Attention moved to the June WTI contract, the new front month, where more gasoline was poured onto the fire, as worries continued about the Cushing Oklahoma oil hub running out of storage in the next few weeks. The June contract plunged by 43 percent at one stage, falling from $20.00 a barrel to $11.60 a barrel in frantic trading.I will deal with oil in more detail later, but needless to say, the ravages in energy spilled over into the broader financial markets. Equities finally had to confront reality - a seemingly rare event these days - with broader indices falling in Europe and the US. Price declines in oil driving home the extent of the economic slowdown on the global economy from COVID-19, as opposed to artfully constructed rallies on the back of flawed v-shaped optimism and Federal Reserve quantitative easings.
US Treasury yields also fell as safe-haven buyers returned to government bonds. Those flows and the general flight to safety also boosted the US Dollar generally, making its rally more broad-based having been previously confined to Petro-currencies. The market's sentiment is flip-flopping daily though on currency and bond markets, suggesting that the street is in headless chicken mode, chasing intra-day momentum while desperately awaiting clarity on the bigger picture. From an investors point of view in these types of markets, it is much better to be the chicken on a perch watching the world go by, than a headless one, running around in random directions covered in blood.
In more positive news, the US Senate appears to have passed the latest $500 billion stimulus package, which now moves to the House of Representatives. That has been balanced out though by President Trump issuing an executive order overnight, blocking all immigration to the US for 90 days, to protect American jobs ostensibly. That is an easy win for an election year President though; no one is immigrating anywhere in the world right now, unless it is on a repatriation flight. Nor is anyone likely to be migrating anywhere for the foreseeable future either. The net result has been market neutral, with both headlines cancelling each other out in effect.
Speculation out of North Korea that Kim Jong Un was on death's door yesterday caused a flurry of volatility in North Asian markets. Apart from the merits of some well-known tier-1 news channels placing a first Tweet above fact checking, no evidence has emerged one way or the other to confirm it. South Korea's Government denied there was any evidence that this was even the case, although President Trump wished him a speedy recovery this morning. Where there is smoke, there is fire perhaps. Until Mr Kim reappears in public, an uncertainty discount will be built into South Korean stocks and the Won, but not markedly so. Because of his relative youth, a succession battle to Mr Kim would likely be a messy one and would increase the uncertainty discount.
On the data front, Australia's March preliminary Retail Sales jumped by a seasonally adjusted 8.20percentM/M, an impressive result. The huge rise was led by food retailing, as Australian's rushed to supermarkets to stockpile toilet paper, pasta and canned food. That has mollified losses on their stock markets today and allowed the AUD to make back half of its risk-aversion losses from overnight.
Given that oil is the front and centre of the financial market's attention at the moment, the Official US Government, and American Petroleum Institute's respective crude inventory figures. will be tonight's data highlight. The EIA data is due at 2230 SGT with inventories forecast to fall from 19.25 million barrels to 16.15 million barrels. The API data is released at 0500 SGT tomorrow morning, with markets looking for a drop from last weeks climb of 13.15 million barrels. Given how tenuous oils recovery has been in Asia today, above forecast prints on either or both numbers could see another wave of sellers crash into oil markets.
Oil prices crashed again overnight, and they seem to have assumed a proxy role for the extent of the COVID-19 pandemic slowdown. Wall Street fell for the 2nd day in a row in a reality bites retreat. The S&P 500 fell 3.1percent, the NASDAQ declined 3.50percent, and the Dow Jones fell 2.70percentas the US earning season continued with its series of underwhelming results.
Asia's response has been somewhat less negative, although stock markets are mostly in the red. Mainland China has performed the best with the Shanghai Composite and CSI 300 both flat on the day. The Nikkei 225 and Korean Kospi are down by 1.0percent, with some Kim Jong Un nerves persisting.
Australia's ASX 200 is down only 0.35percentafter impressive preliminary retail sales data saved the day. News that Australia is preparing to buy, now very cheap oil from the US SPR has also had a boosting effect. The Hang Seng meanwhile, has eased in sympathy with the rest of the region, dropping 0.80percenttoday.
The Straits Times has eased 1.50percentas scandals shake the oil trading market there and the official lock-down was extended until the 1st June. The one-month extension is sure to hit Singapore REITS and mall retailers hard even as the Government announced another S$2.70 billion package. Singapore shares are likely to underperform the region in the near term.
