Daily Market Review – 07/05/2015

Daily Market Review for Thursday, May 7th, 2015

Oil extends gains as inventories show surprise fall

Oil prices climbed higher after the U.S. Energy Information Administration on Wednesday reported that crude inventories fell for the first time in 17 weeks. Supplies were down 3.9 million barrels for the week ended May 1st. TitanTrade analysts forecast a crude-stock climb of 1 million barrels. Gasoline supplies were up 400,000 barrels, while distillate stockpiles added 1.5 million barrels last week, according to the EIA.

June crude traded at $62.43 a barrel, up $2.03, or 3.4%, on the New York Mercantile Exchange. Before the report, prices traded around $61.98. The sharp decline in crude-oil inventories comes on the back of a reported oil port closing in Libya said Oscar Duval, chief Trader at TitanTrade.

Also, the rapidly falling U.S. dollar following the release of the disappointing ADP number pushed the oil price higher. The fundamentals and macroeconomic picture are supporting a continued push higher, leaving $60 as key support value from here crude. Oil traders will be looking to the U.S. nonfarm-payroll numbers due Friday. If payroll numbers are positive, it will strengthen market expectation of an increase in rates by June, which in turn could strengthen the dollar and check oil’s price rally. If the NFP might match the disappointing ADP  release we will see oil breaking though most resistance levels it currently has, say TitanTrade experts.

Gold loses its shine

Gold futures moved between small losses and gains on as investors mulled a lower-than-anticipated reading on private-sector employment and comments from U.S. Federal Reserve Chief Janet Yellen. Gold was showing a mild loss in early trading, but comments on Wednesday from Yellen warning of inflated values in stocks on also were being watched by investors and unsettling U.S. stocks, say TitanTrade analysts.

Payrolls processor ADP said the U.S. created 169,000 private-sector jobs in April. Economists polled by MarketWatch had expected 189,000 jobs. Still, analysts predict the metal will stay under the $1,200 mark ahead of Friday’s much-anticipated U.S. jobs report (the Non Farm Payrolls report). The weak ADP data were “a tragedy,” said Naeem Aslam, chief market analyst at AvaTrade. “It has been two consecutive months that we are receiving a feeble jobs number and it appears a trend is emerging.”

In order to confirm this trend, there still need to be more readings. For now, the ADP data have struck traders’ confidence int he US labor market, which enabled them to position themselves for a weak U.S. nonfarm payroll reading Friday. The dollar index was down against major rivals, aiding gold prices again, while U.S. stocks traded lower. A weaker greenback often provides support for dollar-denominated gold prices, says Oscar Duval, Chief Trader at TitanTrade.

U.K. election

The main parties are running neck and neck, with neither Labour nor the Conservatives managing to draw ahead despite months of campaigning. So smaller parties have become increasingly influential. On Thursday, British voters go to the polls to decide who will run the U.K. for the next five years. There are a few things to know about the general election: the UK is not used to coalition government and the small parties will sell their votes for the highest bidder, say TitanTrade experts; coalition negotiations could drag on for weeks/months as there are a lot of interests to be matched adn rewarded.

The prime ministed to be is another uncertainy –  voters don’t choose the prime minister directly, and the leader of the winning party takes the job, usually. A coalition of the second-placed party with a minor partner could end up forming a government, leaving the first-placed party out in the cold. So it may not be the party with the most seats that ends up with the prime minister post. For the financial markets, the British exit from the Euro-zoneis the primary worry. Will the new government put the U.K.’s EU membership up for a vote and trigger its departure in a so-called “Brexit”?