Take That Comrade
The EU and the United States are slapping sanctions on Russia and the trade is trying to calculate the hit on the global economy. The sanctions are supposed to target "key sectors" of Russia's economy like banking, defense and most importantly energy.
While many feel the impact is priced in and that the sanctions might have been tougher the crude (NYMEX:CLU14) oil markets act like it will be a negative on economic growth. While the EU tried to avoid the gas industry as a target they still have to be concerned that Russia may try to cut off gas supply as we get closer to winter.
The EU is still dependent on Russia for trade and about one-third of their energy supplies and Russia is dependent on the money it gets from the EU. The stakes have been raised but will it be enough to get Putin to fold? It probably won't be enough to change the Fed's game plan as they meet today.
The United States is telling Russia to frack-off by denying Russia fracking technology and access to U.S. deep water oil-production equipment for use in the Arctic and other deep waters the Russians want to explore. Oil companies BP PLC and Total that have major deals with Russia are getting prepared to take a hit. Russian oil production expansion really depends on Western technology so it seems that Russian oil production will not live up to its potential anytime soon. But Russia may not take US poultry! Take that President Obama!
Not to mention financing of other types of commodity transactions as well. The U.S. made that harder by placing sanctions on Russia's second-biggest lender VTB Group, as well as the Bank of Moscow and the Russian Agricultural Bank. The EU has also slapped Russian banks with sanctions but we are not sure which ones but that should make it difficult for state-owned Russian banks to raise capital for any type of deal.
Gas oil in Europe rose and the dollar made a record high against the ruble.
Nat gas (NYMEX:NGU14) rallied back on expiration and the possibility of a storm. The National Hurricane Center is reporting that showers and thunderstorms associated with an area of low pressure located about 1,300 miles east of the southern Windward Islands remain limited. The circulation of the system is well organized, however, and the low could develop into a tropical depression later today or tomorrow while it moves generally west-northwestward near 15 mph.
Fed Day today! While we hope for surprises probably won't get any unless Janet Yellen gets chatty. Maybe the Fed will acknowledge the strong jobs number but with iffy housing data it will be hard to make the case that all is well. As far as the taper goes expect no change another taper of $10 billion, is on tap.