Although Asia may well be viewing the travails of the US oil market as a US-centric problem, the falls of the last two days highlight the extent of the demand slowdown in the world. Hence, price action cannot be entirely ignored. Equity markets seem to be reluctantly facing up to this reality, with the US $500 billion stimulus package hardly causing a ripple on Wall Street. When good news stops lifting equity markets, momentum has likely waned for now. The downside of the equity markets globally most definitely is the soft side for now.
Asian markets remain reluctant this week to continue overnight moves, and given the flip-flop nature of daily sentiment, it is hard to blame them. Such was the case overnight, where another bout of volatility in oil markets saw the US Dollar strengthen on safe-haven demand. US Treasury yields also fell as investors piled into government bonds and out of commodities and equities.
Resource-based currencies such as the AUD and NZD were under pressure, with both falling around 1.0percentyesterday. The same could also be said for Petro-currencies, with the selloffs continuing on the Russian Ruble, Norwegian Krone, Canadian Dollar and Mexican Peso. The later not helped by a 50-basis point cut by the Central Bank. With oil focusing on the world's mind on the extent of the global contraction, the resource/oil grouping are likely to remain unloved this week.
Asian currencies have proved surprisingly resilient this week. Resource proxies the IDR and MYR easing only slightly against the Dollar. That same story is repeated elsewhere with USD/JPY unchanged for the week, and the KRW and CNY only modestly weaker. The fall in oil prices, while a burden for producing countries, is a boon for importing countries. Asia is the worlds largest importer, and the falls in oil are acting as a natural support for regional currencies. In Indonesia's case, although it exports crude, it refines very little and imports most of its refined petroleum products. Pertamina is chartering ships to go bargain hunting globally now, and thus the fall in crude prices has not been the burden on Indonesia, one would logically think it would be.
WTI's June futures, the new front month, fell the chill of the US oversupply situation yesterday, plunging 33percentto $12.80 a barrel, having tested $11.50 a barrel earlier in the session. Knowing what the price of US oil futures and the US over the counter grades is becoming a challenging business. I see a considerable divergence in my WTI feeds across different providers. Some physical delivery grades, such as Alaskan crude, are still trading at negative prices. That is, they will pay you to take them off their hands.
On a spot basis, WTI finished around $12.80 a barrel yesterday. After an initial profit taking rally, sellers have quickly swamped WTI, and it is now trading just above $12.00 a barrel. Sentiment has not been helped by the Texas Railway Commission -the state quango with the powers to enact production cuts- deciding to put off its decision on production cuts until early May. The urgency with which oil longs positioned in the June contracts, want to roll into a still illiquid July contract suggests that selling interest remains unabated. June WTI will move below $10 a barrel sooner, rather than later.
Brent Crude is seeing further panic selling in Asia today. Having fallen by a gigantic 24percentto $19.60 yesterday, Brent has collapsed again in Asia after an early dead cat bounce. Brent has fallen 16.0percentto $16.50 a barrel this morning, the November 2001 lows. The sell-off today has a capitulation look about it, after OPEC+ tried to convene communications last night, but with no signs of progress.
Brent should find technical support at this level initially, however, a move through $16.00 a barrel will re-open calls for a test of the late 1998 lows around $10.00 a barrel, which is the only meaningful technical support can see from here.
The panic buttons will be being pushed across OPEC+ this morning and rightly so. State budgets will be devastated if prices remain at these levels, exacerbating the COVID-19 slowdown to many countries who can least afford to sustain it. I suspect the IMF's phone will be ringing hot this morning. The only plausible action from here would be another round of follow-up cuts from OPEC+ and enacted immediately.
The correlation to equities for gold reappeared with force overnight, investors selling gold to raise case as stock markets dived sharply lower. Gold slumped by $36 at one stage to $1661.50 an ounce. It salvaged some pride later in the session and rose to close at $1687.00 an ounce. Gold has eased with equities again in Asia, falling five dollars to $1682.00 an ounce in muted trading.
With the return of the linear equity/gold correlation, the positive outlook for gold fundamentally becomes far more muddied. Equity markets face a potentially tricky couple of weeks ahead. If the correlation holds true, gold will now struggle to sustain gains above $1700.00 an ounce, let alone mount a challenge to $1800.00 an ounce. The latter now looks technically insurmountable in the current environment.
If anything, further losses in equity markets make a retest of the $1640.00 support region more likely for gold. Stop-losses from frustrated longs will inevitably appear if that support breaks. Gold probably trades in a wide, but real, range of $1640.00 to $1710.00 an ounce for the remainder of the week.
