US crude settles at $48.90, tumbling nearly 5% on disappointment in OPEC’s production policy

Oil prices plunged more nearly 5 percent on Thursday after OPEC and other major exporters extended their current deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.

OPEC and other major producers, including Russia, will roll over their six-month deal to remove 1.8 million barrels a day from the market through March 2018. Investors had hoped the cartel might reduce output even further to drain a global glut that has depressed the market for almost three years.

Brent crude oil plunged $2.52, or 4.7 percent, to $51.44 a barrel by 2:36 p.m. ET (1836 GMT). U.S. West Texas Intermediate (WTI) crude futures ended Thursday’s session down $2.46, or 4.8 percent, at $48.90.

 The S&P 500 energy sector was trading down nearly 1.8 percent for its worst day since May 4.

Crude oil futures fell sharply lower around midday, after paring losses throughout the morning.

Michael Cohen, head of energy markets research at Barclays, said the market may have been looking for “the icing on the cake,” such as deeper output cuts or limits on exports.

“When those things weren’t included, then this kind of movement happens. We remain constructive on oil prices for next couple months as inventories draw down,” he told CNBC in an email.

Khalid Al-Falih, Saudi Arabia’s energy and industry minister, said he was not concerned by daily market moves during a press conference following OPEC’s meeting.

Still, energy consultancy Wood Mackenzie said keeping existing oil output at current levels for another nine months would result in a 950,000 barrels per day production increase in the United States, thus undermining OPEC’s efforts to balance supply and demand.U.S. oil production has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd as drillers take advantage of higher prices and the supply gap left by OPEC and its allies.

Investors are also nervous about

Fed minutes weigh on dollar, euro resumes climb

The dollar was on the defensive on Thursday, with investors low on incentives to buy the greenback after the Federal Reserve dialled down some expectations that it would hike interest rates soon, while the euro began to climb back towards a 6-1/2-month high.

Fed policymakers agreed they should hold off on raising interest rates until they see evidence that a recent economic slowdown was transitory, the minutes from their last policy meeting showed on Wednesday.

The minutes were seen to indicate heightened Fed caution towards interest rate hikes and took the wind out of an earlier bounce by the dollar, which had been plagued recently by U.S. political concerns centred on President Donald Trump.

The dollar index against a basket of major currencies was down 0.3 percent at 96.972.

“The minutes, while leaving the door open for another rate hike weren’t as hawkish as some investors had been expecting – there had been speculation ahead of time that hawkish tones could be quite supportive for the dollar,” said Alexandra Russell-Oliver, currency analyst at Caxton FX in London.

“I think some of those expectations were a bit disappointed following the minutes and we’ve seen the dollar ease off since. That’s also because it’s been quite vulnerable recently.”

The dollar rose 0.3 percent to 111.830 yen, pushed away from Tuesday’s one-week high of 112.130 yen.

The euro, which went as low as $1.1168 overnight, was 0.2 percent higher at $1.1240, making its way back towards the 6-1/2-month peak of $1.1268 touched on Tuesday.

The common currency has enjoyed a bull run this month on factors including an ebb in French political concerns and upbeat euro zone data.

“The euro is resuming its advance with the dollar sagging on the Fed’s minutes. It has the momentum to surpass the $1.1300 mark and we could see the rise continue towards $1.1500,” said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.

“That said, the market is low on incentives after the Fed minutes’ release. We have to wait until the U.S. non-farm payrolls report for the next big event, with dealers keeping an eye on any irregular Trump-related news headlines in the meantime.”

The Canadian dollar was at C$1.3405 per dollar after touching C$1.3389, its strongest since April 19, after the Bank of Canada gave a more upbeat assessment of the economy than some investors expected.

Stronger crude oil prices, which have bounced sharply from multi-month lows seen earlier in the month amid hopes that an OPEC-led production cut would be extended, have also supported the loonie this week.

S&P and Nasdaq close at record highs as big tech stocks rise

U.S. stocks closed higher on Thursday as tech stocks climbed while Wall Street remained positive about the Federal Reserve’s plan to trim its balance sheet.

