Daily Market Color

Slumping Oil Prices Weigh on Risk Assets

Appetite for risk is starting the week lower off the back of falling oil prices and a stronger dollar.  US equities have given up part of Friday’s gains, while Treasuries yields and swap rates rallied in the belly and long end of the curve.  WTI crude fell to $38/barrel, its lowest level in almost seven years after OPEC opted not to implement production cuts at its policy meeting last week and U.S. production remains high as well.  OPEC will continue to [officially] produce about 31.5 million barrels a day, above its prior quota of 30 million, at least until they meet again in June.  The continued fall in oil prices and strong dollar will surely be watched closely by the Fed, but the central bank has generally viewed these as transitory factors that shouldn’t derail a rate hike next week at the December FOMC meeting. 

With the Fed poised for liftoff, LIBOR continues to tick up, with 3ML setting at its highest level since early 2012.  There is little in the way of important US economic data released today and the only scheduled Fed speaker is Bullard (voter ’16, hawk).  The flow of potentially market-impacting data picks up tomorrow featuring one of Fed Chair Yellen’s personal favorite indicators, the JOLTS Job Openings report.

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