Oil Tumbles While RBC Continues Strong Bank Earnings
CMC Markets | Aug 24, 2016 08:20
The big story in overnight trading was how quickly the speculation on Iran potentially ready to join a deal among suppliers was trumped by weak fundamentals. A surprise 4.4 mmbbl increase knocked the wind out of oil markets, sending WTI down 1.6% and Brent down 1.0%. Oil may remain active today particularly around DOE inventories, with traders looking for confirmation of the BOE report.
Global equity market trading remains subdued, with US indices flat this morning and the DAX up 0.4%. A usually seasonally quieter period with many players on holiday and limited news, combined with people waiting to see what Fed Chair Yellen has to say on Friday, has many traders sitting on their hands at the moment. The FTSE is down 0.2%, held back by the continuing recovery in GBP as Brexit fears fade.
Canadian banks are in the spotlight this morning. Banks rallied yesterday on a positive kickoff to earnings week, and today's report from the Royal Bank Of Canada (TO:RY) was even better. RBC reported record earnings of $1.72 per share up 7% over year and above the $1.70 street estimate. RBC raised its dividend by 2%, a sign management remains encouraged about its future prospects.
Most importantly, RBC cut its credit loss provision by 31% from last quarter on reduced provisions to the oil and gas sector. Questions about oilpatch exposure has dragged on sentiment toward the banks, and improved confidence in the oilpatch could provide a general boost to banks and energy companies.
Yesterday, new home sales nearing levels last seen nine years ago provided more evidence of a robust US economy. Today traders may look to house prices and sales of existing homes for more indications on the strength of consumer spending.
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