The S&P 500 posted a record close and notched a new all-time intraday high. Information technology was among the best-performing sectors, rising 0.8 percent. Tech has been on a tear this year, surging more than 19 percent.

The Nasdaq composite also recorded all-time highs on an intraday and closing basis as Netflix, Alphabet, and Facebook shares all rose. Amazon also climbed, nearing the $1,000 per-share mark.

The Dow Jones industrial average, meanwhile, ended Thursday’s session within half a percent away from its record high, rising 70 points, with UnitedHealth and 3M contributing the most gains.

According to the minutes from its May 3 meeting, which were released Wednesday, the Fed sees a system where it will announce cap limits on how much it will allow to roll off each month without reinvesting.

“The markets are taking the Fed’s comments on how they plan to unwind the balance sheet as a positive,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

Pavlik also noted that the S&P closed decisively above 2,400 on Wednesday, a key technical level, that could prompt more investors to jump into the market.

Katie Stockton, chief technical strategist at BTIG, said: “Short-term upside is likely greatest for small- and mid-cap stocks given their relatively oversold position.”

Equities came into Thursday’s session riding a five-day winning streak, wiping out losses from last week’s sell-off as investors shrug off negative news from Washington.

“Investors have been focusing on strong earnings and improving fundamentals rather than political noise,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management. “Now people are wondering what to worry about next.

“I think it was a buy-the-rumor-sell-the-news event,” said Tamar Essner, energy analyst at Nasdaq. “There was also some hope that the cuts would deepen a bit.”

In economic news, jobless claims hit 234,000 last week, rising slightly from the previous week, but remained near their lowest levels in more than 40 years.

U.S. Treasurys rose on Thursday, with the benchmark 10-year yield slipping to 2.253 percent and the short-term two-year note yield declining to 1.293 percent.

 

 

GBP/USD: Needs A Fresh Catalyst To Stay Above 1.30

Barclays Capital FX Strategy Research notes that GBP/USD has been pushed above the psychological 1.30 level on higher-than-expected retail sales last week combined with USD weakness.

“Although GBP remains on an appreciating trend, with market positioning and valuation providing a boost, further near-term upside will likely require a catalyst, in our view. Baring further unexpected negative political headlines from the US, we do not think this week will provide such catalyst and expect the Cable to range-trade,” Barclays argues.

Data wise, Barclays notes the calendar is quiet this week, and expects Q1 17 GDP (Thursday) to be confirmed at 0.3% q/q.

GBP/USD is trading circa 1.3022 as of writing.

EUR/USD: Rallied ‘Very Far, Very Rapidly’ – What’s Next?

Danske Bank FX Strategy Research notes that EUR/USD has moved very far, very rapidly in a very short period on the ongoing accelerated repricing of both Europe and the US.

“The difference in the economic surprise indices between the eurozone and the US is at the highest level since spring 2015 and PMIs in the eurozone have been marching higher consistently since September 2016, while the cycle in China and the US is faltering. Eventually, there will be a spill-over from the IP cycle in China and US into the eurozone as there always is, but for now, the eurozone is shining,” Danske clarifies.

In line with this view, Danske is envisaging the beginning of the end of the USD’s multi-year bull run, and remains structurally bullish on EUR/USD.

“In the medium to long term, we remain bullish on EUR/USD as fundamentals such as valuation and current-account balances suggest a much higher EUR/USD over time,” Danske argues.

S&P 500 Futures: Down Hard Early In The Week, And Up Big Late In The Wee

The political circus was in full swing last week, and the S&P 500 futures (ESM17:CME) bore the brunt of it. After a quiet start to the week, the President Tump / former FBI director Comey headlines kicked the ES into high gear. On Wednesday, the S&P took a 1.8% nose dive, the Dow futures (YMM17:CME) were down 1.5%, and the Nasdaq 100 futures fell 2.75%. One of the things I asked my Twitter followers and the PitBull was, ‘did algorithmic trading push the markets further then they should have?’ For the most part, the answer was a unanimous ‘YES’!

