Comment of the Day
Video commentary for June 16th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Dollar weakens are global central banks play catch up with the Fed, gold and oil firm, natural gas eases, stocks extend declines, bond remain weak. recession risk continues to rise.
Traders Bet Dovish Bank of Japan to Capitulate After Swiss Shock
This article from Bloomberg may be of interest to subscribers. Here is a section:
A Small BOJ Policy Change Should Have a Large Ripple Effect While Japan’s policy makers are expected to continue with monetary easing, there’s growing speculation in global markets about the potential for a shock decision. The BOJ has been keeping a lid on government bond yields since 2016 and defending that cap vigorously in recent days, but pressure is building to either alter its policy stance or give guidance on when that will end after the Federal Reserve’s biggest interest-rate hike since 1994. The yen rallied as much as 1.1% Thursday.
“As the BOJ is now the last central bank standing as regards easy policy, it’s unsurprising that bets against the BOJ are building,” according to Jeremy Stretch, head of G-10 foreign-exchange strategy at CIBC. While Stretch expects the central bank to stick with its current policy, “any suggestion of an adjustment to the YCC threshold would result in a material bounce in JPY valuations,” he wrote, referring to yield-curve control, in a note published Thursday.
My view - The Dollar began to ease today as the risk of recession rises and other countries join the Fed in raising rates. The surprise more by both the SNB and BoE begs the question how long the BoJ can hold out against rising inflationary pressures. They will certainly be among the last to raise rates.
Russia's Gazprom continues cutting natural gas supplies to Europe just as customers try to build up inventories for winter
This article from Business Insider may be of interest to subscribers.
Gazprom said Thursday it was further cutting gas flows to Europe citing more technical issues with its Nord Stream pipeline, Reuters first reported.
Russia's state-run supplier's latest reduction, the second in just two days, edges the Nord Stream's pipeline's capacity down by 40%. The move comes as European countries try to bulk up gas storage in anticipation of winter. European stores are currently 56% full, Reuters said.
Gazprom said issues with a gas compressor lead to the initial reduction. The company said that a delay in equipment sent to Canada for repairs is to blame for Thursday's reduction in flows, a claim that Germany disputes as a reason to push gas prices higher.
European natural gas prices climbed as much as 30% Thursday morning on the news. Norway, Europe's second-largest supplier behind Russia, has increased exports to make up for a curb in Russian gas in light of the Kremlin's invasion of Ukraine. The EU pledged to be 90% rid of Russian supply by the end of 2022, and fully exit from Moscow-sourced fossil fuels by 2027.
The EU has also turned to liquefied natural gas to make up for supply shortcomings in light of its sanctions against Russia, although a fire in Texas last week at a key export hub lowered supply expectations.
My view - Russia’s energy/economic military strategy will be most effective if it can prevent Europe from rebuilding inventories over the summer. The rationale is European politicians will be much more amenable to make concessions if their populations are cold and miserable this winter.
Rheinmetall Unveils New Tank as Arms Demand Set to Surge
This article from Bloomberg may be of interest to subscribers. Here is a section:
The German arms maker expects revenue to surge by as much as 20% per year driven by growing demand for military equipment, according to Chief Executive Officer Armin Papperger. Rheinmetall is boosting capacity and can at least triple ammunition production within the next twelve months, he told Germany’s Bild am Sonntag in an interview.
The company also is able to double military truck output “because a lot of Cold War infrastructure can be reactivated fairly quickly,” the CEO said.
Rheinmetall’s first modernized Marder light tanks are also ready for delivery, Papperger said, adding that when and where the vehicles get shipped depends on the German government. Berlin has faced criticism for what some see as tepid commitments to deliver weapons to Ukraine.
Rheinmetall is currently updating 100 decommissioned Marder vehicles, 88 Leopard 1 tanks and additional Leopard 2 versions. The vehicles could potentially be delivered to Ukraine or replace equipment dispatched by other countries.
My view - Spending money on arms is always easier when there is a war. The argument for modernizing the military apparatus of any country is more difficult without a clear urgent reason to do so. That’s especially true for democracies where competing priorities often take precedence and even more so for Europe with explicit protection guarantees from the USA. .
Eoin's personal portfolio Stock market short increased June 13th 2022
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.