Breakfast Bites - Gold Hits $3000; Crude Oil on watch
SPX moves into correction territory
Rise and shine everyone.
A tough week is coming to an end, with Gold finally hitting that $3000/oz mark. Target hit for us today!
Today, we also get the University of Michigan Sentiment report at 10 am ET and the focus will be the inflation expectations reading, which has been increasing again since November.
Yesterday, even a softer PPI reading wasn’t enough to hold the markets up. Markets seem to be leaning into bad news more than good these days. The S&P 500 has now entered correction territory, just past the -10% mark.
This could push the market towards an upward bounce, and US Equity Futures are actually looking slightly better this morning. The US Government averting a shutdown probably has something to do with that as well.
There have been discussions about improving momentum, and that CTAs and Hedge Funds are likely done with their selling. To be fair, I don’t think that is the case, and risks are still skewed to the downside, particularly given the political and economic environment. This is why we need to watch the UoM Sentiment reading today. Oh and let’s not forget that the Vix is still above 20.
European markets are higher this morning, with German Bund Yields still showing strength. The GBP fell marginally, on UK GDP data that showed an unexpected contraction of -0.1% MoM in January vs. +0.1% est. Industrial production was down -1.5% YoY pulling down the data point.
Finally, we have the BoJ meeting next week, right before the Fed on Wednesday. Markets are wondering whether we see a leak over the weekend about a hike. The last few data points have been coming in stronger, with yields moving higher signaling a potential hike from the BoJ.
More Sanctions - Watch Crude Oil
Keep an eye on crude oil today—Trump just hit Iranian shadow fleets with fresh sanctions, targeting 10 oil and fuel tankers along with three tugboats, most of them floating off China’s coast. This is another squeeze on Iran’s illicit oil trade, and it’s bound to tighten supply.
Meanwhile, in a separate move, the Trump administration let a key license expire that had allowed payments for Russian energy in US dollars. “General License 8,” in place since 2022, gave select Russian banks a workaround to keep processing energy payments. The Biden administration had already set it up to lapse on March 12 by shortening its usual six-month renewal period, and Trump’s team quietly let it die. No big announcements, just a direct hit to Russia’s oil revenue.
Now, this makes it a lot harder for refineries and traders to pay for Russian oil in Western currencies.
The market reaction? Oil prices could be on the move again.
Earlier this year, sanctions on Russia helped push crude higher, probably forcing Moscow into peace talks. But with Russia rejecting a proposed 30-day ceasefire yesterday, the pressure is back on. And with Iran’s shadow fleet taking a hit, supply is tightening even more. All signs point to more volatility in the oil market.
What We’re Watching
10 am ET - University of Michigan Sentiment Data - Particularly inflation expectations
News flow on
The US Government Shut Down
BoJ hike
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
