Afternoon analysis 17.02.2016

In the afternoon, the oil market continues to set sentiments. Slightly weaker data from the USA. Publications from Poland are slightly weaker, however, the headline reading of the industrial production is definitely more pessimistic than unseasoned data.

The oil market is still the center of attention

Resource market participants continue to speculate as to what degree the discussions in Tehran can influence the future evaluation of oil. Additionally, depreciation on the WTI and Brent caused a deterioration of global sentiment for the past few weeks, due to the fact that some investors thought that lower oil prices were caused by possible demand related problems.

It was also indicated that a further reduction of raw material prices, equal a smaller demand from the countries who export oil, problems of mining companies, and the sector which finances them. Due to this fact, the current rebound on oil is considered positive by the capital market. This also supports the American dollar, because it decreases the probability of postponing the hikes due to disturbances in the financial market.

It is still difficult to ask, what does the market expect from today's discussions in Tehran. It is unlikely that Iran will agree to keep the production at the current level. It is because this country was planning to increase it by approximately 500 thousand of barrels during the following weeks, and by 1 million barrels within one year.

However, it is possible that some transitional solution will be established, which will allow Iran to increase the export, while concurrently limiting (at least theoretically) an increase in production of other countries. This could extend the growths on oil, stock market indexes, and support the dollar.

Data from USA and Poland

Today's data from the American real estate market were slightly worse than expected, particularly when it comes for initiated investments. A decrease has been observed in every region. However, the biggest one was in the East Coast, probably due to multiple days of a blizzard in January.

The American industrial production was, on the other hand, a positive surprise. It increased by 0.9% m/m, whereas the expectations were in frames of 0.4% m/m. Worse news was the downwards review of December data. It went down from negative 0.4%, to negative 0.7%. However, in general the publication should sustain the positive sentiments.

On the contrary to yesterday's readings from Poland, the ones from today were definitely below economists estimates. Retail sales went up only by 0.9% y/y, whereas the forecasts assumed a +2.9% growth. The same consensus concerned industrial production, and the actual result was +1.4%. However, this data could be disturbed by seasonal factors.

According to the Polish Central Statistical Office, unseasoned industrial production increased by 3.3% against the December reading at the level of 4.0% (without being unseasoned it was +6.7% y/y the previous month). On the other hand, the actual increase in retail sale (adjusting for inflation) was at the level of +3.1%.