Author: SondraHunter

Credit risk in the European banking system has surged to all time high as the market priced in more than 90% chance that Greek debts will default. Investors’ fears intensified despite government’s denial of imminent default and commitment to austerity measures. The situation has sent other peripheral yield spreads much higher. As far as core economies are concerned, French banks are at risk of being downgraded by Moody’s.

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Financial Markets Tumble on Risks of European Credit Crunch

Brent oil futures end the week’s trading session back down at $112 a barrel as the euro’s foreign exchange rate took a big hit with investors piling back into the US dollar, hence weakening oil prices and weighing on other commodities.

Brent Oil Futures – Closing Price

ICE Brent crude oil futures for October 2011 delivery ended the week’s trading session at $112.56 a barrel on the ICE Futures Exchange, $0.09 lower than last week’s closing price of $112.65 a barrel.

Weaker Euro Exchange Rate

The euro had its biggest loss against the US dollar in more than a year on speculation the European Central Bank will cut interest rates amid record Greek bond yields and the region’s deepening debt crisis.

The euro fell 3.9 percent this week to $1.3656, from $1.4205 on 2nd September, the biggest weekly drop since 12th July, 2010.

“The momentum on the weaker euro trend is set to accelerate. The solutions coming out of Europe are not working and not helping the periphery or the bond markets to stabilise.” according to Ken Dickson, investment director of currencies at Standard Life Investments in Edinburgh.

Gold Prices and the US Dollar

Meanwhile, gold prices also slid lower on Friday as the US dollar advanced, however gold clawed back much of its loss by mid afternoon as the resignation of European Central Bank policymaker Juergen Stark reignited aversion to riskier assets.

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Brent oil futures end week back at $112 as euro rate weakens

Risk aversion came back yesterday as ECB delivered a dovish statement after the September meeting and Fed Chairman’s speech offered nothing new in stimulating the economy. Macroeconomic data remained weak. Gold rebounded strongly after 2 days’ selloff with the benchmark contract soaring to as high s 1873.3 before settling at 1857.5, up +0.85%. Oil prices slipped with the front-month WTI contract losing -0.32% and the equivalent Brent crude contract down -1.08%. The 447B plan offered by US President Barack Obama after the market close may help relieve the market in the short-term.

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Sentiment Weakened by ECB’s Dovish Statement and Bernanke’s Speech

Optimism was supported by hopes that Obama’s job stimulus would help boost the US employment situation and the German court decision would clear hurdles for the votes in support of the new EFSF. Economic indicators released were not as disastrous as expected. The Beige Book signaled that growth moderated but labor markets were described as ‘stable’. Wall Street rallied with the DJIA and the S&P 500 indices gaining +2.47% and +2.86% respectively. In the commodity sector, oil follow equities’ suit and jumped with the front-month WTI contract surging +3.86% and the equivalent Brent contract rising +2.57% to the highest level in a month. Gold slumped, losing -2.97%, as risk appetite increased.

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Risk Appetite Rises amid Job Growth Hopes

Brent oil prices open today’s trading session tumbling back down to near $110 a barrel as European stock markets head lower with EU debt problems back in focus, driving markets and oil prices lower.

Latest Brent Oil Price

In London, Brent crude oil futures for October 2011 delivery was trading at $110.83, 08.25 GMT this morning on the ICE Futures Exchange.

Europe Debt Concerns

Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis and increase pressure for governments to try more radical solutions.

On the markets London’s FTSE 100 Index fell 1.6 percent at the open to 5205.16, while the DAX in Frankfurt lost 2.3 percent to 5410.77 and the CAC-40 Index in Paris slipped by 2.3 percent to 3075.98.

Germany Debt Ruling Looms

A court ruling may reduce the freedom of the German government, the biggest contributor to the euro zone’s bailout fund, to finance rescues of crisis-hit countries such as Greece.

On Wednesday morning, Germany’s Federal Constitutional Court will deliver its ruling, awaited for over a year on suits claiming Berlin is breaking German law and European treaties by contributing to multi billion euro bailouts of Greece, Ireland and Portugal.

Legal experts think the court is highly unlikely to block the contributions altogether. But it is expected to give the German parliament a bigger say in approving them.

Brent to WTI Price Spread

Meanwhile, the spread between front month Brent oil on ICE Futures Europe exchange and WTI oil on the NYMEX was at $25.97 a barrel as of 8.25 GMT, compared with $25.88 at settlement on 2nd September, according to the latest data.

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Brent oil price falls back to $110 as European markets tumble

The US job market remained sluggish in August. Against consensus of a +90K increase, non-farm payrolls were unchanged from a month ago while July’s addition was revised lower to 85K. The unemployment rate stayed at 9.1% during the month. Risk appetite dropped after the data with Wall Street slipping for the second day. In the commodity sector, the front-month contract for WTI crude oil price plunged to a 4-day low of 85.42 while the equivalent Brent crude contract fell to 111.36, the lowest level in 3 days. On the contrary, gold jumped to a 1-week high of 1884.6 as the US dollar dropped and demand for safe-haven assets increased on deteriorating US outlook.

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Oil Plunges as Payrolls Disappoint

Financial markets were not impressed by the ISM manufacturing index which surprisingly held above 50 in August. Indeed, the details of the report suggested US economy is deteriorating and the manufacturing sector still has high chances of falling into the contractionary territory in September. Meanwhile, manufacturing PMIs showed weakness in most of the countries last month, damping optimism of investors. Following equities’ coattail, oil prices initially climbed higher but then reversed. Losses were, however, limited by the threat of a storm in the Gulf of Mexico.

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ISM Not Encouraging At All as Market Reaction Suggested