Oil Lower After Iran Deal, Earnings In Focus

Oil Lower After Iran Deal, Earnings In Focus

Crude oil futures have eased after news of Tuesday’s historic deal reached between Iran and six world powers in which Iran agreed to limit its nuclear activity in exchange for a lifting of US, EU and UN sanctions.  



Oil Lower After Iran Deal, Earnings In Focus
Oil Lower After Iran Deal, Earnings In Focus

China, France, Germany, Russia, the US and the UK have spent years negotiating with Iran on this issue and the deal should enforce a number of measures to significantly reduce Iran’s ability to pursue nuclear weapons. The lifting of sanctions raises the prospect of an increase in global supplies of oil, and there has been a consequent reaction in the crude oil futures markets.  Brent crude oil futures slid 0.5% in early trading today, while US crude futures were down 0.2% in electronic trading ahead of the full pit-traded session at $52.10 per barrel.

After the recent dominance of Greece in terms of what has been the main focus of the financial markets, we are likely to see a switch to other matters this week, as the US earnings season kicks into high gear with the large US banks reporting this week. JP Morgan Chase ($JPM) announced second-quarter earnings of $1.54 per share pre-market on Tuesday, up from $1.46 for the same period last year and beating the consensus estimate of Wall Street analysts, though revenue was down from a year ago, and slightly below expectations at $24.5 billion. Wells Fargo ($WFC) also reported this morning and matched expectations with its earnings, and Dow Jones-component Johnson & Johnson ($JNJ) beat estimates for both earnings and revenue. Yum! Brands ($YUM) reports after the market close on Tuesday, while Bank of America ($BAC), Intel ($INTC) and Netflix ($NFLX) are among the big names reporting on Wednesday.

Expectations for a Fed rate hike seem further away than ever after a disappointing batch of economic news on Tuesday morning. US retails sales dipped 0.3% in June, far worse than expected, while May’s sales were revised down to +1.0% from an originally-reported +1.2%. Auto sales appear to have been a significant reason behind the slump, with retails sales down just 0.1% in June once sales of motor vehicles are stripped out. In the second quarter it now looks as if most of the strength was in May, after a slow April and with this latest indication of a slack June there are likely to be downward revisions in second-quarter GDP growth estimates.

Not only is growth looking soft, but there are few signs of inflationary pressures. US import and export prices were both down in June, despite the recovery in petroleum prices. Export prices fell 0.2% in June, for a year-on-year decline of 5.7%, while import prices sagged 0.1%, for a year-on-year change of -10.0%. Producer prices for June are released on Wednesday, while the consumer price index is due on Friday, and it will be interesting to see if they tell a significantly different story to today’s data.

 

US Stock indices opened slightly lower today: shortly after the opening in New York, the Dow Jones was down 21 points or 0.12% at 17,956, while the S&P 500 Index ticked down 0.01% to 2099.4.


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