Major indices price for the 2nd day this week
The European shares have back-to-back gains to start the trading week.
Yesterday, the German DAX led the way with a 1.4% gain. Below are the percentage changes from Monday.
- German DAX, +1.4%
- France’s CAC, +1.3%
- UK’s FTSE 100, +1%
- Spain’s Ibex, +0.5%
- Italy’s FTSE MIB, +1.1%
Today, additional gains were tacked on. The provisional closes are showing
- German DAX, +1.55%
- France’s CAC, +1.9%
WTI climbs above $55
Oil prices are breaking out of a sideways trade with a 2.3% rally. WTI briefly touched $55 for the first time since January 2020.
The break from the range is also a rise above the Feb 2020 high of $54.50.
It comes at the start of a strong seasonal period for oil.
OPEC today lowered its 2021 oil demand growth forecast to 5.6 million bpd from 5.9 million bpd but the market is looking more at inventories, which may be quickly drawn down in the coming months.
OCED inventories will be 100 million barrels above the 5-year-average by the end of March 2021, in the forecasts. But by the end of June, they will be lower than the 5-year-average. This year stockpiles will be drawn down each month and fall a total of 406m barrels under the base case.
I believe that oil and oil companies are among the most undervalued assets in the world. The transition to green energy is coming but it will take decades and the lack of investment in oil production is going to cause much higher prices within 2 years.
A positive day for Asian equities
Broader market sentiment is continuing to exude more calm as the retail trading frenzy starts to show signs of settling down, with the VIX receding as well.
The Hang Seng is up 1.5% while the Shanghai Composite is up 0.6% on the day, with S&P 500 futures seen up by 0.5% as we look towards European trading.
The mood is pinning the dollar slightly on the softer side but nothing that stands out too much for the time being. NZD/USD is up 0.3% as buyers push above its 100-hour moving average @ 0.7173 and look towards its 200-hour moving average @ 0.7188.
Reserve Bank of Australia February 2021 monetary policy announcement and Governor Lowe’s statement
- The Board decided to maintain the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond,
- as well as the parameters of the Term Funding Facility.
- It also decided to purchase an additional $100 billion of bonds
More QE from the RBA but policy rates left untouched (as expected). More QE is significant, the Bank had been expected to announce this, but perhaps at a later date. The extra purchasing will begin in April.
The Chicago Mercantile Exchange has ramped up the Comex XAG margin
In response to the spike in volatility.
SI futures maintenance margins raised by 17.8%
- to $16,500 per contract (from $14,000)