Trump Pumps Fake Oil Price Crisis While Strangling Venezuelan Exports

Donald Trump sent the oil market into a tailspin Monday with one tweet claiming oil prices are too high and blaming OPEC for it. Is Trump unaware that oil prices are a function of supply and demand? Or is he deliberately shifting the blame off his destructive embargo of Venezuela?

Though it is a fact that oil prices are at a three month high, “Oil prices are getting too high,” is merely Donald Trump’s opinion.

And calling the world “fragile” and suggesting higher oil prices would be some kind of catastrophe is an alarmist narrative.

Trump is Being a Drama Queen About Oil Prices

Trump’s overly-dramatic tweet fits in nicely with the Goldman Sachs report from earlier today predicting that Brent Crude oil will go even higher to $75/bbl before the end of the year.

But trying to scare up a panic over oil prices is a cry for attention from the sitting president, one that fits in with his television persona as a tough world negotiator.

That Goldman Sachs report also said the $70-$75/bbl trading range would be temporary:

“‘While prices could easily trade in a $70-$75/bbl trading range, we believe such an environment would likely prove fleeting,’ according to Goldman’s global head of commodities research Jeffrey Currie and senior commodity strategist Damien Courvalin.”

And oil prices are determined by supply and demand. So they’re not “too high,” as Donald Trump avers. They’re at the level that reflects supply and demand.

Oil Prices are Higher Because of Involuntary Supply Curbs in Libya and Nigeria

In Libya, the National Oil Corporation refuses to start production in the Sharara oil field, the North African country’s biggest. | Source: Wikimedia Commons

One reason oil prices are higher is because of involuntary supply curbs in socially and politically unstable Libya and Nigeria.

In Libya, the National Oil Corporation refuses to start production in the Sharara oil field, the North African country’s biggest.

The facilities were recently seized by a Libyan militia group, and the oil company’s chairman says the militia has “committed violent and terrorizing acts against workers.”

In Nigeria, contentious political elections underway now have dampened the country’s oil production. Western military interventions have destabilized both countries.

Libya and Nigeria Are Both Obama and Clinton’s Fault

The Obama administration’s regime change intervention in 2011 is partly to blame for the oil crisis. | Source: U.S. Navy

That includes a bill signed by President Obama in 2016 to station U.S. military boots on the ground in Nigeria, stirring up more armed conflict there.

It also includes the Obama administration’s 2011 regime change intervention in Libya, backed by British and French intelligence, as well as U.S. air power.

The result was an unmitigated catastrophe of violent civil disorder, warring factions, and a deluge of new terrorist recruitment, training, and planning in the power vacuum left by the relatively stable, secular government of Muammar Gaddafi.

What makes the intervention in Libya all the more baffling is what a close partner Gaddafi had been with both the Bush and Obama administrations in the Global War on Terror/Overseas Contingency Operation after 9-11.

So the previous administration and both major political parties in Washington deserve their share of the blame for the 300,000 barrels a day that aren’t pumping through Sharara.

Venezuela is Trump and Bolton’s Fault

Nicolas Maduro Petro
Donald Trump himself is to blame for high oil prices, given his administration’s intervention in Venezuela. | Source: Shutterstock

Oil prices are also higher than they would have been otherwise as a result of Donald Trump’s own half-baked geopolitical interventions as president of the United States.

Most notably, the White House blockaded oil shipments to and from Venezuela with an embargo on Venezuelan oil last month.

In a research note Monday, Goldman Sachs said the disruption in oil supply from Trump’s embargo on Venezuela is likely to reach as high as 300,000 bbl/d in the coming months:

“While the decline in net exports has been softened so far by the use of domestic light crude for blending, we believe Venezuelan disruptions are likely to accelerate in coming months to potentially 200-300 kb/d if no political resolution occurs.”

At today’s OPEC Reference Basket price of $66/bbl, that’s $6.8 billion worth of oil annually that Donald Trump is personally responsible for keeping stuck in Venezuela.

