Central Banks Try To 'Print Babies' To Boost Consumption

Oil

We focus on Brent as the global benchmark.

Brent was unchanged on the week at $42.85 / bbl.  But supply continues to creep upwards and a major source of demand is disappearing.

On the supply side, the US rig count has risen 10% in the last four weeks.  And Libyan exports have risen from zero to 500 kbd in a month, whilst Iran is getting nearer to opening its new pipeline in the New Year.

Meanwhile on the demand side, China has finally hit the brakes on its buying binge due to "swelling inventories and limited import quotas".  The world's largest importer had added 1.7mbd to storage between January and September.   

The OPEC+ cartel therefore has a familiar problem, as its Secretary General noted:

“We have to be realistic that this recovery is not picking up pace at the rate that we expected earlier in the year.”

The issue, as history has proved is that, "OPEC is like a teabag - it only works when it is in hot water".  And today, the pressure is once again on countries to increase their income by raising volume.

S&P 500

We focus on the US S&P 500 Index as the world’s major stock market index.

The Index was also unchanged on the week at 3484.  But the VIX volatility index pushed up by 10% - suggesting a change in trend may be nearing:

  • Market chartists are increasingly highlighting technical signs of an impending pull-back
  • The risk of a disputed election is starting to move sentiment from greed to fear
  • A Biden win could well lead to a market sell-off, as investors locked in gains before tax hikes

The S&P has been a momentum-based market for some time, where sentiment rules rather than earnings fundamentals. And so the technicals may give early warning if a new sell-off threatens.

Interest rates

We focus on the US 10-year rate, as this is the “risk-free” benchmark for global markets.

The rate slipped to 0.74% from last week's 0.77%, after a dramatic mid-week collapse to 0.70%. But the week's main event was a major speech from Fed Governor Quarles, responsible for market supervision, reviewing the market collapse in March and noting that:

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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this ...

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