Oil Slides Ahead of Inventory Data

US indices are on course to open a little higher on Wednesday, buoyed by stronger earnings from Apple on Tuesday and ahead of some important jobs data from ADP which will act as a precursor to Friday’s non-farm payrolls number.

US Futures Higher After Apple Results, 44 Companies to Report Today

It’s been a very good earnings season for the US so far and Apple’s results were another reminder of this. With futures pointing at a higher open on the back of this, we could be looking at another record day for US stocks, assuming the momentum from second quarter results can be maintained. With another 44 S&P 500 companies reporting on Wednesday, there is certainly scope for another bump higher if companies continue to beat expectations as they have.

DAX Ticks Lower as Eurozone PPI Declines

Commodities Drag on Europe as Oil Slides Ahead of Inventory Figures

One drag on stocks in Europe and possibly in the US later has been the oil moves over the last 24 hours, with Gold, Silver and Copper adding to the downside in the commodities sector. Yesterday’s oil drop was initially triggered hours before the inventory data, which added further downside pressure later in the day, and it seems expectations now ahead of the EIA inventory numbers have increased a little.

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Last week’s substantial decline in inventories – albeit a smaller one than API reported a day earlier – came as reports suggested that Saudi Arabia was cutting exports to the US with the end goal appearing to be to cut inventories and grab markets attention. While this clearly had the desired impact initially, this week’s numbers – should EIA report something in line with API – could raise questions about the effectiveness of the measures or whether they’re being sustained. As it stands, Brent remains above $50 while WTI is above $47.50, as long as that remains the case, it would appear traders are anticipating further inventory declines.

ADP Employment Numbers Could Offer Insight Ahead of Friday’s NFP

The ADP employment data will as always be of interest today, particularly as it’s one of the few pieces of data we’re due to get. While the number itself isn’t always as accurate as we’d hope, it could provide insight into whether the July jobs report is going to be good or disappointing. Expectations ahead of the release suggest markets are preparing for another good report on the job creation side, with 185,000 new jobs expected.

We’ll also hear from two Fed officials today – John Williams and Loretta Mester – both of whom are not voters on the FOMC this year but will be in 2018. Neither of them are particularly dovish when it comes to interest rates so it will be interesting to see whether they have become so in light of recent inflation data.

USD Finds Some Legs, But….

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.