So if the world is really so fragile that it can’t take an oil price hike, then instead of telling OPEC to loosen up and take it easy, Donald Trump should take it easy on Venezuela.

Donald Trump Image from AFP PHOTO / JIM WATSON


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Author: Wes Messamore
Image Credit: Source: AFP PHOTO / JIM WATSON

Falling GDP, China’s Weakening Economy Drops Crude Oil Price By 2%

China’s weakening economy is driving fears of a global slowdown and now impacting oil markets. The price of crude oil fell 2.1% today.

New Data Shows a Cooling Chinese Economy

The latest data on Chinese imports and exports, below expectations, dropped the Dow Jones 230 points in premarkets today. The Dow Jones recovered but failed to turn green, ending the trading session down 0.36%.

Imports to China fell 7.6% year on year, while exports fell 4.4%.

According to recent reports, sources are warning that China is planning to lower its growth forecast to 6%. And, Moody’s has also found that “producers price inflation” has lowered over six consecutive months, a further sign of reduced demand in China.

Brent Crude Oil Price Drops 2%

The international benchmark for oil price, Brent crude, fell $1.48, or 2.5%, a barrel ending the trading session at 1.92% down at $59.27 a barrel.

Norbert Ruecker, head of macro and commodity research at Julius Baer said of China’s impact:

“Both imports and exports disappointed expectations and are set to revive fears about a global growth slowdown.”

Stephen Innes of Oanda echoed the sentiment saying:

“Oil prices are getting weighted down by the prospects of weaker economic growth in China.”

Despite hope last week of positive trade resolutions between the US and China, Innes added:

“This data drives home just how negative of an impact trade war is having on the Chinese and perhaps global economy.”

The import figures do not specifically point to a slowdown in China’s demand for oil, yet. Reuters calculations put China’s imports of crude oil up 30% in December 2018 compared to the previous year.

Oil futures also fell, the NYMEX-traded West Texas Intermediate (WTI) dropped 0.9% to $51.12 per barrel.

OPEC Cuts May Hold Back a Greater Impact on Oil Prices

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries including Russia agreed to cut oil output by 1.2 million barrels per day beginning this January. The move is designed to prevent market oversupply and boost oil price. This could be balancing today’s impact on crude price from China and slowdown fears.

Saudi Arabia’s Energy Minister Khalid al-Falih said today:

“The global economy is strong enough, I’m not too concerned. If a slowdown happens, it will be mild, shallow and short.”

Al-Falih is confident in the current performance of the oil market and does not believe OPEC should reconvene early to address the issue.

Analysts are predicting oil prices, per Brent Crude, to reach the mid-$60s and WTI to reach $55. This may depend on China’s economic performance later this year and the final outcome of US-China trade talks.

Krishna Memani, chief investment officer at OppenheimerFunds, said today he does not expect a US recession for at least five years. Memani believes a positive resolution between the US and China will happen as both countries have too much to lose, leaving the markets “home free.”


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Author: P.H. Madore
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Venezuela to Present Petro Crypto to OPEC as a Unit of Oil

The Venezuelan government is reportedly going to present its oil-backed cryptocurrency, the Petro, to the Organization of Petroleum Exporting Countries (OPEC) as a unit of account for oil.

According to local news outlet Telesur, the country’s petroleum minister and the president of state-run oil and natural gas company PDVSA, Manuel Quevedo, stated that Petro transactions will begin in the “first semester of 2019.”

On social media, PDVSA further revealed Quevedo claimed the Petro is the future of the Venezuelan economy, and that “growth and economic prosperity are equal to the Petro.” As CCN covered earlier this year Daniel Peña, the executive secretary of Venezuela’s Blockchain Observatory, told the Cuatro F newspaper he expected the cryptocurrency to positively impact the economy within “three to six months.”

