Futures Rebound Off Lows Following Chinese Intervention;
- Oil Dips Ahead Of Fed, BOJ
Ahead of two key central banks events this week, the Fed announcement on Wednesday – in which Yellen is expected to do nothing and most likely will continue the dovish relent first seen a month ago – and then the BOJ on Thursday (which also mark the anniversary of the second longest and most artificial bull market in history) where Kuroda is increasingly expected to shock with something even more ridiculous, global shares have fallen modestly around the world as oil declined on signs a global surplus of crude is likely to persist. The yen strengthened with gold, reflecting investor caution before central bank meetings this week in the U.S. and Japan.
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.
U.S. crude futures erased Friday’s gains on Saudi Arabia’s plan to complete an expansion of the Shaybah oilfield by the end of May (allowing the world’s largest exporter to maintain total capacity at 12m b/d) coupled with concern a global glut will be prolonged as Mideast producers boost supplies.
Additionally, Iran has increased output by 1m b/d since sanctions lifted in January, according to Iran’s Oil Minister Bijan Namdar Zanganeh. Then the other upside catalyst, Kuwait’s now forgotten oil strike, has been fully offset as Kuwait oil output returns to 3m b/d after strike ends.
What until late January was record oil shorts has flipped to record oil longs, suggesting positioning is now stretched and a downside move may be imminent.
Combined, these indicate why there is little reason for significant oil upside from here: “We’re still in oversupply,” Wayne Gordon, executive director for commodities at UBS AG Wealth Management, told Bloomberg TV. “We don’t think that the production cuts that we’re seeing in the U.S. and non-OPEC countries are large enough yet to structurally support the oil price higher. For the next couple of months we’re going to the downside again.”
Bank of Japan on Thursday.Most economists predict monetary stimulus will be stepped up by the BOJ.
Earnings are due from companies including Apple Inc. as well as China’s largest banks this week.
As the chart below shows, the rebound from the February lows has been all about central banks. What can they do to sustain the bounce in the future?
Top European News
- Philips Lighting IPO Looking More Likely as Profit Rises: Leaning toward holding an IPO of its historic lighting business after 1Q profit beat estimates and an attempt at a private sale has so far been unsuccessful
- German Business Confidence Unexpectedly Weakened in April: Ifo’s business climate index fell to 106.6 in April from 106.7 the previous month; median estimate was for increase to 107.1
- Deutsche Bank Co-CEO, Ex-Officials Cleared in Munich Fraud Case: Co-CEO Juergen Fitschen and four former bank officials were acquitted of charges that they lied to judges during a more than 14-year-old dispute with a German media mogul
- EDF Falls After Announcing Share Sale, Deeper Cuts, Divestments: To sell about EU4b billion of new shares and deepen cost cuts
- Cinven Said to Be Leading Bidder for TUI Hotelbeds Booking Unit: Tour operator may announce deal as early as this week
- Nordic Banks Warn Brexit Adds to Extreme Negative Rate Scenarios: Both Nordea and Handelsbanken, say a U.K. exit from the EU would push Denmark even further away from positive rates
Global Market Snapshot
- S&P 500 futures down 0.1% to 2084
- Stoxx 600 down 0.6% to 346
- FTSE 100 down 0.3% to 6294
- DAX down 0.5% to 10277
- German 10Yr yield down 1bp to 0.22%
- Italian 10Yr yield up 2bps to 1.49%
- Spanish 10Yr yield up 1bp to 1.61%
- S&P GSCI Index down 1% to 344.4
- MSCI Asia Pacific down 0.4% to 133
- Nikkei 225 down 0.8% to 17439
- Hang Seng down 0.8% to 21304
- Shanghai Composite down 0.4% to 2947
- US 10-yr yield down less than 1bp to 1.88%
- Dollar Index down 0.2% to 94.92
- WTI Crude futures down 1.3% to $43.30
- Brent Futures down 1.1% to $44.654
- Gold spot down less than 0.1% to $1,232
- Silver spot down 0.5% to $16.89
Global Headline News
- Ball to Sell Beverage-Can Assets to Ardagh for $3.42 Billion: Will sell 17 can factories in the U.S., Europe and Brazil, plus other facilities, assets to be sold had rev. of $3b last yr
- Second U.S. Bid to Force Apple to Unlock Phone Ends in a Whimper: The U.S. government said it no longer needs Apple’s assistance to get into an iPhone used by a New York drug dealer
- Apple’s IPhone Maker Showcases Labor Changes to Silence Critics
- Yahoo Said to Narrow Field of Bidders as Soon as Next Week: Received more than 10 first-round offers for core unit, initial bids valued Yahoo’s core business at about $4b-$8b
- Halliburton Reports $2.1 Billion Charge on Job Cuts, Assets: Company delays earnings as it seeks to wrap Baker Hughes deal
- Carmakers Brace for Tough Scrutiny After Emission Scandals: Carmakers have to be clearer about the way they certify their fuel economy and emission ratings: Daimler CEO Dieter Zetsche
- Williams Northeast Natural Gas Line Denied New York Permit: Proposed $925m Constitution natural gas pipeline was denied a key environmental permit from New York state regulators
- Proposed Bank Pay Rules in U.S. May Boost Salaries, Deter Hiring: Changes would have biggest effect on early career top earners
- Oil Bulls Plunge Into Market as U.S. Gasoline Demand Hits Record: Hedge funds boost bullish wagers to highest since May: CFTC
- GE Seeks to Raise as Much as $922 Million in Czech Bank Unit IPO: Offering 260.6m of existing shares, or 51% of GE Money Bank at indicative price of 68 koruna ($2.83) to 85 koruna each
- Obama Said to Be Sending 250 More Military Personnel to Syria: Move comes a week after U.S. announced more forces for Iraq
- Disney’s ‘Jungle Book’ Holds Box-Office Lead Over ‘Huntsman’: “The Jungle Book” collected $60.8m in its second weekend at theaters in the U.S. and Canada: ComScore
- Ford CEO Assumes Apple Working on Car, May Become Rival: BBC: Co. working on assumption that major rivals in future may not be General Motors or Chrysler but Google and Apple, BBC reports
- N.Y. Times Said to Cut Hundreds of Jobs This Year: NYP
- Google CEO Said to Plan Corporate Incubator: The Information
- UMG, Sony Music, Warner Music Fight YouTube on Filtering: FT
- Disney-Alibaba’s Web-Streaming Service Halted in China: SCMP