Saudi Arabia offered to cut its oil output to January levels, as OPEC members seek ways to stabilize crude prices at talks this week in Algiers.“Saudi Arabia is ready to freeze production at the January level,” Boutarfa said, calling the offer “an interesting step.” Saudi Arabia pumped a record 10.69 million barrels a day in August compared with 10.2 million in January, suggesting the Saudis are willing to cut total output by half a million barrels.
One day after what was a rather disastrous hearing for Wells CEO John Stumpf, which culminated with a Senator telling the embattled chief executive he may want to consider going to prison, the bad news continued overnight when the bank that overtook Wells in the "biggest US bank by market cap" category, JPMorgan, downgraded Wells to Netural, cutting its price target from $53.50 to $48.00 as a result of "tough Senate hearings and mounting public scrutiny following the opening of fraudulent accounts."
While the BOJ may have disappointed with its latest iteration of monetary policy, now known as "QQE with Curve Control", Asian and European stocks as well as U.S. equity index futures rallied in early trading perhaps on the back of the bounce in the USDJPY which has now completely faded.
Asked to name the next big short, Eisman initially declined. “I’m not in such a rush to do it again,” he said. “It took years off my life.” Then he relented, saying, “The only big short out there is when the world loses confidence in QE.”
The overnight session started with more weakness out of Asia, where chatter that the BOJ may end up doing nothing despite all the trial balloons (as we hinted yesterday), sent the USDJPY sliding, pushing the Nikkei lower, leading to a 7th consecutive decline in the Topix, the longest such stretch since 2014 even though the BOJ is now actively buying a record amount of ETFs. However, the modest dip in S&P futures and European stocks proved too much for BTFD algos, and risk promptly rebounded.
Earlier today the IEA revealed a much more pessimistic outlook on the state of the oil market, predicting that a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply means the crude market will be oversupplied into late 2017. The reason: a "dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
China, the world’s largest oil consumer, has been increasing oil imports and feasting on the low crude oil prices. Could Russia and Saudi Arabia’s plan to stabilize crude oil prices cut into China’s oil hoarding plans?
The physical holdings of Chinese gold ETFs have surged five-fold from 7 tonnes at the end of January, to 35 tonnes at end of August. The Huaán Yifu Gold ETF, which was holding 23 tonnes in August, entered the global top 15 list.
After two years of a Saudi-led strategy of all-out pumping, adopted to protect market share against the surge in U.S. shale oil, OPECand Russia are putting cooperation back on the table. As Bloomberg notes, their last attempt to do this - a proposal to freeze output in April - collapsed in acrimonybecause of rivalry between Saudi Arabia and Iran. There may be four potential outcomes from the Algiers talks.
Truck-related stocks have massively outperformed the broader markets this year up over 30% while the S&P 500 is up only around 7%. This outperformance has come despite abysmal Class 8 net orders which seem to just get worse each month with August 2016 net orders down over 25% compared to last year. In fact, the level of trailing 12-month net orders is the lowest since January 2011 with YoY changes now in negative territory for 18 consecutive months.
What was most striking in the latest Triennial BIS survey, was the shrinkage in FX trading by hedge funds and proprietary trading firms which fell by more than 30% over the past three years. The shrinkage in the share of FX trading by these investors is likely the result of regulatory pressures and FX rigging investigations which caused significant retrenchment by FX prop desks.