Oil bucks the trend and retreats One notable laggard in the commodity rally was oil overnight, with both Brent crude and WTI testing range highs again before retreating. Once again, it appears that speculative fast money has no stomach for the slightest reversal of loss of price momentum, leading to a tail-chasing rush for the door. With the Brent crude futures curve back in sold bullish backwardation, any fall in prices should be limited. However, the bad news from India keeps getting worse, with record Covid-19 cases recorded yesterday. As the third-largest oil importer globally, India remains the weak link in the oil rally narrative. It appears to be tempering gains, even if oil’s broader technical picture looks strong. The first signs that India’… [Read More...]

The euro is showing little movement on Wednesday. In the North American session, EUR/USD is trading at 1.2005, down 0.06% on the day. Services PMI show stagnation Business activity across the eurozone remains weak, as reflected by eurozone Services PMIs for April, which were released earlier on Wednesday. The German, eurozone and French releases were all close to the 50.0 level, which separates contraction from expansion. This means that the services sectors in the eurozone are not showing growth, as the Covid-19 lockdowns and a sluggish vaccine rollout have taken a heavy toll on the services industry. At the same time, there are some bright spots to report. Manufacturing continues to show significant expansion, and German Retail Sales sparkled in March, with a gain of 7.7%, which crushed … [Read More...]

US stocks are rising after solid economic data, calm in the bond market, and as the global economic recovery improves.  A private payroll report and a couple of Service index readings suggest the US economic recovery continues but not at a breakneck pace.  The next big catalyst for equities is that the US needs its allies to also win the fight against COVID and that will take time. The gains abroad are greater as the recovery potential in Europe far exceeds what is left for the US. ADP Data watchers mostly agree that historically a link does not exist between ADP and the nonfarm payroll report.  During most of the COVID-19 pandemic, ADP report has mostly underperformed the official private payroll numbers.  The April ADP payroll report … [Read More...]

After a strong hand over from Wall Street, European stocks are pushing higher on Friday. Bourses are extending gains boosted by broadly upbeat corporate earnings and better-than-expected Eurozone GDP data. The Eurozone economy contracted again in Q1 due to extended lockdown restrictions, which pushed the bloc into a second technical recession. The bloc’s economy contracted by 0.6% quarter-on-quarter in the first three months of the year, representing a slight improvement from the -0.7% contraction seen at the end of 2020 and better than the -0.8% contraction that was forecast. On an annual basis, GDP contracted -1.8%, which is significantly better than the -4.9% contraction recorded in Q4 2020. The Eurozone economy was locked down pretty much across the entire first quarter. Given the resurgence … [Read More...]

Month end, rising concerns of pricing pressures, and some Fed taper chatter sent US stocks down from record highs.   US Data The personal income and spending data was all about the effects of the stimulus checks.  Personal income will obviously decline over the next couple of months, so that means we will have to wait until deep into the summer to get an accurate reading.  The PCE Deflator was pushed higher on rising food and oil prices.   The Fed clearly signaled they are expecting inflation readings above 2.0%, so the market did not react much to today’s PCE Core deflator 1.8% rise from a year ago.  Inflation is picking up but it is still too early to make the argument if it is transitory.  The Chicago PMI … [Read More...]

The Japanese yen has steadied on Wednesday, after sustaining sharp losses a day earlier. Currently, USD/JPY is trading at 108.73, up 0.03% on the day. Japanese Retail Sales for March were stronger than expected, with an impressive gain of 5.2%. This beat the forecast of 4.6% and ended a nasty streak of three straight declines. With Tokyo, the largest city in the country, currently under a lockdown, consumer spending will be hampered and this will likely be reflected in the April Retail Sales report. Will FOMC stay the dovish course? The US economy continues to show impressive growth, and with inflationary pressures getting stronger, there has been some talk that the Fed may need to reconsider its ultra-accommodative monetary policy. However, the Federal Reserve has said … [Read More...]

US stocks are mixed ahead of the FOMC decision and Apple’s results.  The Dow Jones Industrial Average is leading the decline following Boeing’s lackluster earnings report and a disappointing cancer drug study from Amgen. Much of today’s attention stayed with Alphabet’s superb results, Microsoft’s strong quarter that didn’t impress, and Boeing’s challenges.  Wall Street needs to see how much Apple crushes this earnings report and if they deliver another stock buyback plan and boost their dividend.  For the S&P 500 index to continue making fresh record highs, the Fed needs to remain optimistic but eternally dovish and Apple needs to deliver. Earnings Google Alphabet was a favorite trade early in the pandemic, but now it is also benefiting from the reopening of the economy.  A … [Read More...]

The euro is showing some life in the Friday session after several days of drifting. In the European session, EUR/USD is trading at 1.2054, up 0.33% on the day. There was positive news from manufacturing on Friday, as both eurozone and Germany PMIs beat their forecasts, with readings of 63.3 and 66.4, respectively. Both readings point to strong growth.   ECB meeting a snoozer There were no surprises from the ECB, which held its policy meeting on Wednesday. In fact, the meeting was somewhat of a disappointment, as the meeting provided little guidance to the market as to the central bank’s future intentions. Policymakers made no changes to the Pandemic Emergency Purchase Programme (PEPP) and maintained the key interest rate at a flat 0.00%. ECB President Christine Lagarde had … [Read More...]

US stocks are wobbling as investors struggle to navigate through a very muddied global outlook and a wrath of earnings updates that for the most part has priced in a slow return to pre-pandemic life.  The US economic recovery remains strong as jobless claims continue to improve and the housing market eases off its peak.  The eurozone is about to become the economic recovery flavor of the week, perhaps quarter, but ECB President Lagarde did little to boost short-term optimism that they were closer to following Canada’s lead in tapering asset purchases.  The COVID situation across India and Japan remains a drag on risk appetite, but shouldn’t derail optimism for the second half of the year. Biden Wall Street hit the panic button and headed … [Read More...]

Oil prices recover on EIA inventory report Crude prices pared earlier losses after energy traders viewed the EIA crude oil inventory report as mostly bullish given improving diesel and gasoline demand.  Initially, WTI crude slumped on the surprise small build with US stockpiles, but that was short-lived.  Crude oil inventories rose 594,000 bpd versus a forecast of a 3.26 million decline, snapping a streak of 3 weeks of draws. US crude production remained steady at 11 million barrels a day and that is somewhat surprising given the recent increases in rig counts.  With OPEC+ poised to ramp up production, concerns could be percolating that we might not be ready for more output. The crude demand recovery is losing momentum and that won’t get better anytime soon especially since international travel … [Read More...]