OPEC+ sees no need till release more oil

Sources put damper on the US hopes that OPEC+ should release more oil

OPEC+ sources are saying that:
  • OPEC+ sees no need to release more oil into the market at present
The comments come despite urges from the US White House which last week encouraged OPEC/Saudi to increase production in order to prevent the slowing of the global economy (due to higher energy prices).
Crude oil has moved higher on the report and currently trades down $0.64 or -0.95% at $67.28. The low price earlier today reached $65.72. The high price reached $68.87 earlier in the day.


Crude oil has rebounded

Euro Stoxx index falls for the first time in 11 trading sessions

European indices move lower today

The major European indices have closed lower today.

  • The Euro Stoxx index fell for the first time in 11 trading sessions (10 higher closes).
  • The German Dax came off of a record levels.
  • The France’s CAC could not reach its all-time high from 2000
A look at the provisional closes shows:
  • German DAX, -0.5%
  • France’s CAC, -0.9%
  • UK’s FTSE 100, -1.0%
  • Spain’s Ibex, -0.83%
  • Italy’s FTSE MIB, -0.85%
The Euro Stoxx index fell -0.7%.
In other markets as London/European traders look to exit:
  • Spot gold plus $5.50 or 0.32% at $1784.85.
  • Spot silver is up for cents or 0.21% $23.75
  • WTI crude oil futures are down $0.35 or -0.49% at $67.60
  • bitcoin is trading down $773 at $46,248. The digital currency traded above $48,000 today
In the US stock market, the major indices are lower but off their lowest levels:
  • Dow is down -79 points or -0.22% at 35436
  • S&P index is down -16.29 points or -0.36% at 4451.53
  • NASDAQ is down 125 points -0.85% 14697.65
In the forex market, the CHF is now the strongest of the majors while the CAD remains the weakest. The USD is mixed with gains vs the CAD, AUD and NZD and declines vs the JPY and CHF. The greenback is near unchanged levels vs the EUR and GBP.

Economists see ECB laying out plans to wind down PEPP programs in Q4

What’s the timeline for cutting pandemic emergency programs?

What's the timeline for cutting pandemic emergency programs?
The ECB is likely to announce plans to reduce pandemic PEPP bond purchases in Q4 according to a Reuters poll of economists. Most also see the program to be wrapped up by the end of Q1.
The eurozone rebound, rising vaccination rates and the framing of the ‘pandemic emergency purchase program’ make ending it a priority, especially for the more-hawkish ECB members.
There is talk of announcing a phase out as early as September but new variants could push out that timeline. 12 of 29 economists see a September announcement while others said Q4 (15), December (10) or H1 2022 (22).
On the actual start of tapering, 18 of 29 said before year end with 11 saying in 2022. Meanwhile, 29 of 34 forecast the program would be wrapped up by the end of March.
Growth expectations are 2.1% in Q3 and 1.2% in Q4. For 2021 it’s seen at 4.6% and steady at 4.4% in 2022.

Japan Q2 prelim GDP +0.3% q/q vs +0.2% expected

Japanese second quarter growth data

  • Q1 final reading was -1.0%
  • Annualized sa +1.3% vs +0.7% expected
  • Q1 final reading was -3.9% annualized
  • Private consumption +0.8% vs -0.1% expected (-1.5% prior)
  • External demand -0.3 pp vs -0.1 pp expected (-0.2 pp prior)
  • Capital expenditures +1.7% q/qvs +1.7% expected (prior -1.2%)
  • Exports +2.9% q/q
  • Domestic demand contribution +0.6 pp
The domestic economy held up better in Q2 despite covid restrictions. It’s another data point that shows that the global consumer is holding up better to lockdowns than previously and increasingly learning to live with restrictions. Meanwhile, external demand is struggling with two quarters of declines.

Some background if you find useful:

  • state of emergency curbs to combat the coronavirus pandemic are sapping GDP growth, weighing on consumption.
  • Export growth is robust, which is a positive
  • rising energy and commodities prices could worsen terms of trade (Japan is heavily reliant on raw material imports)

Fed’s Kashkari wants to see “a few more” solid employment reports before tapering

No surprise that Kashkari isn’t in a rush

The battle lines on Fed tapering are somewhere between September and January. It’s no surprise that Kashkari is on the dovish end of the spectrum and said he wants to see “a few more” solid jobs reports before advocating for a taper.
He said the objective is to restore the labor market to at least pre-covid levels.
The tricky read through on US employment is that so many people aren’t participating the jobs hunt. After Sept 6, special benefits will end but the pandemic won’t. Is it that people are collecting government money or that people who can afford to stay home (or retire) aren’t planning to return any time soon?
No surprise that Kashkari isn't in a rush

What the rout in Afghanistan means for markets

Not much impact

Not much impact
The swift fall of Afghanistan caught the world off guard with President Ashraf Ghani fleeing the capital as it fell.
It will certainly be the major geopolitical story this week but I don’t see any angles where it will affect markets. Afghanistan’s economy is tiny by any standard (except perhaps the opium trade). For example, Afghanistan uses only 30,000 barrels per day of oil.
What will happen is a human tragedy and an embarrassment for the US and the coalition that fought for 20 years to overthrow it but I don’t see how it moves the needle in markets in any way.
Some point to potential gold demand with people fleeing but even there, the minuscule wealth of Afghanistan is negligible.
The UN security council will meet on Monday.
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