After a big rally on Thursday the index futures markets continued higher on Friday. The S&P 500 futures (ESM17:CME) rose 17.9 points, or 0.75%, to 2381.50. The Nasdaq 100 futures (NQM17:CME) climbed 22.75 points, or 0.45%, to 5653.25, and the Dow Jones futures (YMM17:CME) gained 143 points, or 0.55%, to 20787.00. Even with the strong late week rebound, major indexes in the U.S., Europe and Japan ended the week lower on worries about President Donald Trump’s ability to push through proposals, including tax cuts and infrastructure spending.

In the end, despite the drop and all the ‘bad news’ out of Washington, the S&P 500 futures, at its high of 2388, was only 16 points off its all time contract high. Yes, the bears got their way, but the overall patterns remain the same; drop and pop. After the dust settled, the S&P 500 fell 0.4% for the week, its worst weekly drop in more than a month. The Dow industrials also fell 0.4% during the week, and the Nasdaq Composite dropped 0.6%.

The late week rebound regained much of the weeks losses and showed not only how political strife can rattle the markets, but also how investors focus eventually goes back to corporate earnings and economic growth. I understand that the markets are over extended, and have been for a long time, but I also understand how historically low interest rates have made it impossible to be a seller. It all goes back to that old saying, ‘don’t fight the Fed’. The bounce back showed that as long as the data is improving, the stock market still has more room on the upside.

Gold on track for biggest gain in five weeks

Gold rose on Friday and was on track for its best week in five as the dollar softened on political turbulence in the United States, boosting bullion’s safe-haven appeal.

Spot gold was up 0.65 percent at $1,254.63 per ounce. It climbed 1.9 percent for the week while U.S. gold futures rose 80 cents to settle at $1,253.60 an ounce.

“We have political turmoil in the US which has driven the dollar lower… this week’s sentiment has supported gold,” Danske Bank analysts Jens Pedersen said, adding that it was unclear whether bullion would hold on to the gains into next week.

Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty, gaining alongside bond yields and the Japanese Yen while stocks usually take a
hit.

President Donald Trump last week fired FBI Director James Comey, triggering a political firestorm which culminated on Wednesday in the Justice Department’s appointment of a special counsel to probe possible ties between Russia and Trump’s 2016 presidential campaign.

“Political risk is back on again after market participants became overly complacent following the outcome of the French elections,” Commerzbank analyst Carsten Fritsch said.

“Risk sentiment took a major hit,” he said.

The dollar index, which measures the greenback against a basket of six major currencies, was headed for its worst week in nine months while world stocks were set for the first weekly fall in five.

New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking
labor market slack.

“Safe-haven buying has provided strong support to gold prices over the past six months,” ANZ said in a note.

“However, rising geopolitical risks in the U.S. and elsewhere are likely to propel prices even higher, despite the specter of a rate hike in the U.S. next month.”

 

Dollar heads for worst week in over a year amid political uncertainty

The U.S. dollar was poised on Friday for its worst week since April 2016 against a basket of major currencies, having given up much of the gains made since Donald Trump was elected U.S. president.

The dollar index, which tracks the greenback against a basket of six world currencies, has shed around 2 percent this week. On Friday, it fell 0.6 percent, hitting its lowest since Nov. 9, the day of the U.S. election results.

Uproar over Trump’s recent firing of FBI director, James Comey, who was overseeing an investigation into possible links between the president’s team and Russia, have pressured the dollar.

 “The dollar overall, across the board, has been getting beat up this week and a lot of that has to do with the political risk here in DC,” said John Doyle, director of markets at Tempus Inc in Washington. “While we saw a little bit of a reprieve yesterday, were right back on that dollar weakness train.”

The U.S. currency has also suffered from a resurgent euro, which has gained more than 2 percent this week and was on track for its best performance since February 2016. It rose 0.8 percent on Friday to hit a six-month high of $1.1196.

That advance of the euro, said analysts, was spurred by a possible winding back of the European Central Bank’s expansive monetary stimulus program, with data pointing to a robust recovery in the euro zone.

 

Dow closes more than 100 points higher as stocks shrug off hangover

U.S. equities closed higher on Friday as concerns about Donald Trump’s presidency recede for the time being.

The Dow Jones industrial average rose about 140 points, with Boeing and Caterpillar contributing the most gains.

