Explaining the catalysts that move the "market" overnight has become so farcical it is practically an exercise in futility and absurdism.
"The outlook for Chinese demand, in contrast to optimistic forecasts of producers, is skewed heavily to the downside," BNP says, in a new note warning of further deflationary pressures and protracted weakness in iron ore prices. For those who still think a "hard landing" can still be avoided, look no further for evidence to the contrary.
For the 2nd day in a row, WTI crude prices are falling (back below $55) after Saudi Arabian Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks around 10 million barrels per day in April. The investment community remains divided over the future (perhaps more a reflection of time horizons): BofA notes Large Speculators bought crude contracts for the 3rd consecutive week - the longest streak since June 2014; but Blackstone (among other private equity firms) have stayed on the sidelines (despite plenty of cash to put to work) as public markets have exuberantly filled the void so far this year: Oil producers have been able to “raise a lot of debt and, in some cases, equity publicly at values that we wouldn’t touch."
It is only fitting that the next business day following a headline that "Global Futures Slide China Tumbles On Short Selling Boost" we would see China, in an apparent panic, not only cut its RRR by 100 bps to 18.5% - far more than expected and the most since 2008 - but, more importantly, hinted that the Friday regulatory decision to encourage short sales and tighter margin rules on "umbrella trusts" was in no way meant to pop that the Chinese stock bubble, ridiculous as it may be. End result: after Chinese futures crashed by up to 6% on Friday after the Shanghai close, overnight the SHCOMP was down just 1.64%, erasing the bulk of the futures loss. More importantly, US equity futures have seen a strong bid this morning in yet another attempt to defend not only the Apple Sachs Industrial Average from going red on the year but the all important 100 DMA technical levels.
Energy companies “biding their time in the hopes they don’t have to face the music.”
After trending sharply higher in recent months, the US dollar has entered a consolidative range against most of the major currencies.
Rig counts fell for a record 19th week in a row. Total rigs dropped 34 to 954 and oil rigs dropped 26 to 374. This means the total rig count drop is now greater than 50% - the fastest drop since 1986. Crude prices had slid into the rig count announcement and popped afterwards.
In order to maintain a grip on market share by pushing U.S. shale producers out of the market, Saudi Arabia (and OPEC) is willing to use up its spare capacity. That could lead to a price spike.
Just as China was closing for trade and Europe was opening, something previously unseen happened: no, not another another GPIF or Virtu inspired marketwide stop squeeze, those are quite recurring these days. It was virtually every Bloomberg terminal around the globe suddenly going dark.
The sudden decision to buy EUR and dump USDs (after a slew of Fed speakers spewed their usual spew) has sparked a buy everything trade across markets as bonds, stocks, and crude are surging...
Oil prices should become 'lower for longer", but the wild card would be the OPEC meeting this June...