Markets are slowly grinding higher as yesterday’s slump disappears following some stability with bond yields.  A significant rally however will be difficult until traders have clarity on the Fed’s policy path.  Today’s release of the FOMC minutes could show how the risks related to global trade could warrant further rate cuts, but traders will likely pay more attention to Fed Chair Powell’s speech at Jackson Hole on Friday.

Bunds
Germany’s auction on a new 2050 bund was met weak demand as investors remain bearish on the growth prospects in the short-term and on uncertainty as to how aggressive the ECB will be with a new wave of easy money coming into markets next month.  With the whole German yield curve now in negative territory investors will have to think hard if they want to pay Germany to loan them money out for 30 years.

Oil
Oil prices are rallying on some tightness with the supply side of the equation from both the US and Canada. Crude prices started to rebound from a bullish API stockpile report that could signal the largest Cushing draw since February 2018, if the EIA validates it. Yesterday, Alberta decided to extend their crude oil output cuts by a year. With Canadian heavy crude restrictions being extended, we should see US refiners should struggle to fill the void from lowered shipments from Mexico and Venezuela.
The biggest risk to crude prices is if Fed chair Powell disappoints at Jackson Hole on Friday and doesn’t signal more easing will be coming. The longer-term outlook still looks suspect for oil but rising expectations for a trifecta of stimulus from the US, Europe and China, should keep prices supported in the short-term.  Oil will struggle to breakout much higher until trade war concerns are firmly alleviated between not just the US and China, but the US and Europe.

Brent crude oil futures rose above $60 a barrel for the first time in over a week on Wednesday after a data report showed a larger-than-expected drop in U.S. crude inventories, but ongoing worries about a possible global recession capped gains.

Brent crude had gained 32 cents, or 0.5%, to $60.35 a barrel by 0403 GMT, after settling 0.5% higher on Tuesday.

U.S. crude was up 25 cents, or 0.45%, at $56.38 a barrel.

Markets in wait-and-see mode

Everything is looking a little flat on Wednesday, finally a reflection of what you would typically expect in this period after a chaotic few weeks.

Leading index rebounds

The Westpac leading index showed some improvement in July, rising 0.1% m/m after a 0.08% decline in June. This was the first positive reading since March and in comments linked to the release, Westpac stated that this was the first above-trend reading since November. Westpac noted that the changes in the share market, commodity prices and the inversion of the yield curve point to a likely softer reading for August. The bank still expects the next RBA cut to come in October.

AUD/USD was marginally higher during the Asian morning, partly from the data but also reflecting better risk appetite across asset classes. The pair is lining up for a second daily gain for the first time since early-July. US indices moved higher by between 0.32% and 0.44% while USD/JPY traded 0.24% higher at 106.48.

Daily Markets Broadcast

2019-08-21

Stocks rebound is short-lived

Ed Moya, Senior Market Analyst at OANDA joins Cory Fleck to share his thoughts on the US markets and all the recession fears that are on investors minds. Most importantly for this week we look ahead to major events that could drive markets, these include the Jackson Hole meeting and the G7 summit over the weekend.

Ed Moya on The Korelin Economics Report

Stocks slipped on Tuesday as investors digested a sharp rebound from a strong sell-off last week.

The Dow Jones Industrial Average traded 50 points lower, or 0.2%. The S&P 500 and Nasdaq Composite pulled back 0.3% and 0.2%, respectively. The Dow was on pace to snap a three-session winning streak.

Micron Technology and Advanced Micro Devices dipped 1.1% and 1.3%, respectively. Netflix shares pulled back 3%.

Oil futures retreated on Tuesday, with crude prices pausing after a sharp run-up in the previous session that had been partly fueled by reports that Yemen’s Houthi rebels launched a drone attack over the weekend on one of Saudi Arabia’s largest oil fields.

West Texas Intermediate crude for October delivery CLV19, -0.07% lost 25 cents, or 0.5%, to $55.90 a barrel, after the most-active contract gained 2.4% on Monday. October Brent BRNV19, -0.05% edged 20 cents, or 0.3%, lower at $59.64 a barrel, following a 1.9% gain in the previous session.

Oil prices have mostly risen over the past two weeks as expectations that central banks across the globe will combat signs of recession with greater stimulus that could help stimulate appetite for crude and other energy assets.