Go here to see the original:
- Andrew McAfee and the Myth of America's Green Growth - Foreign Policy - June 22nd, 2020
- Investing in public education worldwide is now more important than ever - Brookings Institution - June 22nd, 2020
- Point of Care (POC) Molecular Diagnostics Market Worth $2.39 Billion by 2027, Growing at a CAGR of 13.2% from 2019- Pre and Post COVID-19 Market... - June 22nd, 2020
- Why the real climate change fight is in Saskatchewan - Policy Options - June 22nd, 2020
- The power of supply chains and the circular economy - IT-Online - June 22nd, 2020
- Great Plains College Opening Limited Hand-on Training This Summer - SwiftCurrentOnline.com - June 21st, 2020
- Skilled response: Skilling can be a way out of the current economic crisis - The Financial Express - June 21st, 2020
- The Greater Bay Area: Integration, Differentiation and Regenerative Ecologies - ArchDaily - June 21st, 2020
- Predictions for Utilities in 2020 - Transmission & Distribution World - June 21st, 2020
- Dow Sets Targets to Reduce GHG Emissions, Stop Plastic Waste, and Drive Toward a Circular Economy - CSRwire.com - June 21st, 2020
- Canadian Mining Symposium closes with panel discussion on mining in the Yukon featuring the Deputy Premier, the Hon. Ranj Pillai - The Northern Miner - June 21st, 2020
- Gender economist Katica Roy: How to create a workplace that truly values Black women - NBC News - June 21st, 2020
- Tax reform is the key to creating fiscal space - The Daily Star - June 21st, 2020
- Ministers of 'Belt and Road Initiative' issue joint statement on combating COVID-19 - WAM EN - June 21st, 2020
- Environmental Peacebuilding in the Middle East: The Bridge Between Climate and Conflict - The McGill International Review - June 21st, 2020
- Future of the Forests : As the Nantahala and Pisgah national forests face a historic turning point, the planners are impassioned and the stakes are... - June 19th, 2020
- Indonesia 2020: Total Hospital & Medical Installed Base Mapping with COVID-19 Updates - Less Than 5% of the Total Beds in the Country Equipped to... - June 19th, 2020
- Groundswell Startups Partners with StarterStudio to Bring Idea & Build Stage Startup Programming to Brevard - SpaceCoastDaily.com - June 19th, 2020
- Vatican document on integral ecology: Safeguarding Creation is everyone's responsibility - Vatican News - June 19th, 2020
- A year of good and affordable kai in Papatoetoe - OurAuckland - June 19th, 2020
- Opinion: To kick-start Alberta's return to the global economy, we need to think local first - The Globe and Mail - May 16th, 2020
- Working to find more opportunities to diversify economy | Opinions - Mat-Su Valley Frontiersman - May 16th, 2020
- Assam CM asks Numaligarh Refinery to play proactive role in promoting agro-based economy - Economic Times - May 16th, 2020
- In a Post-COVID-19 World, the Only One Way Ahead for India Is Economic Federalism - The Wire - May 16th, 2020
- Jitters, optimism with Gov. Bakers plan to reopen economy during the coronavirus pandemic - Milford Daily News - May 16th, 2020
- How To Avoid 'Revenge Pollution' While Reviving the Economy - Earth911.com - May 16th, 2020
- COVID-19 is a Budget Challenge for StatesBut There Are Solutions - The Pew Charitable Trusts - May 16th, 2020
- COVID-19 Crisis: Understanding the State of Economy during and after the Lockdown - Economic and Political Weekly - May 16th, 2020
- Healthy Oceans: Keeping Asia and The Pacific Afloat - Jakarta Globe - May 16th, 2020
- Northern Dynasty Minerals: Alaska's Pebble Project Approaches Key Permitting Milestone As COVID-19 And Collapsing Oil Prices Threaten State's Economy,... - May 16th, 2020
- Should Sierra Leoneans be pawns on the SLPP-APC political chessboard? A Rejoinder - Sierra Leone Telegraph - May 16th, 2020
- ADA provides COVID-19 update in first-of-its-kind press conference to dental media - Dentistry IQ - May 16th, 2020
- In light of the pandemic, government's policies and programmes target social sector - The Kathmandu Post - May 16th, 2020
- The future of recycling: 4 experts explain - News - The University of Sydney - May 16th, 2020
- Bright Blue and WSP: Net zero more urgent than ever for government and business - Rail Professional Magazine - May 16th, 2020
- Healthy Oceans Needed To Keep ASEAN Afloat - The Asean Post - May 16th, 2020
- China would be shooting itself in the foot if it bans Australian iron ore - Small Caps - May 16th, 2020
