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Meme: What are the types of headaches?On September 17th, the cost of insuring euro-denominated credit against default remained low ahead of the Federal Reserves interest rate decision. AJ Bell analyst Russ Mould said in a report, "Today is the key day investors have been anticipating all year—the Fed is likely to cut interest rates for the first time in 2025." Mould noted that a 25 basis point rate cut could further boost market sentiment, but a 50 basis point cut (currently considered less likely) could spark market concerns about the US economic outlook. According to S&P Global Market Intelligence data, the European cross credit default swap index, which measures the risk of default on euro high-yield bonds, fell 1 basis point to 251 basis points, approaching the 3.5-year low of 248 basis points reached on Monday.On September 17, TA Securities warned that if the Federal Reserve holds interest rates steady and incoming data continues to weaken, the market could interpret this as a policy mistake. This scenario could prompt investors to shift toward healthcare and consumer staples stocks, leading to outflows from financial, industrial, and growth-reliant technology sectors. U.S. Treasury prices could rebound, while overall risk appetite could fade.On September 17, TA Securities predicted that if the Federal Reserve cuts interest rates by 25 basis points to a range of 4.00%-4.25% as expected, the market will react by "buying the forecast and selling the reality," as most investors have already priced in a 25 basis point rate cut. A 25 basis point rate cut would be interpreted as a cautious, supportive, "insurance" cut aimed at maintaining growth momentum without signaling distress. This environment typically favors consumer staples, healthcare, and technology stocks, which benefit from lower borrowing costs and have defensive or secular growth characteristics. Financial stocks, on the other hand, tend to underperform the broader market due to the impact of narrowing interest rate spreads on earnings.On September 17, Russias weekly crude oil exports fell sharply, driven by a decline in cargo volumes at Baltic ports due to Ukrainian drone attacks that affected facilities in key Russian regions. Vessel tracking data showed that Russias average daily seaborne crude oil exports were approximately 3.18 million barrels in the week ending September 14, down 934,000 barrels from the previous week, marking the largest weekly drop since July of last year. However, the less volatile four-week average of exports rose slightly: the week ending September 14 was revised to an average of 3.46 million barrels per day, higher than the revised average of 3.42 million barrels per day in the week ending September 7. This rebound was due to the previous weeks exceptionally large exports, when Russias exports of Urals crude oil through Black Sea and Baltic ports drove cargo volume growth. The four-week average data can more clearly reflect the underlying trend.

Despite weakening China inflation, WTI crude oil prices surpass $80 per barrel. API inventories are scrutinized

Daniel Rogers

Apr 11, 2023 14:34

 截屏2023-04-06 下午4.29.32_1024x576.png

 

WTI crude oil reaches a new intraday high near $80.40, buoyed by marginally bullish market sentiment and a weakening US Dollar ahead of Tuesday's European session. Even so, the price of black gold remains within a one-week trading range of approximately $2.0 upon the resumption of full markets following the weekend break.

 

Consequently, the US Dollar Index (DXY) breaks a four-day uptrend by falling to 102.35 at press time, down 0.20 percent intraday. In doing so, the greenback bears the weight of remarks made by the president of the Federal Reserve (Fed) Bank of New York and the vice chairman of the Fed's rate-setting committee, John Williams, who cites rising chances of benign inflation. Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, according to Reuters, "The Federal Reserve may not need to raise interest rates further to fight inflation, as the aftermath of last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy."

 

On a separate page, the conclusion of China's military exercises near Taiwan is combined with the Australian-Chinese trade agreement and expectations for increased investment in Japan to illustrate the cautious optimism in the markets. Positive headlines from the International Monetary Fund's (IMF) Managing Director Kristalina Georgieva, who stated on Monday that the global economy is expected to grow less than 3% in 2023, with India and China expected to account for half of the global growth this year, also favored the optimists.

 

In spite of this, CME's FedWatch Tool forecasts that the US Central Bank will raise rates by 0.25 percentage points in May, which challenges market sentiment and WTI crude oil purchasers. Also weighing on risk appetite and energy benchmark prices could be China's disappointing inflation data and a cautious tone ahead of high-profile US data/events.

 

Above all, the OPEC+ supply limits and rising expectations of increased energy demand from the world's largest energy consumer, China, support the upward momentum of WTI crude oil.

 

Moving forward, the weekly report of Oil inventories from the American Petroleum Institute (API), which was -4,346,000 barrels the week prior, could influence WTI prices. For unambiguous direction, the IMF's spring summit and US inflation, as well as the Fed Minutes, will receive the most attention.

 


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