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  • Hello and welcome back to the Note.

  • Well, we had the worst day since February for the world's stock markets yesterday,

  • today we've had one of the best.

  • Now we heard from the Fed late in the U.S. afternoon,

  • they published the minutes to their last meeting,

  • that really didn't change very much, rate expectations were almost unchanged afterwards.

  • The big driver came from the oil market.

  • Now if we take a look at the oil price over the last two years,

  • you can see obviously the dramatic decline that it suffered in 2014, it still hasn't been corrected

  • You can see in the last week or so, an incipient further decline, it dropped some 15% from the peak it reached last month.

  • Therefore, the rebound that it's had in the last couple of days

  • even though only just shows up on that chart has been enough to restore sentiment in the stock market quite considerably.

  • That largely comes from inventory data here,

  • in the States there is still a flood of oil available here in America,

  • but the latest numbers do show that the inventories have declined slightly,

  • that has been enough to put up prices and to reassure those watching in the stock market that the oil price is not going to go on another indefinite decline,

  • hence stock markets have recovered.

  • Now we also now know that the Fed is watching this very closely.

  • Perhaps, for me, the single most interesting line to come out of their minutes was their clarification that when they say they are data-dependent,

  • the data they depend on includes international and financial data that's affected the economic outlook.

  • And that includes both the oil price and as we come to now, the dollar.

  • Now as you can see, the dollar strengthened radically while the oil price was weakening.

  • And it will / has not escaped attention that it is now weakening once more today, it has dropped on a trade-weighted basis to its lowest level since last October,

  • as you can see it's roughly at the same level it's been for over a year now.

  • A weaker dollar helps U.S. companies, it flatters U.S. profits, and will generally boost the stock market as well,

  • it also alleviates pressure on emerging markets, countries whose currencies had come under pressure

  • and where there had been some concerns about a possible debt crisis.

  • Therefore if you do see oil rising and the dollar weakening as you have today,

  • that relieves everybody and so at least for today you get a good strong day on the stock market.

Hello and welcome back to the Note.

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B1 FinancialTimes oil oil price stock stock market weakening

Oil on troubled markets | Authers' Note

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    Kristi Yang posted on 2016/04/08
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