Portugal's default assault

A default by Portuguese Espirito Santo International, parent company of Portugal's Banco Espirito Santo, reminded the market that maybe, just maybe, the problems in the European banking sector may not be over just yet. Euro stocks tanked and oil prices that were going for a record amount of down sessions bounced late in the session as traders covered shorts as the stocks found some support late in the US session.

Crude oil (NYMEX:CLN14) has been assaulted by weakening demand and rising supply. Iraq's exports are actually higher than when the ISIS crisis began and Libya is intent on flooding Europe and Asian markets with light sweet oil.

Yet it was gold (COMEX:GCN14) that seemed to find the majority of the risk aversion. Even after India failed to follow through on expectations that India would lift its 10% import duty on gold it stayed strong. Reuter's reported India surprised bullion markets by keeping the import duty on gold and silver (COMEX:SIN14) unchanged at 10 percent in its fiscal budget, a move likely to limit overseas purchases by the second-biggest bullion consumer and further encourage smuggling. India, desperate to trim a gaping current account deficit, took a slew of measures last year to curb demand for bullion, its second-biggest import after oil. Besides the duty imposed by the finance ministry, India's central bank also imposed the so-called 80-20 rule that required a fifth of all bullion imports be re-exported.

Reuters reported that Indian gold imports plunged by a fifth last year though jeweler and investment demand rose 13 percent, causing a spurt in smuggling. The World Gold Council reckons that 200-250 tons of gold have been smuggled into India since the imposition of import controls. Only 2.5 tons of smuggled gold have been seized by law enforcement agencies, according to government officials.Believe it or not Portuguese Espirito Santo International is rebounding. The FT Reports that Banco Espirito Santo shares have jumped almost 12 per cent after the local stock market lifted a trading suspension imposed after the Portuguese bank got hammered by concerns over its exposure to its troubled biggest shareholder.

Natural Gas (NYMEX:NGN14) continued its downward move as the Polar Vortex comes back and supplies beat weekly expectations. Yes I am serious. Well kind of. 

The Energy Information Administration reported that U.S. Natural gas stocks increased by 93 bcf versus expectations of 92 bcf. Still supply is 27.6 percent below the five year average yet if the weather stays unseasonably cool the shortage gap may continue to tighten. Yet at the same time if prices fall too far too fast in may impact the production side.

Soybeans (CBOT:SNN14) and corn tanked to the lowest levels since 2010 ahead of today USDA report that may show the biggest crop of those commodities in history. Bloomberg reported that the U.S. production may total 13.93 billion bushels of corn and 3.79 billion bushels of soybeans, the most ever, according to a Bloomberg News survey before the U.S. Department of Agriculture updates its outlook at noon today in Washington. Most crops are in good or excellent condition after ample rain, USDA data show. Cool weather in the Midwest will prevent heat stress on crops through next week, according to MDA Weather Services."

Yet talking to Price Groups analyst Jack Scoville, all might not be well for the crop. He has reports of yellowing corn that has had too much water and concerns that cool temperatures may slow crop progress! Stay tuned for USDA today.

 
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.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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