The S&P 500 gained around 0.7 percent, with industrials leading all 11 sectors higher, as shares of Deere rose 7.3 percent after posting quarterly results that easily beat expectations.

The Nasdaq composite rose 0.47 percent.

“With the special prosecutor, … this gives the administration the opportunity to defer questions about the investigation. That’s why we’re seeing a bit of a relief rally,” said James Smigiel, managing director at SEI.

Stocks suffered their biggest pullback of the year earlier this week after news that former FBI Director James Comey put together a memo on a conversation with Trump. In this conversation, Trump allegedly asked Comey to stop investigating former National Security Adviser Michael Flynn.

“Trump’s got everybody on edge, both Republicans and Democrats. Everybody thinks there’s a smoking gun somewhere, and when you get something that might look like that, then people get excited,” said Maris Ogg, president at Tower Bridge Advisors.

Justice Department officials announced Wednesday that Deputy Attorney General Rod Rosenstein had tapped former FBI Director Robert Mueller as special counsel, taking over the investigation into Russia’s alleged meddling in the 2016 election.

“For a while now, we’ve been in this tenuous position for stock prices and I think that’s going to continue until we get more clarity,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Trump made his first trip overseas since taking office on Friday, first traveling to Saudi Arabi, which is planning to buy billions of dollars worth of U.S. arms.

In economic news, there were no major data released Friday. However, St. Louis Federal Reserve President James Bullard said the central bank’s plans to raise rates may be too fast.

The Fed is slated to meet next month, with market expectations for a rate hike near 80 percent, according to the CME Group’s FedWatch tool.

U.S. Treasurys fell on Friday, with the benchmark 10-year note yield advancing to 2.233 percent and the two-year note yield near 1.27 percent.

The U.S. dollar fell against a basket of currencies, with the euro rising 0.92 percent to $1.1202.

“The US side should, however, become less USD negative, in so much as the market is starting to more realistically appraise the way politics will impact the Fed, notably via US financial conditions,” said Alan Ruskin, global head of Group-of-10 foreign exchange strategy at Deutsche Bank, in a note.

“A June hike is still seen as very likely, while the 10y yield has also stopped short of the major 2.15/2.16% support line. In that sense the USD has more support, if Washington goes a little quieter, at least while the special prosecutor sets up infrastructure,” he said.

 

Dow Jones Industrial Average Bounces Back, Inching Toward All-Time Highs

The new trading week kicked off on a very positive note on Monday, with sizable gains across the board for U.S. stocks. Technical analyst Dave Chojnacki of Street One Financial recaps the action gives investors and traders an important update on the key technical levels for the major averages.

The market moved higher right from the opening gate on Monday and stayed strong through the morning hours. This time, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were the stronger indices, as the Nasdaq 100 held up the rear.

Through the PM hours, the major averages moved mostly sideways, and a last hour move to the upside left the NDX and SPX at new highs. The rally was widespread, as most sectors finished in the black. The volume was below average, but better than the last few Mondays.

At the close, the DJIA was up 0.4%, the SPX added 0.48%, and the NDX gained 0.3%. Breadth was positive, 3 to 1, on below average volume. ROC(10)’s were mixed, with the DJIA and SPX advancing and the NDX declining. The DJIA crossed back into positive territory, joining the other major indices.

RSI’s were higher, with the NDX continuing to be the strongest index at 80.2. It continues in overbought territory. The DJIA continues with its MACD below signal, while the other major indices remain above. The ARMS index ended the day at 0.83, a bullish reading.

The rally continues, with the NDX and SPX hitting new highs. The NDX closed at 5704 and hit 5706 intraday. The SPX closed at 2402, and rallied to 2404 intra-day. The SPX and DJIA attempted to get out of the narrow range they have been in for the last 15 days. The SPX closed at 20 points above its 20D-SMA (2382). It is comfortably above critical near term support of 2328.

The NDX has put more distance from its 20D-SMA of 5584. Its critical near term support is way below at 5353. The DJIA has yet to break above its March closing high of 21115, but remains 120 points from its 20D-SMA of 20861. The VIX inched up just 0.02 of point to finish at 10.42. It remains extremely low.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 75 ETFs in the Large Cap Value ETFs category.