Connect with us

Economics

Commodities and Cryptos: Oil pares gains post big build, Gold tests $1800, Bitcoin’s global appeal

Oil Crude prices rallied in early trade after the Climate Prediction Center and the International Research Institute for Climate and Society predicted…

Share this article:

Published

on

This article was originally published by Market Pulse

Oil

Crude prices rallied in early trade after the Climate Prediction Center and the International Research Institute for Climate and Society predicted the US could have a cold, wet winter.  If La Niña delivers another cold winter, the natural gas crunch will continue to lead to added demand for crude.

The commodity boom is still in place, but crude prices had to pare gains after US stockpiles posted a surprisingly huge build.  The EIA crude oil inventory report posted a headline 6.1-million-barrel increase, much more than the anticipated 521,000 expected build.  There is a lot in this report, but the three big takeaways are that inventories posted a big build as refinery runs plunged, but some of that could be attributed to seasonal maintenance.  Secondly, US production ticked higher and it will probably continue to do so, but will not come anywhere near the levels seen during the Trump administration. Lastly, demand was mixed; jet fuel demand weakness remains, distillate demand impresses as supply chain issues are keeping truck drivers busy, while gasoline increased but still nowhere near pre-pandemic levels.

Any dips in oil prices are quickly being bought by energy traders.  WTI has decent support at the $80 level and if that holds, short-term resistance from the $83 level might not put up much of a fight.

Gold

Gold prices can’t break past $1800 after solid earnings and positive data for the economy delivered a broad-based rally on Wall Street. Investors are mostly convinced that large parts of inflation will prove to be persistent, which is why commodities should see strong support for the rest of the year.

With real yields likely remaining in negative territory even as the Fed debates interest rate hikes next year, the outlook for gold should turn bullish for many traders.  The dollar still might have some support in the short-term, but eventually that will unwind.  Gold’s bullish rebound is facing a plethora of resistance around the $1800 level, but eventually it should make a run towards the $1840 region.

Bitcoin

Bitcoin prices are rallying as global cryptocurrency adoption skyrockets.  The latest Chainalysis Global Crypto Adoption Index shows massive growth across emerging markets and that trend will continue as investors abroad scramble for inflation hedges.

Crypto traders also shrugged off BOE’s deputy governor Cunliffe’s warning that Bitcoin could trigger a 2008-level meltdown.  Russia President Putin also made some comments on cryptos, noting that they have value, but shouldn’t be used for trading oil.  Bitcoin is not centralized anymore now that China is out of the picture and further support from a wide range of countries is always bullish for cryptos.

It is hard to imagine investors will pump up Bitcoin to the $60,000 level before next week’s potential SEC Bitcoin ETF decision.







Author: Ed Moya

Share this article:

Economics

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time…

Share this article:

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time records on Tuesday (Oct. 26). In his podcast, Peter Schiff focused on a few speculative stocks that have had meteoric rises (and in some cases crashes) over the last few days. He said this is evidence of the speculative fervor in this massive bubble.

What we’re seeing today is just another indication of the casino-like nature of today’s stock market that is completely the byproduct of artificially low interest rates, the inflation that the Federal Reserve and other central banks have created.”

So far, this latest round of speculative excesses has not marked the top of the market. After all, the markets continue to set new records.

I don’t know that this latest iteration of the speculative fever means that the markets have topped out. But it does provide additional evidence of the bubble-like nature of this market. And eventually, it’s going to come crashing down. If not now, sometime soon. And if it doesn’t come crashing down, it’s only because the dollar came crashing down instead.”

If we end up going down the hyperinflation route, we won’t see a stock market crash in nominal terms in dollars.

But everything will crash even faster and further in terms of real money. So, if we have hyperinflation, yes, these bubbles will implode, but you won’t be able to see the implosion if your prism is the US dollar. But it will be far more visible if you’re looking at it through the lense of gold.”

The first stock Peter discussed was Tesla. The stock hit an all-time high interday Tuesday although it closed off that mark. Nevertheless, the market cap is over $1 trillion. Only four other stocks in the world have market caps of over $1 trillion. Apple and Microsoft have market caps of over $2 trillion. Google is at $1.8 trillion, and Amazon has a market cap of $1.7 trillion.

That means Tesla is the fifth most valuable company in the world even though its earnings pale in comparison to those other four companies.

None of this would be possible but for the monetary policy of the Fed.”

So, why did Tesla stock go up so much?

The stock price surged after Hertz announced it would buy 100,000 cars from Tesla. The projected revenue for the contract is $4 billion. That means even if Tesla makes a 25% margin (an unlikely scenario), the profit would be just $1 billion. Meanwhile, the value of Tesla stock increased by over $100 billion on the news.

It makes absolutely no sense. It went up by more than 20 times the added revenue of the deal, 100 times the added profit of the deal. Why is that sale so valuable to Tesla? Does the market just believe that everybody is going to give Tesla these kinds of orders, like all the rental car companies? But even if they got all the rental car companies’ orders, it still isn’t going to be worth the increase in the market cap of the stock. This is just pure speculative frenzy.”

The point to understand is the increase in the market cap of Tesla stock has no relationship to the news that drove the price up. Nobody cares. It’s “buy now and ask questions later.”

Peter discussed some other stocks with crazy valuations, including Donald Trump’s company Digital World Acquisition Corp. and Bakkt Holdings, which saw a big rise on news of a crypto partnership with MasterCard.

In this podcast, Peter also talks about Jack Dorsey’s hyperinflation warning, Stanley Druckenmiller’s failure to understand the Fed is the problem, and how politicians aim their weapons at billionaires but end up hurting the middle class.