- LETTER TO THE EDITOR: City should follow through with lowering taxes in midst of pandemic - Nanaimo News Bulletin - April 27th, 2020
- In the City: Resources and support for local businesses - Coloradoan - April 27th, 2020
- Why there isn't a one-size-fits-all plan for states to reopen their economies - Kiowa County Press - April 27th, 2020
- Absorbing the Shocks or Irreversible Damage? The Impact of COVID-19 on Africas Political Economy - Modern Ghana - April 27th, 2020
- Why States Need to Come up With Their Own Plans to Reopen Their Economies - The National Interest - April 27th, 2020
- Daily life grinds to a halt with empty streets, a rising death toll as coronavirus lays siege to Detroit - MLive.com - April 27th, 2020
- 'We will digitise assets to generate land-based taxes' - Guardian - April 27th, 2020
- Fortuna provides an update on its operations at the Caylloma Mine in Peru - Junior Mining Network - April 27th, 2020
- Thuli Madonsela: What if the poor mattered? - News24 - April 27th, 2020
- COVID-19: Steady Rewind Mode on Global Civilization - THISDAY Newspapers - April 27th, 2020
- Resource Based Economy | The Venus Project - April 26th, 2020
- RESOURCE BASED ECONOMY | Future by Design - April 26th, 2020
- Introduction to a Resource Based Economy - April 26th, 2020
- What is a Resource-Based Economy? | The Venus Project - April 26th, 2020
- Facts adjusts print schedule to adapt to changing economy - Brazosport Facts - April 26th, 2020
- Letter: The Earth can't breathe - Opinion - Columbia Daily Tribune - April 26th, 2020
- Reopening the U.S. economy is like walking a tightrope and Trumps guidelines may be too lax - MarketWatch - April 26th, 2020
- We need a better head start for the next pandemic | VOX, CEPR Policy Portal - voxeu.org - April 26th, 2020
- Free interactive tool launched to help businesses through COVID-19 - GlobeNewswire - April 26th, 2020
- The South's Handling Of Coronavirus Could Be 'A Macabre Game Of Whack-A-Mole' - OPB News - April 26th, 2020
- Why COVID-19 confinement is hitting people with intellectual disabilities hard - World Economic Forum - April 26th, 2020
- The Observer view on the domestic abuse bill failing women trapped in lockdown - The Guardian - April 26th, 2020
- Harmful tweets from high places: Why Is Twitter acting now? - Salon - April 26th, 2020
- Cannabis cultivation could be a key economic driver for reconstruction after Covid-19 - Daily Maverick - April 26th, 2020
- Tom Gordon: Holyrood's finances are out of step with the Covid crisis - HeraldScotland - April 26th, 2020
- More than a quarter of the US economy is shut down - AL.com - April 7th, 2020
- Elizabeth Warren on coronavirus, the presidency, and the economy - Vox.com - April 7th, 2020
- Summit Chamber of Commerce forms economic recovery team to assist local businesses during and after shutdown - Summit Daily News - April 7th, 2020
- It is necessary to worry about health, but pessimism about the economy will hurt us - The Conversation AU - April 7th, 2020
- Highways England and the circular economy - New Civil Engineer - April 7th, 2020
- Working Washington Emergency Grants Now Open to Small Businesses in Thurston County Impacted by COVID-19 Crisis - ThurstonTalk - April 7th, 2020
- Culture, Resilience, and Sustainability of the Salish People - State of the Planet - April 7th, 2020
- RJ Corman: From Iron Horses to Race Horses - The Pressbox - April 7th, 2020
- Akdere invited to join G20 taskforce on economy, employment and education - Purdue Polytechnic Institute - April 7th, 2020
- Covid-19 live updates, April 7: Mental health resource Getting Through Together now available - The Spinoff - April 7th, 2020
- 5 Unexpected Impact Investments in COVID-19 Recovery | Karma - Karma - April 7th, 2020
- Corona: What have you done to our economy and society? - Elets - April 7th, 2020
- ESDS Software Solutions recognized as Asias 15th Best Workplace by Great Place To Work Institute - Elets - April 7th, 2020
- Trudeau to destroy another resource industry in the west but to the chagrin of the Feds Alberta could benefit - Brooks Bulletin - January 19th, 2020
- Bringing Consensus Politics Back to Environmental Issues - State of the Planet - January 19th, 2020
- PNGs economy rebounds in 2019, a year in review - POST-COURIER - January 19th, 2020
- B.C. cheers high tech in its rural communities - but financial support is missing - The Globe and Mail - January 19th, 2020
- Hello, Hanover - The Post - Ontario - January 19th, 2020