Quote of the Day
Adopt the pace of nature: her secret is patience.
Ralph Waldo Emerson
A quiet trading session on Tuesday led to a relatively quiet trading so far this morning. The main features of the market are still Europe, China and a sprinkle of geopolitics in and around the Middle East. All have been impacting oil prices as well as most risk asset markets. Starting with Europe the news is mostly positive as the negotiations with the Greek lenders are looking like they will result in a resolution and Greece will not default on its obligations. In addition the market is viewing the IMF's comments that they want to increase their lending fund to $1 trillion dollars as another positive. Whether or not the IMF will be able to achieve this objective is a whole different story in my view especially because the US is a major contributor to the IMF and the US is facing its own budget & spending issues. At least for today this news is acting as a positive for the euro and leading a rally in European and global equities and commodities.
There is not much new news out of China except for the Chinese government is allowing five of its largest banks to increase lending by 5% to help jump start the economy. All of the news and sentiment surrounding China suggest that the government is going to continue to expand its efforts to get its economy growing at more near historical levels and this action will involve lowering bank capital reserve requirements as well as short-term interest rates at some point in time. Also I would not be surprised to see some sort of stimulus program directed to the internal economy. This overall mentality that China is so far achieving a soft landing and changing their monetary strategy is serving as an underlying positive for oil and many traditional commodities.
Global equity markets are continuing to gain ground as shown in the EMI Global Equity Index table below. The EMI Index has gained 1.9% on the week resulting in the year to date gain widening to 5.2%. Germany is soaring higher and holding the top spot with an 8% gain on the year with Brazil and Hong Kong rounding out the top three. The major gainers this year so far are the bourses that were the major losers last year. How long this pattern continues is certainly an unknown as a lot of the strength in the three aforementioned bourses is a combination of short covering and light risk on buying. For now the global equity markets continue to act as a supportive catalyst for higher oil prices as well as for the broader commodity complex.