Market update: Yields rise and oil prices jump, Russia escalates

25 Sep

by Mihály Tatár

 

Good Morning!

 

  • Stock traders remained wary (SPX -0.35%, Dow -0.68%, DAX -0.64%, Shanghai -1.12%), less on the Chinese non-negotiation but rather watching yields and oil prices marching higher (US 2Y yield 2.83%, 10Y 3.09%, German 10Y yield 0.51% – there is no reason to expect a touchy-feely Fed tomorrow and Draghi just warned on ’vigorous inflation’ in the Eurozone, meaning, global tightening did anything but pause; while oil traders were busy hunting topside stop-losses after the OPEC meeting, propelling WTI to 72.70 and Brent to 81.40 USD). (As always, oil analysts are now busy updating their forecasts, Trafigura and Mercuria, for example, expect the return of 100 USD prices, and others, like John Kemp, talk about ’oil market echoing 2007/8’, or the burst to 146 USD just before the global recession arrived, with only BP sticking to its warning that the trade war hasn’t been priced in. My personal opinion remains unchanged: Global growth is very robust, that’s bullish, the majority underestimated Trump’s willingness to reshape the Middle East, also bullish, what is not bullish is that high WTI prices hurt US interests – Trump is down but not out in this – and almost nobody in the economist profession dares to predict a serious Chinese slowdown.) Currencies were less active on Monday (EURUSD 1.1745, EURHUF 323.60, EURPLN 4.30, GBPUSD 1.3110 – the latest surreal Brexit developments included Merkel saying that ’It’s very important for me that we do this in a friendship’, leaning on Brussels to avoid a harsh line, just when ’bad-cop’ Macron pressured May to better conclude negotiations yet in October, while UK authorities warned that flights may be grounded in case of no-deal Brexit because of the EU might not recognize aviation safety certificates). The exceptions were the Turkish Lira, which jumped 3% after noises that the detained US pastor might be released – if anyone remembers that was the final straw for Trump on Turkey, but the deep political hostility remains, with Turkey threatening to ’run intelligence operations on US soil against political opponents’ and to ’defend Jerusalem from Israeli invaders’ – neither will go unanswered; and the Swiss Franc, which finally weakened   – EURCHF 1.1350, it stopped its normalization after the Italian election result in the spring  – helped by the Draghi line and the rising yields but somewhat also by the news that Trump will soon meet the North Korean leader again.

 

  • As a punishment against Israel for downing the Russian IL-20 aircraft over Syria, Russia announced it will arm Syria with the S-300 air defense system – an on-off project always frantically stopped until now by Jerusalem and also making the US angry – and start jamming navigation systems, including satellite navigation, on-board radars and combat communication systems in the Eastern Mediterrranian theater. The crucial measure is the latter – stealth F-35 pilots won’t be particularly afraid of the once mighty S-300 – which may turn the larger Syria region into an electronic warfare zone between the US, Russia and Israel. In the meantime, US Secretary of State Mattis dismissed Iran’s accusation that the US was behind the deadly bomb attack that killed 25 people – most of them Revolutionary Guard members, but Teheran promised revenge, and President Rouhani refused to meet Trump at the UN assembly, which is not a good sign for the future.

 

Have a nice day,

Mihály

 

If you liked the post, follow Barrelperday on Facebook!

Or subscribe to our Twitter feed or Newsletter

No comments yet

Leave a Reply