Market Update – The Third Way

  • Oil rose 3.4% on the week with Brent at USD 56
  • Gold fell 1.8 % to 1315
  • Haven assets decline, global equities rise
  • North Korea launches second missile over Japan

Thus far President Trump’s leadership has been long on noise but short on results. He has failed to come up with any legislative wins in his first eight months, despite the Republicans’ control of both chambers of Congress and the executive. This is mostly due to intransigence – the White House has simply not been playing its traditional coordinating role to help bills through Congress.

There are also now rumours of another potential deal with the Democrats on DACA, a program to legalise people who arrived in the country illegally as children and have grown up in the US. Yet to be confirmed, this deal would be in exchange for additional border security funding but surprisingly doesn’t mention the wall with Mexico, a key issue for Trump’s base.

Jeromine Bertrand (CFA) of Momentum Global Investment Management, one of our UK regulated, discretionary fund managers, shares his view. Click here to view.

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BofA – OPEC: Extend and Pretend

00096c2a-1600The last time OPEC (and Non-OPEC) member nations sat down to attempt a coordinated increase in oil prices by cutting production they succeeded… for about three months. Ever since then, oil has been on a gradual declining path, boosted by a surge in US shale output and declining global demand, with WTI recently even sliding sliding below OPEC’s implicit price floor of $50/barrel. Which is why on 25 May, after the failure of the first 6 month production cut, the same nations will try the same exercise, this time looking to cut output for 9 months, and hoping for a different outcome. At least that is the general expectation.

Bank of America’s Francisco Blanch has released a note previewing this week’s OPEC meeting titled “OPEC: extend and pretend“, and which boils down to the 3 choices faced by OPEC: maintain, curb, or hike output.

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Oil Jumps Most in Nine Months After OPEC Agrees to Output Cuts, But Will It Work?

opec-production-cut-announcementOil soared as much as 10% after OPEC approved the first supply cuts in eight years in an effort to ease a record glut and stabilise global markets, but how effective will the proposed cuts be in raising oil prices?
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PortfolioMetrix October Performance Update

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It was a terrible month for the pound and there was plenty of news from the US election to keep investors occupied. That said, suffering sterling did have the effect of raising returns on diversified portfolios, raising the performance on PortfolioMetrix Portfolios to all time highs during the month. Learn more

IMF Cuts Saudi 2016 Growth Forecast as Oil Stays Low

IMF cuts Saudi Forecast.jpgThe International Monetary Fund has cut its economic growth forecast for Saudi Arabia’s non-oil sector this year to 0.3 per cent, underlining the depth of the slowdown in the oil-dependent kingdom following a two-year slump in crude prices.

The new numbers, released ahead of Saudi Arabia’s first-ever international bond sale, suggest that the government’s efforts to cut costs and diversify its economy away from petroleum are having less of an effect than the IMF forecast previously. Saudi Arabia generates more than 80 per cent of its official revenue from oil, according to a World Bank report in July.

The impact is cascading through the broader economy and knocking consumer confidence, causing the non-oil sector to slide into a technical recession in the last quarter of 2015 and the first three months of this year. Learn more

Oil Slides As Iran Turns Down Saudi Offer

iran-rejects-saudi-cut-offerThe Saudi “cut” offer that rallied crude yesterday was nothing but a strawman to enable them to pinpoint blame on Iran for the failure of talks. Unwilling to freeze its output – even based on the ‘offer’ of Saudi cuts – Iran’s Bijan Zanganeh exclaimed “it’s not our agenda to reach agreement in these two days,” blowing a hole in the hope train for crude’s recovery.

Iran wants to raise its crude production to 4 million barrels a day, Bijan Namdar Zanganeh said in an interview Tuesday. OPEC’s third-largest producer – with daily output of 3.6 million barrels last month – will talk to other members at the International Energy Forum in the Algerian capital and it’s possible the group could reach a formal supply deal at its November meeting in Vienna, he said.

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Weekly Market Update

News this past week

  • Gilt prices rise as BoE suffers from supply drought
  • US July data comes in below expectations
  • Encouraging economic data out of China
  • EU waives budget deficit fines for Spain and Portugal
  • Oil rebounds from its bear market

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