The Fed vs. Mother Nature

Euro debt fears are leading traders to safe haven plays once again. Assets like the dollar and gold are rising and oil once again is falling. With the focus back on Europe the market is forgetting about the increasing risk of more quantitative easing as the Euro bank stress tests seems to have only dented already shaky confidence. While in the real world the threat of default looms large, in the mad world of Euro stress tests that prospect is unthinkable.

Today European woes are driving us. The FT reports that, “A dangerous rift among European leaders over how to resolve the Greek debt crisis threatens to drive stock markets lower on Monday, after a German central bank chief warned against plans to issue Eurobonds," reports The Telegraph. In an attack that pits Germany against other Eurozone countries ahead of a vital European summit this week, Jens Weidmann, the head of Germany's central bank, said proposals to shore up Greece with bonds guaranteed by the Eurozone amounted to forcing taxpayers to "vouch for Greece's entire national debt". The head of the European Central Bank placed a major obstacle on the path to a new agreement on a Greek financial bail-out, saying the bank could not accept defaulted bonds as collateral, potentially cutting off funding from the Greek banking system, reports the Financial Times. Jean-Claude Trichet, in an interview with Financial Times Deutschland published on Monday, said other Eurozone governments would have to come up with ways to keep Greek banks in business if they continued pushing for a bail-out plan that would lead to bond defaults.”

The fundamentals on oil have still changed as the Federal Reserve has QE 3D still on the table. A key number to watch may be the Philly Fed because a real weak number could increase the odds that more stimuli is coming. We know what the 600 billion bond buying program did for commodities and to the emerging markets. Not only did it jump US exports by devaluing the dollar, it put upward pressure on emerging market currencies as the hot money went in search of yield. It also created demand for oil as we saw the fed inspired expansion of demand as well as hot money investing.

Yet Mother Nature may have her say as the second tropical storm of the season has assumed its name. Tropical Storm Bret does not seem to be a major threat to gulf oil and gas supply at this time as the storm is south of most oil instillations and is close to land. Still there may be some disruptions regardless. The National Hurricane centers says that,...BRET CENTERED JUST NORTHWEST OF GREAT ABACO ISLAND...EXPECTED TO BEGIN MOVING NORTH-NORTHEASTWARD LATER TODAY.

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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