Comment of the Day
12th June 2023
Eoin Treacy
Jun 13
Video commentary for June 12th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: oil prices test lower side of the range on slower global growth, Nasdaq pops on the upside for the same reason. Treasury yields stable ahead of the Fed meeting. Japan extends breakout, Yen on the cusp of breaking lower against the Euro, gold stable, CNY approaching potential support.
BOJ Is Said to See Little Need to Tweak Yield Control Now
This article from Bloomberg may be of interest to subscribers. Here is a section:
Still, officials aren’t confident enough to say achievement of the BOJ’s 2% price target is in sight, pointing to the need for continued monetary stimulus, the people said.
The yen fell and bonds rose after the report. The yield on 10-year Japanese government bonds fell 1 basis point, while bond futures ticked higher.
Governor Kazuo Ueda and his fellow board members will conclude a two-day policy meeting on June 16. Speaking in parliament Friday, Ueda said that recent data appear to show inflation deviating upward from the BOJ’s base case.
The final policy decision next week will be made after assessing economic data and developments in financial markets up until the last moment, the people said.
As the last anchor of global low interest rates, whether the BOJ will decide to pivot away from easing is a key factor that could cause ripples across global financial markets.
T. Rowe Price, BlackRock Inc (NYSE:BLK). and the European Central Bank are among those warning that any policy normalization from the BOJ may send a wave of Japanese cash flowing out of global markets and surging back home.
Eoin Treacy's view
Japan’s consumer prices might still be experiencing upward pressure but producer prices have fallen enough to approach the upper side of the underlying range. With slowing global economic activity, and a slow Chinese recovery the likelihood of deflationary forces triumphing has increased. That suggests the BoJ is unlikely to back away from yield curve control in the near term since their primary objective is sustained inflation.
This section continues in the Subscriber's Area.
Eoin's personal portfolio: stock market long initiated
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
This section continues in the Subscriber's Area.
Oil Extends Losses as Goldman Forecast Adds to Demand Concerns
This article from Bloomberg may be of interest to subscribers. Here is a section:
Oil extended losses as Goldman Sachs (NYSE:GS) Group Inc. cut its price forecast again, adding to a drumbeat of concerns about the outlook for demand.
West Texas Intermediate slumped below $68 a barrel after Goldman — which has had one of the more bullish forecasts for crude — made its third downward price revision for the global benchmark in six months, trimming its estimate to $86 for the end of the year on rising supplies and waning demand.
“Beyond the fact that a vocal crude bull cut their crude forecast again, physical market indicators also are shaking confidence of bulls expecting the market to shift from a surplus to a deficit in the coming months,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “Time spreads, which are the holy grail for traders assessing supply and demand dynamics, continue to deteriorate, fueling a massive risk aversion and prompting shorts to maintain pressure on prices.”
Eoin Treacy's view
Most commodity research focuses on supply because that is where the most volatility happens most of the time. Demand, by comparison, is more predictable and increases annually most of the time. It is when volatility creeps into demand projections that prices tend to swing around most because now two variables are present so outcomes are much more uncertain.
This section continues in the Subscriber's Area.
Bunge Is Said to Near Deal to Buy Glencore's Viterra (TSX:VT)
This article from Bloomberg may be of interest to subscribers. Here is a section:
Combining the two will create a trader big enough to take on the industry’s elite: Minneapolis-based Cargill Inc. and Chicago’s Archer-Daniels-Midland Co. The deal is the culmination of Bunge Chief Executive Officer Greg Heckman’s transformation of the once troubled St. Louis-based crop trader into a cash-rich oilseeds champion.
Eoin Treacy's view
The size and influence of large soft commodity traders means they have a great deal of power to shape the market to their liking. That implies creating new markets for the commodities they trade, like ethanol or biofuels, and ensuring there are ready markets for those products through lobbying efforts. That’s the definition of an oligopoly.
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