DeGroote MarketWatch

DeGroote Marketwatch is a student-generated weekly report on the financial markets.

Trader in Residence has concluded for the semester.

Week of March 17, 2017

The biggest news of the week was the federal reserve’s decision to raise interest rates. As was widely expected, the Federal Open Market Committee (FOMC) raised the federal funds target by a quarter point (0.25%) to a range from 0.75% to 1.00%. The central bank hiked rates for the first time this year, the second time in three months, and only the third time since the 2008–2009 global financial crisis. After announcing the quarter-point hike, Fed chair Janet Yellen said the Fed intended to take a go-slow approach to further interest rate hikes. unemployment dipped to 4.7% in February and inflation was rising near the stated 2% target. President Donald Trump also released details of his proposed budget this week, indicating large increases in defense and security spending with cuts to various departments including the state department and the EPA, as well as eliminating funding to various ‘non-defense’ programs.

In Europe the Dutch elections and another legal step towards the UK exiting the European Union helped the pan-European benchmark Stoxx 600, the blue chip FTSE 100, and other major indexes ended higher. Equity markets soared after the center-right ...

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is oil ready for another crash?

Week of March 10

Yuxin Liang

On March 8th, WTI crude oil price hit 3-month low and dropped 5.4% from $53.14 to $50.28 due to increase in crude oil inventories reported by American Petroleum Institution (API) and Energy Information Administration (EIA). The energy sector plummeted 2.5% on March 8th, it was the biggest drop in six months. The oil price crashed in March is not evitable.

The API reported 11.6 million barrels of the week of March 3rd crude oil inventories on March 7th afternoon. It largely exceed market estimation and previous weekly data 1.66 million barrels and 2.502 million barrels respectively. API cumulatively recorded 35 million barrels increased since the first week of 2017. The EIA crude inventories increased for eight weeks consecutively. It released that it surged 8.2 million barrels exceed expectation by 2 million barrels. In terms of the production side, US production level recorded at 9,088,000 barrels per day that are the highest level since March 2016.

There is another clue for the crash of oil price. The U.S. Commodity Futures Trading Commission (CFTC) recorded the highest level of the net long position at 413,637 contracts on the week February 21st. After following a week of February 28th, CFTC reported net long position of crude oil futures and options were decreased by 26,930 contracts to 386,707 contracts, which represent 6.5% reduction from the previous week. The bullish signal for hedge fund ended; speculators had started to cover their long positions on March 3rd. Moreover, when the contracts are expired, there are more physical crudes will be delivered. Therefore, the crude inventories are expected to continue to surge in upcoming months.

Even though OPEC had reached an agreement for output cut deal, the rise in oil production and inventories can offset the effort of OPEC and continue to limit upside potential of oil price. The positive factor, for now, is to wait for the next extension cut plan, but there are many negative factors pressuring current crude oil price below $50. The market has been traded out of the fundamental basis for the past months even the supply of crude oil has consecutively increased for weeks. The bearish signal has been switched on.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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World Market Performance

IndexOpenClose% Change
INDU20821.7621005.71.88%
SPX2367.342383.12.66%
NDX5343.315373.48056%
SPTSX15533.4715608.50.48%
UKX7243.707374.261.8%
DAX11804.0312027.361.89%
NKY19283.5419469.170.96%
HSI23965.723552.72-1.7%
SHCOMP3253.433218.31-1%

Market at a Glance *

* Click image to see full size version

Economic Calendar

Date  ReleaseActualConsensusPrior
Mon ECB President Draghi speech
JPY Tertiary industry index (Jan)0-0.3%
TueCNY retail sales YoY (Jan)9.5%10.5%10.9%
GBP 10Y bond auction1.31%1.18%
`WedUSD fed interest rate decision1.00%1.00%0.75%
USD retail sales0.1%0.1%0.6%
ThurJPY boj interest rate decision-0.1%-0.1%-0.1%
GBP boe interest rate decision.25%.25%.25%
FriUSD/DEU Trump-Merkel meeting
EUR trade balance20BN22.3BN24.5BN

 

DeGroote MarketWatch is a weekly financial newsletter prepared primarily by students. It is designed to inform and educate the community. It is an educational tool. The DeGroote School of Business is not responsible for the consequences of actions taken based on DeGroote MarketWatch.
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