Wednesday January 13th


Dow futures up triple digits as oil gains

U.S. stock index futures ticked higher early on Wednesday, as risk appetite returned to Asian and European stock markets amid an oil rebound. Brent and WTI crude oil futures gained about 3 percent to trade above $31 per barrel on Wednesday, pulling away from the psychologically important $30 mark, after better-than-expected trade data from China. Chinese crude imports hit a record in December, according to customs data. Overall Chinese exports and imports fell by less than expected in December, leaving a trade surplus of over $60 billion for the month, the data showed. While the Shanghai composite stock index erased early gains to close 2.4 percent lower, Asian markets mostly closed higher on Wednesday, while European markets extended gains. "China may take a back seat for a day or two, but oil prices remain a threat to markets, as oil-producing countries and companies rethink the medium-term outlook," Kit Juckes, strategist at Societe Generale, said in a research note on Wednesday. "Weak oil prices will be a major factor behind default rates in 2016 and even if the latest rush of forecasts of oil reaching $25/20/10 (a barrel) aren't proven right, the damage has already been done," he added. The strength of the U.S. dollar also remains a concern for traders and will likely feature heavily in this quarter's earnings reports. No major U.S. companies are due to post results on Wednesday, but Infosys, a major employer in the states, will report after the market closes. In other stock news, General Electric announced plans to cut 6,500 jobs in Europe over the next two years on Wednesday. At 2 p.m. ET, the Federal Reserve's Beige Book and the monthly budget will be released and may shed some light on the state of the economy and when the next interest rate hike may come. In a Wednesday speech, Boston Fed President Eric Rosengren said global and U.S. economic growth may be slipping and force the Federal Reserve into a more gradual course of rate hikes than officials currently expect. "While monetary policy should not overreact to short-term temporary fluctuations in financial markets, policy makers should take seriously the potential downside risk to their economic forecasts and manage those risks as we think about the appropriate path," Rosengren said. Weekly crude inventories are also due on Wednesday. Mortgage application volume increased 21.3 percent last week versus the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. U.S. Treasury prices fell on Wednesday ahead of a $21 billion auction in benchmark 10-year notes. Asia markets closed mostly higher, with some of the major indexes rebounding Wednesday, in a sign of returning stability even in the face of lingering worries about China and falling commodity prices. Chinese indexes, however, bucked the trend, falling more than 2 percent in another late session sell-off. That follows a volatile start to the year, in which Chinese stocks plunged, spurring a global market rout. In Japan, the Nikkei 225 recovered all of Tuesday's 2.71 percent drop, to close 496.67 points, or 2.88 percent, higher at 17,715.63, while South Korea's Kospi saw gains of 25.42 points, or 1.34 percent, to end at 1,916.28. Oil prices rose 2 percent on Wednesday as positive Chinese trade data and an unexpected draw in weekly U.S. crude oil inventories gave investors reasons to buy crude futures. U.S. West Texas Intermediate crude (WTI) was up 90 cents, or 2.9 percent, at $31.34 a barrel at 8:19 a.m. (1319 GMT). On Tuesday, it fell 97 cents to close at $30.44 a barrel, after touching a low of $29.93, which was last seen in December 2003. Brent crude, the global benchmark, was up 86 cents, or 2.8 percent, at $31.72 a barrel. The contract fell 69 cents to settle at $30.86, after bottoming at $30.34, on Tuesday. Gold fell on Wednesday as a stronger dollar and a rebound in stock markets reduced its appeal as a safe asset. Asian shares made their first real rally of the year after better-than-expected Chinese trade data, which offered some rare optimism for the global economy. The pan-European FTSEurofirst 300 index rose 1.3 percent after four declining sessions, making gold less attractive. Spot gold was down 0.5 percent to $1,080.81 an ounce, while U.S. gold futures were down 0.4 percent at $1,080.80. Gold rallied to a nine-week top of $1,112 last week, but expectations of further U.S. interest rate increases lowered demand for the non-interest-paying metal while boosting the dollar.