Summary:

• Stock markets resume rally, S&P500 (US500) hits 2,600 pts for the first time
• USD slightly weakens after Yellen’s speech, JPY leads gains in G10
• Oil prices surge as API report suggest a large drop in inventories

Global stocks seem to be back in rally mode. It was the second straight session with gains from Europe to Asia and it’s worth mentioning that on Wall Street S&P500 (US500) briefly topped 2,600 pts for the first time in history led by technology and health-care companies. It could mean that a turmoil from the last two weeks is over and herald a resumption of the bull market, especially given that December usually brings positive rates fo return for most of the stock indices. In Asia Hang Seng CE (CHNComp) led is currently leading the gains as it has added so far 0.66%. The Japan’s Nikkei (JAP225) closed up 0.48% despite stronger JPY against USD and Australian S&P/ASX200 (AUS200) moved 0.38% higher. The latter benchmark was supported to some extent by construction work done data for the third quarter as it surprised to the upside (+15.7% q/q, vs. -2.3% expected).

One of the most interesting events overnight was Janet Yellen’s speech. She said that tightening too quickly could risk stranding inflation below Fed’s 2% target. Moreover, there was “some hint” expectations for future price increases may be drifting down. On the other hand, she underscored that weakness in inflation should be temporary. Thus, a rate-hike in December is almost a done deal – we get minutes from the latest Fed meeting which could confirm this move and give us a hint about rate path for 2018. The US dollar is now the weakest currency among G10 and JPY is a top performer despite upbeat sentiment on equity markets. Reuters reported that there are ane early signs form BoJ of reducing policy accommodation. However, it is still rather unlikely to see changes in the bank’s policy in foreseeable future.

 After a successful re-test of 21-period EMA USDJPY may be heading towards 38.2% Fibo retracement (111.870). Source: xStation5

The last but not least was an API report on estimated changes in oil inventories. There was reported the biggest draw in 3 months – inventories dropped by 6.4mm barrels while consensus called for a decline by just 2.2mm barrels. It’s a good sign for bulls ahead of the release of official data form DoE (today at 3:30pm BST). Moreover, higher prices were supported by news on Canadian pipeline disruption to the USA and investors expect that OPEC will prolong production cut next week. 

 OIL.WTI prices jumped overnight. Breaking above the resistance at 57.90 USD may pave the way towards 62 USD handle. Source: xStation5