It is increasingly certain that the future will not be like the past. Previous downturns have been equally devastating but the primary causes eventually reversed themselves; low commodity prices recovered and damaging government policies were rescinded. This recovery will be different for a variety of reasons which will combine to cap growth, opportunity and profits, even if oil and gas prices spike. The following major changes appear permanent...
"Vaxxed, the controversial documentary alleging a direct causal relationship between vaccines and exponential increases in autism amongst children is a deeply disturbing and hence critically important piece of work that will cause many sleepless nights for parents of infants everywhere..."
With the price of oil creeping ever higher, mothballed shale oil production is quietly going back online.
With the Fed decision just one day away, followed the very next day by the increasingly more irrational BOJ, stocks had no desire to make significant moves and overnight's boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.
"Well, if you're involved in the oil patch directly, drilling activity or anything like that I think we've gone beyond recession and it's more a depression. The facts are that this latest round of commodity price collapse that happened the first part of this year I think really put the nail in the coffin for the industry."
Futures are currently unchanged, but the E-mini was down as much as 12 points less than two hours earlier after the European open when this time it was up to the PBOC to intervene in global markets by pushing the Yuan higher (selling USDCNY via intermediary banks) sending global stocks sharply higher off session lows and leaving the S&P futures virtually unchanged. As Bloomberg reported, there has been increasing USD/CNY selling in afternoon session as Dollar Index edged lower. This is the PBOC entering the building and levitating stocks.
One day after stocks were this close from hitting new all time highs on what have been either ok earnings, if looking at non-GAAP data, or atrocious earnings, based on GAAP, and where any oil headline is now immediately translated as bullish by the oil algos, so far futures are relatively flat, while European stocks were at their moments ago in anticipation of the latest ECB announcement due out in just one hour. However, unlike last month's "quad-bazooka", this time the market expects far less from Draghi. “Having pulled put the monetary bazooka in March, the market is sensibly expecting no further policy measures from the ECB,”
Most recent analyses of oil prices have focused on the amount of mismatch between supply and demand, and the need to craft a temporary agreement to reduce oil production. The thing that is missing in this discussion is an analysis of buying power of consumers. Is the problem a temporary problem, or a permanent one? Lack of oil supply may bring a temporary spike in oil prices, but it cannot fix a permanent problem with consumer spending around the world.
The Doha-disappointment appears to have sparked some risk-aversion as yesterday saw Russia's biggest exchange-traded fund - Market Vectors Russia ETF - suffer its largest outflows since May 2015. However, in a perfect example of ill-timed moves, Russian stocks have soared over 6% from the knee-jerk lows pushing back up towards cycle highs.
Wells Fargo Finally Reveals Its Dire Energy Exposure: $32 Billion To Junk-Rated Oil And Gas CompaniesSubmitted by Tyler Durden on 04/14/2016 10:25 -0400
The punchline in Wells Fargo's earnings report is in the reminder of just how generous Wells has been in lending to junk-rated oil and gas companies in the recent past to compensate for its eclining NIM: Wells reported that ~22%, or $8.8 billion, of exposure to investment grade companies, which means $32 billion is to junk-rated companies!
Having surged to its highest since 2008 in February, Core CPI's YoY gain inched back from 2.3% to 2.2% YoY in March hovering at post-crisis highs. The food index declined in March, as did the cost of 'shelter' and medical care, but used cars and truck prices declined, as we noted previously.
- Global shares reach four-month high, forex hit by Singapore sting (Reuters)
- Dollar Rally Hits Commodities as Europe Halts Global Stock Gains (BBG)
- Currencies Across Asia Fall Sharply Against U.S. Dollar (WSJ)
- IEA expects limited impact from oil output freeze at Doha (Reuters)
- IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop (BBG)
- BofA Profit Declines 13% on Trading Slump, Energy Reserves (BBG)
In another quiet overnight session, the biggest - and unexpected - macro news was the surprise monetary easing by Singapore which as previously reported moved to a 2008 crisis policy response when it adopted a "zero currency appreciation" stance as a result of its trade-based economy grinding to a halt. As Richard Breslow accurately put it, "If you need yet another stark example of the fantasy storytelling we amuse ourselves with, juxtapose today’s Monetary Authority of Singapore policy statement with the storyline that the Asian stock market rally intensified on renewed optimism over the global economy. Singapore is a proxy for trade and economic growth ground to a halt last quarter." The Singapore announcement led to a sharp round of regional currency weakness just as the dollar appears to have bottomed and is rapidly rising.
In a historic event, one which is perhaps the lowlight of the sad demise of the US coal industry, U.S. coal giant Peabody Energy, the largest U.S. coal producer which employs 8,300 workers, filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades.
In terms of oil, it’s estimated that the Arctic has 90 billion barrels of oil that is yet to be discovered. That’s equal to 5.9% of the world’s known oil reserves – about 110% of Russia’s current oil reserves, or 339% of U.S. reserves.