Oil – OPEC+ meeting next week, demand is strong but there is fragility

Via ANZ, a good overview of oil heading into the OPEC+ meeting July 1:

  • group … reviews its production agreement
  • Increased travel and strong economic growth is likely to see the recovery in demand accelerate. This will tighten the oil market. 
  • However, the situation is fragile amid sudden outbreaks of COVID and the possibility of rising supply from a variety of sources. 
  • The market is calling out for more crude oil, while others are concerned about the inflationary impact of higher prices. 

Fitch Ratings: Bitcoin hampered by its significant price volatility

Fitch Ratings with the opinion on BTC

  • says bitcoin could increase regulatory, AML risks for El Salvador banks
  • says the high level of bitcoin price volatility will challenge its use as a store of value and means of payment
  • believes foreign parent banks would offer operational, technical support to el Salvador banks to manage bitcoin implementation associated risks
I imagine the BTC folks are huge fans of ratings agencies …. or maybe not 😀
Fitch Ratings with the opinion on BTC

S&P and NASDAQ index post record closes

Dow rises over 300 points and leads the way with a gain close to 1%

The major indices saw solid gains across the board with the Dow industrial average leading the way after Pres. Biden and a group of 20 centrist senators agreed on a $1 trillion infrastructure plan.

The NASDAQ and S&P index both closes higher and at record levels. The NASDAQ record was the third day in a row.  The Russell 2000 index gained 30.16 points or 1.31% at 2333.62.
The final numbers are showing:
  • S&P index up 24.64 points or 0.58% at 4266.48
  • NASDAQ index up 97.98 points or 0.69% at 14369.71
  • Dow industrial average up 322.65 points or 0.95% at 34196.89.
After the close the Fed will announce the stress test results for the US banks. Today financials all rose smartly with Wells Fargo up 2.78%. Citigroup up 2.4%, PNC financial 2.18%. J.P. Morgan rose 0.91% but like other major financials.
Dow rises over 300 points and leads the way with a gain close to 1%_

European shares see solid gains in trading today

German DAX, +0.8%

The major European stock indices have seen solid gains in trading today.  The provisional closes are showing:

  • German DAX, +0.9%
  • France’s CAC, +1.2%
  • UK FTSE 100, +0.6%
  • Spain’s Ibex, +1.3%
  • Italy’s FTSE MIB, +1.2%
In the European debt market, the yields on moved lower with the UK yield down -3.8% after the Bank of England decision.
German DAX, +0.8%_
In other markets as London/European traders look toward the exit shows
  • Gold has given up its gains and trades up only $0.53 or 0.03% at $1779.20. At the start of the New York session, the price was up $7.80 at $1786.35.
  • Spot silver is up $0.17 or 0.69% at $26.07. That is the same level as the start of the North American session
  • WTI crude oil futures are up $0.14 or 0.19% at $73.22. The low price reached $72.32. The high extended to $73.61
  • Bitcoin is trading up $1348 or 4.07% at $34,414. At the start of the New York session it was trading at $34,124.70
A look at the US stock market as both the NASDAQ index and the S&P index both looking to close at record highs
  • S&P index up 23 points or 0.54% at 4264.90
  • NASDAQ index up 120.51 points or 0.4% at 14392.20
  • Dow industrial average up 240 points or 0.71% at 34114.68

US dollar creeps higher as infrastructure optimism builds

Infrastructure could boost US growth and pull forward rate hikes

USDCAD 10 mins
The odds of a bipartisan infrastructure deal rose today after Sen Romney said the framework was agreed and a report said Biden was likely to support it.
To be sure, there’s still a long road and politics is filled with twists and turns but the bull case is a nearly $1 trillion bill passed with bipartisan support followed by a Democrat-only bill that could be $2-4 trillion.
The dollar is creeping higher even as stocks rise, suggesting this is a US-only story rather than part of the risk trade. Interestingly, yields are lower though, which is not what you would expect on a higher prospect of more spending.
There are still plenty of details to work out though and we’re now into the quarter-end countdown so maybe I’m reading too much into the dollar move anyway.

Thursday’s Fed speakers and their biases – Williams is one to watch

Lots and lots

Hard to think of slower markets today.
Still looking for an explanation after the Fed’s latest hawkish dot plot shift then here are the Fed speakers up later today and there are a lot of them. The biases noted. Hopefully they will inject some life into things.
  • Barkin – neutral
  • Bostic – hawk
  • Harker – hawk
  • Williams – neutral
  • Bullard – hawk now
  • Kaplan – hawk
The one to watch will be Williams.  
Any sense in which the average targeted inflation has been ‘achieved’ or the Fed has moved on from that and that will be USD bullish. On June 22 Williams said that’ I don’t think it is close to the ‘substantial progress’ that we set out ‘to trigger taper’.

Copper to fall lower on Chinese supply?

Copper 4 hour trend line

Copper futures retraced a little this week, but there are some bearish signals according to Bloomberg:
  • China’s import demand is around lowest since 2017
  • LME stockpiles are up around 30% this month
On top of this China, fearing consumer inflation, will start sales of the metal from Gov’t reserves. This could be the start of China keeping copper prices lower.
Low risk entry is on break of 4 hour trendline. Fed speakers later could push it lower if USD rises on any hawkish comments – one to watch
Copper 4 hour trend line

One of the biggest imbalances in the global economy is that Euro is too strong. Our fair value for EUR/$ is below parity, as EUR/$ at 1.20 (blue) maps into a higher broad trade-weighted Euro (black) than in the past. How is the Euro zone supposed to reflate in this strangle hold?