North American News
US equities test the lows late then rebound
- Closing changes in the major North American markets
US stocks started higher but were sold aggressively at the open and then once again at the close. That suggests there’s some heavy volume out there looking to get out of stocks — which is the opposite of the rebalancing flows that are modeled into quarter end.
- S&P 500 -0.3%
- Nasdaq -0.9%
- Russell 2000 +0.5%
- S&P/TSX 1.1%.
US May pending home sales +0.7% vs -3.7% expected
- US May 2022 pending home sales report
- Prior was -3.9%
- Year-over-year -12.0% vs -11.5% prior
- Index 99.9 vs 99.3 prior
- First rise in six months
US 5-year auction 3.271% vs 3.236% WI
- Huge tail in the $47 billion auction
This would be one of the biggest tails I remember and the largest since at least 2016.
The 2-year sale also tailed earlier, though a much more pedestrian 0.7 bps.
This is a frightening miss and shows there’s not the real money demand for bonds at these levels, even though they’re as high as they’ve been in years.
Plenty of people have been calling the top on yields but that’s tougher to believe given this sale.
US sells 2-year notes at 3.084% vs 3.077% WI
- Results of the 2-year sale
The US Treasury sold $44 billion in two-year notes.
- Prior was 2.519%
- Bid to cover at 2.51 vs 2.61 prior
Commodities
Gold Price Forecast: XAU/USD bulls eye $1,840s for sessions ahead on US dollar weakness
- Gold bears move in despite weakness in the US dollar.
- Bulls lurking in familiar support, eyes towards $1.840s.
Gold is under pressure despite the weakness in the US dollar. At $1,823, the price is down by some 0.23% while the US dollar is also underwater, currently down by 0.18%. The greenback has struggled versus its major rivals at the start of the week due to the prospects of softening inflation which has given cause for a reassessment of the projected path of the Federal Reserve.
WTI jumps from below the 100-EMA, and approaches $110 on OPEC+ cutting its surplus
- US crude oil extends its gains to two consecutive days, though it faces solid resistance at the 50-EMA, around $110.33.
- OPEC+ reduced its 2022 market surplus to 1 million BPD, while Libya’s political turmoil cut production by 600K BPD.
- WTI Price Analysis: Despite breaking an upslope trendline, oil’s price has recovered those losses, and now targets $110.00.
Western Texas Intermediate, aka WTI, records a solid bounce after testing the 100-EMA on the downside near $105.88 a barrel near the daily low and got bolstered late, as OPEC+ cuts 2022 market surplus from 1.4 million BPD to 1 million BPD according to sources cited by Reuters. At the time of writing, WTI exchanges hand at $109.86 per barrel.
Oil is rising to several factors striking the global economy. Over the weekend, the G7 is weighing on putting a lid on Russian oil prices and looking for other ways to supplant Russian oil and gas, as long as Russia keeps battling Ukraine. Meanwhile, Libya’s state oil company reported that it might suspend exports from the Gulf of Sirte amidst a worsening political crisis. Libya’s inability to resolve its political turmoil will shrink the oil market by 600,000 BPD.
In the meantime, talks between the US and Iran will restart in the coming days, according to EU chief diplomat Josep Borrell. If there is progress in Iran’s nuclear deal, crude from the country will begin to flow into the markets as a sign of relief due to the petrol shortage and high energy prices.
At the time of writing, it crossed wires that France President Macron told US President Biden that UAE is producing oil at near-maximum capacity after a conversation with UAE’s crown prince. At the same time, the Department of Energy (DOE) reported that strategic petroleum reserve oil stock dropped to 497.9 million barrels, the lowest level since April 1986.
In the meantime, the US Energy Information Administration said the timeline of publication of its Petroleum Status report that was scheduled to come out last week is still unclear but will not be published Monday, according to Bloomberg.
EU News
European stocks start the week mostly higher
- France and Italy lag
Closing changes for the main European equity bourses:
- Stoxx 600 +0.6%
- German DAX +0.7%
- French CAC -0.15%
- UK FTSE 100 +0.9%
- Italy MIB -0.7%
- Spain IBEX flat
Stocks in Europe peaked about an hour after the open and faded from there
Other News
G7 moving closer to a u-turn on the vow to end fossil-fuel financing
- Big mistake
The G7 made a grand show of pledging to end the public financing of fossil fuel projects by the end of this year in May but now — at the urging of Germany and Japan — is on the cusp of reneging on that promise.
We commit to end new direct public support for the international unabated fossil fuel energy sector by the end of 2022,” G7 energy and climate ministers said in a joint statement following talks in May.
Now, reports this week say the G7 statement will ‘acknowledge that publicly supported investment in the gas sector is necessary’.
This is an embarrassing reminder of the poor policy planning that was always, inevitably going to lead to an energy crisis. Now governments are begging oil and gas companies to drill more while compounding the stupidity by implementing windfall taxes.
I don’t see how this is anywhere close to the end of the energy crisis.
Cryptocurrency News
Bitcoin falls as SEC chairman warns on fraud and manipulation
- Comments from Gary Gensler on CNBC
Gensler called bitcoin a commodity but I don’t think that’s anything new. I believe this was the key comment from SEC Chairman Gary Gensler on CNBC:
“There’s a lot of risk in crypto but there’s also risk in classic securities markets. Difference is there’s no rules or disclosures in the former to protect from fraud and manipulation,” he said.
Gensler added that crypto needs ‘full and fair transparency’. He was referring to stablecoins there, which he compared to money market funds. The thinking there is that he wants the same kind of disclosures in stablecoins as money market funds.
The comments highlight how unlikely it is for the SEC to approve a bitcoin ETF any time soon.