Stocks finally saw some relief this week after a disappointing start to the year. The Nasdaq Composite had fared particularly poorly in January, however a significant part of those losses were recovered with a 2.20% surge on Monday. The S&P 500 wasn’t far behind, closing the day 1.41% in the black, The Dow Jones Industrial Average bringing up the rear with a 0.58% gain on the day. Tuesday saw very little movement in comparison, indices content to consolidate after the strong moves seen the day before.
On the surface, the bullish momentum is somewhat surprising. Stronger than expected employment data, revealed last week, is not what the Federal Reserve is looking for to justify a long-awaited interest rate cut. Whatever the reason for optimism, it was enough to spread to Japanese markets the following day. The Nikkei 225 closed Tuesday 1.16% higher, buoyed by assumptions that any potential interest rate hikes by the Bank of Japan have been pushed even further down the road in light of the widespread damage caused by the recent earthquake. The BoJ has remained adamant it will not increase rates until economic conditions permit such a course of action. Early trading in the Asian session this morning pushed the index deep into 34k territory; valuations not seen since 1990.
Further uncertainty in oil markets saw Brent Crude and WTI fall over 3% on Monday down to $76 and $71 a barrel respectively. The downward pressure follows Saudi Arabia lowering its official selling price for February shipments, once again indicating stagnant global demand. The situation is further complicated by non-OPEC oil producing countries ramping up their own production. A battle for market share is emerging, on the one hand we have traditional oil nations throttling their output in an attempt to bolster prices, on the other we have the likes of the US producing and exporting record amounts of crude.
