NewsCrude starts the week with losses on growth and debt concerns PreviousForecastAnalysisThe week starts on soft, bearish, and pessimistic terms as we merely expected with the end of last week’s trading on Friday with high volatility and mixed sentiment over the outlook for the global recovery; and as crude survived the downside pressures with the end of the week today it compensated with a strong negative start!
WTI Crude Oil Futures for July settlement started the week with south headwinds to move to the intraday low of $97.64 a barrel where it is currently trading slightly above at $97.82 off the high of $100.01 and opening levels of $99.60 a barrel.
Markets started the week with renewed fears over the outlook for global growth and worries over the sovereign debt crisis in Europe that is further pressuring the area into a slow recovery. Investors were triggered by Friday’s downbeat Bundesbank report that said the German economic recovery will lose momentum into the year reviving the jitters over the stability of the area, especially as Germany is the largest economy, and accordingly more downside pressures where set on the euro.
The Chinese manufacturing activity also slowed in May which fueled fears over the slowing global recovery and dented commodities appeal on lower demand expectations. U.S. fundamentals have been softening the past period and the focus returned to debt-laden Europe.
Standard & Poor’s said Italy’s A+ debt rating is at risk of downgrade, prompting the Treasury to assure that they will “intensify” structural changes. Fitch ratings also downgraded Greece’s credit rating by three steps on Friday taking the rating deeper into its junk status! The downgrade is just ahead of a scheduled cabinet briefing today for Greek Prime Minister George Papndreou today regarding new budget cuts and asset sales inline with the pledges in the EU summit last week.
Asian stocks fell heavily and European markets opened strongly bearish on the prevailing pessimism and rising contagion threat that is pressuring risk aversion and keeping risky and high yielding assets lower.
The dollar moved higher on the risk aversion and demand for haven, especially as the euro suffered heavy losses and moved to record lows versus the franc. The euro’s weakness further bolstered the dollar’s strength where the dollar index surged higher to buildup on Friday’s gains as the index hovers now around 76.14 from the low of 75.68.
More volatility is expected and the losses are likely to remain evident for commodities and for crude with the prevailing downbeat sentiment and fears over the outlook for growth and the debt crisis which will keep risk demand averted!