDAQ:MSFT) and Texas Instruments Incorporated (NASDAQ:TXN) will post their fourth quarter numbers.

Oil erases early losses: Crude oil prices rebounded from early morning lows after a key OPEC official said he expects prices to find bottom around current levels. Abdullah al-Badri, Secretary-General of the OPEC said in an interview that the price band of $45-$55 should be the base of the market, and that prices would recover soon. Data from the U.S. Commodity Futures Trading Commission showed late Friday that fund managers reduced their net long positions in U.S. crude futures and options in the week to January 20.

Gold prices slip lower: Gold fell on Monday after traders decided to book some profit following the recent surge in the metal that saw its prices jump to five-month highs. Gold has gained close to 9 percent this month on the back of strong demand for the safe-haven metal, triggered by uncertainties in Europe and falling oil prices. Technical analysts think that support for the metal could kick in at $1272, while any fresh bout of buying could take gold to $1309, the high from January 22.

Euro steady as investors digest Greek election results: The euro recovered from 11-year lows to gain in mid-morning London trade. The common currency fell as low as $1.1098 after projections showed that radical leftist party Syriza were in the driver’s seat to form the next government in Greece. Analysts said that the downside risk to the euro could rise if Syriza reiterates its tough posturing for negotiations with international creditors.

Bond Market News

Treasuries stable as speculation grows that Fed will leave rates unchanged: U.S. 10-year Treasury notes were little changed as a growing number of economists expect the Federal Reserve to leave interest rates unchanged when it meets this week. In related news, the yield difference between the 2-year notes and the 30-year U.S. debt dropped to its least since 2008, on increased demand for the longer-dated bond amid the prospect of a slowdown in global economy.

Greek bond yield rise after Syriza wins: Yields on Greek government bonds rose on Monday after anti-austerity party Syriza inched closer to forming a coalition government in the country. Syriza fell just two seats short of an overall majority in Sunday’s election. But the right-wing Independent Greeks party, which also opposes the bailout deal with the EU, has agreed in principle to provide support to a government led by Syriza.

Chinese property developer Kaisa’s bond prices bounce on reports of a buyout deal: Kaisa Group Holdings Limited (HKG:1638)’s bond prices bounced back on Monday on trader optimism that a rival real estate firm might acquire a stake in the embattled Chinese property developer. Financial news provider Tencent reported that Sunac China Holdings Ltd (HKG:1918) is in advanced talks to buy a part of Kaisa. Earlier this month, Kaisa failed to make a $26 million interest payment on its offshore debt, which sent jitters down the market, forcing a number of large overseas investors to pare down their exposure to the market.

Euro corporate borrowing costs fall below 1%: Corporate debt costs in Europe fell below 1 percent for the first time ever as traders expect Mario Draghi’s planned asset purchase program to bring investors back into the company notes market. According to data from the Bank of America Merrill Lynch Index, the average yield for holding investment-grade corporate bonds in euros dipped to 0.9988 percent. That is the lowest since the Index began to be compiled in 1995.

Japan’s SoftBank planning to sell $3.82 billion bond: Japanese telecom major Softbank Corp (TYO:9984) said it is planning to sell 450 billion yen ($3.82 billion) worth of unsecured subordinated bond, primarily to retail investors. Though SoftBank was tight-lipped on how it would utilize the proceeds, analysts expect the company to use it to repay loans.

Market Levels

  • US: Dow Futures: 17591.00 (0.02%), S&P 500 Futures: 2045.00 (0.05%), NASDAQ Futures: 4274.00 (0.16%)
  • Europe: CAC: 4656.06 (0.32%), DAX: 10751.89 (0.95%), FTSE: 6830.45 (-0.03%).
  • Metals: Gold: 1284.30 (-0.67%), Silver: 18.070 (-1.26%), Copper: 2.4765 (-1.00%)
  • Energy: U.S. Crude: 45.79 (0.44%), Brent Crude: 48.87 (0.18%), Natural Gas: 2.895 (-3.05%)
  • Commodities: Corn: 3.902 (0.58%), Soya Bean: 9.910 (0.76%), Wheat: 5.417 (0.93%)
  • Currency: EUR/USD: 1.1274 (0.59%), GBP/USD: 1.5023 (0.15%), USD/JPY: 118.4480 (0.54%)
  • 10-Year US Treasury: 1.8147% (-0.003), German 10-Year Yield: 0.387% (0.02), Japanese 10-Year Yield: 0.226% (0.000)

Economic Calendar for Monday, January 26, 2015:

  • 09:45 A.M. ET: PMI Services Flash (January)
  • 10:30 A.M. ET: Dallas Fed Manufacturing Business Index (January)
  • 11:00 A.M. ET: 4-Week Bill Announcement
  • 11:30 A.M. ET: 3-Month Bill Auction
  • 11:30 A.M. ET: 6-Month Bill Auction
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