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Energy sector outperforming the market

Energy sector outperforming the market

By Miguel Audencial (Sales Trader, CMC Markets)
22 November 2012

The Australian equities market is trading higher today despite the Eurozone and IMF officials failing to agree on a deal regarding the aid for Greece. The cease fire in the Gaza strip and better than expected US economic data provided optimistic news to investors. Some investors are also hoping that an agreement can be made on Greece’s next aid when the Eurozone and IMF officials meet again next week.

As of this morning, the energy sector is outperforming the market due to higher energy prices despite the alleviation of some supply concerns for crude oil due to the cease fire agreement in the Middle East.

Crude oil traded slightly higher last night after notable losses the day before. It appears that investors are not fully convinced that the temporary break of hostilities is a long-term solution to the conflict in the region. Reported crude oil inventories also unexpectedly declined by 1.5 million barrels after being expected to rise by 800 thousand barrels. Natural Gas Storage figures also fell more than expected. The weaker US dollar contributed to the attractiveness of energy instruments as well as other dollar denominated commodities.

A lower than expected US unemployment claims figure and a higher than expected US Flash Manufacturing PMI data contributed to the US equities markets closing higher this morning.

Trading volumes across asset classes are expected to be subdued until the end of the week as Americans celebrate their Thanksgiving festivities. Unfortunately for those looking for their “fiscal cliff news fix”, developments on this issue would appear to be on a break as well. However, I expect this news break to be short lived and fiscal cliff news will grab market headlines until the end of the year.

The all-important HSBC Flash Manufacturing PMI for China will be released later this afternoon. The index has failed to reach 50 so far this year. A figure in expansion territory has the potential to stretch the gains in the Australian equities market further today.

In Europe, there are several manufacturing and services PMI figures due tonight. The EU Economic Summit will also start tonight where heads of state will meet in Brussels. Expect any figures or developments from these that are outside of expectations to have a relevant impact in the market.


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