Risk-off returns as Stocks and Oil plunge


  • Oil extends losses since inventory data

  • Large declines seen in major stock benchmarks

  • Stock of the week: VF corporation

  • Is UK PM May’s time up?

  • What do European elections mean for Europe and financial markets?


There’s been some widespread selling in risk-assets today with crude oil the worst hit as WTI has tumbled over 5% while Brent is not far behind. The move appears to be a continuation of the drop that began after yesterday’s inventory release with the rise of 4.7M making it 7 of the past 9 weeks that US stockpiles have increased. Also not helping the oil price has been some soft manufacturing data from both Europe and the US that point towards a slowing global economy.   


With the latest developments on the trade front dominating the headlines in recent weeks it’s easy to overlook the impact that the tariffs already in place are having on global growth. German manufacturing can be seen as a bellwether for the global economy and according to recent industry surveys there are alarm bells ringing with the PMI for May producing a 3rd consecutive sub 45 print. The last time this metric did this was in the depth of Eurozone debt crisis back in 2012 and with the latest reading coming in worse than expected, it now means that 9 of the past 10 releases have missed forecasts. The German Dax has tumbled by more than 1.5% today and the market is now probing potentially key support with a rising trendline from December and prior swing lows around 11850 not far away.


A possible head and shoulders continues to develop for the S&P500 but bears will want to see a clean break below the possible neckline around 2805 before they get their hopes up for a deeper correction. The market is lower by just over 1% at the time of writing. Our latest stock of the week comes from the US, with an in-depth look at VF corporation which can be viewed in detail here.


A surprising speech from Theresa May on Tuesday, in which the PM seemed willing to sacrifice a significant amount of Tory support in the hope of gaining cross-party votes in order to pass the withdrawal agreement, appears to have been the straw that broke the camel’s back with speculation doing the rounds that she will be gone by the weekend. It is no secret that the PM’s days have been numbered for some time now but this last-ditch attempt to force through her deal and leave with any semblance of a victory has back-fired. What this all means for the markets is a significant increase in the chances of a no-deal Brexit and this has sent the pound steadily lower in recent weeks. The pound has dropped back to the 78.6% fib this morning against the US dollar around 1.2615. This pair on track for a scarcely believable 13 daily losses in the past 14 sessions.


The elections in the European Parliament starts today and will last until Sunday. The outcome will offer a glimpse regarding support for far-right Eurosceptic parties and therefore may affect the outlook for European economies as well as some financial markets. Here is a brief guide what to expect:


Chart of the day - WHEAT (14.05.2021)
Economic calendar: US retail sales, ECB minutes
Morning wrap (14.05.2021)
Daily summary: US stocks rebound after yesterday's sell-off
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