Morning Brief: 08/03/2021
Market sentiment has turned down in early-week trading after one the world’s largest crude oil terminals was attacked in Saudi Arabi by Houthi rebels, via a drone and missile attack. The move has caused oil prices to surge towards new multi-month trading highs, despite the missile and drone attacks being intercepted.
Brent oil has cracked the $71.00 per barrel level on the news, while WTI oil has moved above the $67.00 level. Market sentiment is fragile as the oil terminal is capable of providing nearly 6.5 million barrels per day, which is roughly seven percent of the world’s oil demand.
US futures markets have turned heavily in the red on the Saudi Arabia news, with the intraday market theme looking like a playbook of last week, which is tech stocks falling, the US dollar rising, and higher US bond yields.
Markets could be falling on the notion that inflation is coming as oil prices continue to rise, and especially if there is a successful attempt to take out a Saudi Oil terminal at some point. It should be noted that value stocks are still in favour, and the Dow Jones Industrial Average is gaining, despite tech being in trouble again.
Markets have chosen to look past the positive news that the US Senate passed the Biden administrations $1.9 trillion stimulus bill over the weekend. The stimulus bill is going to the House of Representatives on Tuesday, where it is expected to pass and then be signed into law by Joe Biden.
The US dollar index is holding onto Friday’s strong gains, as the stimulus bill is seen as being supportive for the greenback, due to the fact that it will help the United States economy recovery.
Much debate still exists over the effect of the $1,400 stimulus checks that most US citizens will be receiving. It should be noted that Bitcoin has been gaining since the stimulus bill was announced over the weekend.
The Australian dollar is bucking the trend of US dollar strength today. The AUDUSD pair is gaining above the 0.7700 level, following the news that China’s exports surged by 60.6 percent over a year earlier in the first two months of 2021, as the pandemic hugely benefit Chinese manufacturers.
Aussie bulls are clearly figuring out that the demand for Australia’s commodities is likely to remain robust while this dynamic remains in place, which should be wholly supportive for the Australian currency.
Data Watch
A scheduled speech from Bank of England Governor Andrew Bailey headlines the economic calendar during the European trading session. Bailey is likely to comment on the post lockdown UK economy after British PM Johnson recently laid out the nations exit strategy.
Expect the British pound currency to be a big mover if Bailey talks up the UK economy, or indeed sounds more hawkish or dovish than expected. It is an interesting time for sterling also, as the GBPUSD pair continues to correct from the 1.4200 level as the greenbacks strengthens.
A shorter dated treasury auctions is the main event during the US trading session. I would expect all the usual themes to remain in play from last week, as the market continues to digest the strong US monthly employment number, the recent stimulus news, and indeed the Saudi Arabian news overnight.