Tyler Durden
Wed, 10/27/2021 – 11:25












Author: Tyler Durden

Share this article:

Continue Reading

Economics

A dovish ECB could weigh on euro

The euro is treading in calm waters on Wednesday, ahead of the ECB policy meeting tomorrow. Currently, EUR/USD is trading at 1.1595, down 0.01% on the…

Share this article:

The euro is treading in calm waters on Wednesday, ahead of the ECB policy meeting tomorrow. Currently, EUR/USD is trading at 1.1595, down 0.01% on the day.

ECB policy meeting next

‘The times they are a changing’ are for major central banks. With the Fed, BoE and other central banks looking to tighten policy, there is pressure on the ECB, which remains in accommodative mode, to join the bandwagon. ECB President Christine Lagarde has insisted that eurozone inflation is transitory, a message we have heard often from Jerome Powell at the Federal Reserve. However, with no sign that inflation in Germany or the rest of the eurozone will ease anytime soon, it is becoming harder for the ECB to ignore the threat of high inflation, especially with the surge in energy prices only adding to inflation levels. Eurozone CPI hit 3.4% in September and is expected to rise to 3.7% in October, which would mark a 13-year high. In Germany, inflation has accelerated for three straight months and climbed to 4.1% (YoY) in September, its highest level since 1993.

Rising inflation is new territory for the ECB, as inflation has continuously fallen short of the bank’s inflation target of 2 per cent. In September, Lagarde said that the ECB was “pretty far away” from raising interest rates, but there is a growing belief in the markets that the ECB may have to raise rates in 2022 if inflation does not ease lower.

The upcoming ECB meeting is unlikely to shake up the markets, unless the bank unexpectedly veers to a more hawkish position. The December meeting should be much more lively, as policy makers may signal their plans for the Pandemic Emergency Purchase Programme (PEPP), which is set to expire in March 2022.

.

EUR/USD Technical

  • EUR/USD faces resistance lines at 1.1628 and 1.1685
  • EUR/USD tested support at 1.1588 earlier in the day. Below, there is support at 1.1531






Author: Kenny Fisher

Share this article:

Continue Reading

Economics

Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Another day, another hawkish surprise from a developed…

Share this article:

Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Another day, another hawkish surprise from a developed central bank.

While nobody expected the Bank of Canada to hike rates today despite soaring inflation, the BOC did surprise most most traders when it announced it is ending its bond buying stimulus program, and accelerated the potential timing of future interest rate increases amid worries that supply disruptions are driving up inflation.

In a policy statement on Wednesday, Canadian central bankers led by Governor Tiff Macklem announced they would stop growing holdings of Canadian government bonds, ending a quantitative easing program that has poured hundreds of billions into the financial system since the start of the Covid-19 pandemic, to wit: “The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds.” Then again, one look at the BOC’s balance sheet makes one wonder just how long this QE halt will survive…

The Bank of Canada will release details of how it will implement the “reinvestment phase’’ of bond purchases in a market notice at 10:30 a.m. That will be a situation where it acquires bonds only to offset maturities, keeping overall holdings and stimulus constant. Most recently, weekly bond purchases had been C$2 billion. BOC head Macklem will also provide more insight into his policy decision at an 11 a.m. press conference.

In any case, the BOC also signaled it could be ready to hike borrowing costs as early as April, as supply constraints limit the economy’s ability to grow without fueling inflation.

Macklem maintained his pledge not to raise the benchmark overnight policy rate until the recovery is complete, but officials now believe that will happen in the “middle quarters’’ of 2022, bringing it forward from the second half of next year as previously thought.

We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.

The language will reinforce market expectations the Bank of Canada is poised to quickly pivot to a tightening cycle amid growing price pressures. Investors are anticipating the Canadian central bank will start raising interest rates within the next six months, with markets pricing in four rate hikes next year.

The Bank of Canada has been using two major tools to keep borrowing costs low: maintaining its policy interest rate near zero and buying up Canadian government bonds from investors to keep longer-term borrowing costs in check. The benchmark interest rate was left unchanged at 0.25% on Wednesday. The central bank has increased its bond holdings by about C$350 billion since the start of the pandemic.

“Shortages of manufacturing inputs, transportation bottlenecks, and difficulties in matching jobs to workers are limiting the economy’s productive capacity,’’ the BOC said adding that “although the impact and persistence of these supply factors are hard to quantify, the output gap is likely to be narrower than the bank had forecast.’’

The more hawkish tone at the bank on Wednesday comes even amid a less rosy outlook for the economy. The central bank cut its growth estimates for both 2021 and 2022, but officials said much of that reflects worse-than-expected supply disruptions in the global economy.

Because of those disruptions, the Bank of Canada marked down estimates of “supply’’ by more than their downward revisions to output. That means the central bank now sees less excess capacity in the economy, and less reason to accommodate demand with cheap borrowing costs.  The build-up of inflationary pressures also appears to be testing the Bank of Canada’s patience. The Bank of Canada revised higher its forecasts for inflation — to 3.4% in both 2021 and 2022.

This means that the BOC is joining the Fed in tightening into a stagflation.

“The main forces pushing up prices — higher energy prices and pandemic-related supply bottlenecks — now appear to be stronger and more persistent than expected,’’ policy makers said. “The bank is closely watching inflation expectations and labor costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.”

In the accompanying Monetary Policy Report that contains the Bank of Canada’s new forecasts, policy makers also said upside risks to inflation have become a greater concern because price increases are above the central bank’s 1% to 3% control range.

In response to the surprise announcement, the Canadian Dollar soared as much as 0.6%, rising to 1.2309 against the USD…

… while the Canadian 2Y yield spiked more than 24bps above 1.00%…

… in a day defined by violent treasury moves, first in the UK and now in Canada.

Tyler Durden
Wed, 10/27/2021 – 10:16










Author: Tyler Durden

Share this article:

Continue Reading

Trending