Who's afraid of the big bad Fed? Oil traders, that’s who! Oil succumbed to the rising dollar after homebuilder confidence hit the highest level in seven years. That kind of number in the sector that led us into the economic crisis is convincing the market that the Fed will signal that they will taper sooner rather than later. The National Association of Home Builders/Wells Fargo index jumped 8 points, which was the biggest monthly increase since September 2002 and came after an upbeat number on New York area manufacturing. Now, if you take Fed Chairman Ben Bernanke at his word, you had better get ready to taper down.
President Obama seems to be getting the market ready for life beyond Ben Bernanke. He said that Ben has stayed longer that Ben wants and probably longer than he should have and a very strong sign that Ben will leave the wind-down to his successor.
Of Course Mario Draghi also was taking victory laps for basically jaw-boning Europe into submission just by threatening to do whatever it takes to save the euro. He said that he is open to QE, but why should he do it when his words seem more powerful than ink. The euro of course continued to rally. Of couse, Draghi should also be thanking Bernanke because it was him and the U.S. central bank that provided the cover with its QE that allowed Europe to try to convince the market that they sort of have their act together.
The rebound in the dollar weighed on crude, which seemed to want to break-out on Mideast tensions. Obama talked tough and other G-8 members snubbed Putin over Syria but all Putin wanted to talk about was that he did not steal the Patriot Super-Bowel Ring. In fact he offered to buy it. What a guy! The Wall Street Journal said "President Barack Obama and Russian counterpart Vladimir Putin clashed openly over Syria as world leaders began a summit, sharply underscoring deepening differences over the civil war." And the Super Bowl ring?
Nat gas came flying back as summer and tropical storms return. The shorts have to run for cover after squeezing the market to the downside. Tropical Depression number 2 will clip the southernmost tip of the Gulf of Mexico but should not pose a major problem for imports or production. The technical setup on gas looks good.
The Wall Street Journal is reporting that Mexico might finally be ready to give in and allow foreign investment in their energy sector. While U.S. production is in a renaissance Mexican oil and gas production is falling. In fact they have been looking to the U.S. to help meet domestic gas demand. This is despite the fact that they sit on a wealth of supply that they can't get to because the government controls the company. The WSJ says that "President Enrique Peña Nieto will seek in the coming months to end a taboo of nearly eight decades by opening the state-run oil-and-gas industry to private investment and competition; a move the government hopes will attract billions of dollars in investment.
Mr. Peña Nieto's government wants to allow private energy firms to share the risks involved in developing increasingly complex energy reserves such as deep-water oil deposits by letting them produce oil and gas through profit-sharing deals and joint ventures with state monopoly Petroleos Mexicanos, or Pemex, according to three high-level government and ruling party officials who gave details of the proposed reform for the first time. The proposal, which would involve amending several articles of Mexico's Constitution, will need two-thirds support from Mexico's Congress. But officials say they are optimistic they can get at least one of the two main opposition parties to back the plan without drastic changes. Formal negotiations will likely start after local elections on July 7, with a bill presented to Congress as early as August, the officials said."