Quevedo, while speaking at the headquarters of the National Superintendence of Cryptoassets and Related Activities (Sunacrip), an organization created to “regulate the activities that are executed by natural and/or legal persons connect to cryptoasset,” stated:

“We will use Petro in OPEC as a solid and reliable currency to market our crude in the world… We are going for growth and economic prosperity of our country giving a hand to the future since the Petro is a currency that is backed by mineral resources.”

Quevedo further emphasized the Petro is part of the country’s economic recovery plan, and as such all oil-based products are set to be commercialized in Petros. At the end of his speech, he called on all companies interested in working with him to “join his platform.”

The Venezuelan government has notably been pushing the Petro’s use. As recently reported, after bankrupting Venezuela the country’s leader, Nicolas Maduro, decided to launch a Petro savings plan that’s set to be available for 18 million Venezuelans.

The oil-backed cryptocurrency was first put for sale to the country’s residents on October 31, and can currently be purchased with cryptocurrencies like bitcoin and ethereum – but not with the country’s fiat currency, the bolivar.

Despite the government’s push, the Petro is a controversial cryptocurrency that has been criticized by the opposition in the country, and by other international organizations. CCN looked at the cryptocurrency’s whitepaper and found it appears to be a ‘blatant’ copy of Dash.

Meanwhile, Venezuelans in the country have been using cryptocurrencies to survive the government’s failures. So much so that bitcoin trading volumes in the hyperinflation-struck country recently hit record highs.


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Author: Francisco Memoria
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Take Five – World markets themes for the week ahead

LONDON

Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.

1/PATIENT, PERSISTENT, PRUDENT

ECB chief Mario Draghi has good reason to stick to a mantra of PPP – patience, persistence and prudence – when the central bank meets on Thursday. Since the ECB’s March meeting, economic data has disappointed, inflation estimates have been revised lower and a global trade spat may loom.

ECB policymaker Francois Villeroy de Galhau has already said the bank may have to alter its march toward a more normal policy stance if protectionism, exchange rates or market swings end up depressing inflation. Flash Purchasing Managers’ Index reports due on Monday will show if the run of soft data — after a record 18 quarters of uninterrupted growth — is continuing.

Economists anticipate that ECB steps towards winding down QE will come only in June or later. But Draghi will be pressed on what he thinks about the economic wobbles, trade wars and the euro. In trade-weighted terms, the euro remains less than one percent below a 3-1/2 year high hit on March 8, the last time the ECB met.

2/FAANGS-TASTIC

The FAANG group of stocks — Facebook, Amazon.com, Apple Inc, Netflix and Google parent Alphabet Inc — have tended to move together in the past, but of late their fortunes have diverged: Amazon shares have risen 33 percent this year, Google and Apple have chalked up single-digit gains and Netflix is up a whopping 72 percent.

Facebook shares are at the other extreme, having fallen 6 percent, hit by fears of tighter regulation and slowing advertising revenue growth after a data privacy scandal.
FAANG-topper Netflix has set the results bar high as well, with corporate earnings on track to rise 19.7 percent for the first quarter, their highest increase in seven years.

Now attention turns to the others. Investor interest is running high in Facebook which reports earnings next Wednesday. Google and Amazon will post their results on Monday and Thursday and investors are hoping that earnings growth and forecasts will be strong enough to bring the FAANGs back into favour.

3/SUCCESSOR-NOMICS

Public support for Japanese Prime Minister Shinzo Abe, the architect of Abenomics — reforms that have lifted growth and corporate profits while weakening the yen — has never been this low. Chances are he will not be re-elected leader of the ruling party, yet investors appear unfazed.

The Nikkei volatility index and implied yen volatility are at their lowest in almost three months. But latest data shows consumer inflation slowed in March to 0.9 percent, stubbornly below the Bank of Japan’s 2 percent target. The question is, if Abe leaves, would his successor have any better ideas than to continue on the path he has set?

The answer may lie at the central bank, which meets on Thursday and Friday. Its governor Haruhiko Kuroda, the man behind the monetary stimulus, was reappointed this year and would therefore survive beyond an Abe exit. While no policy change is expected, the BOJ’s forecasts on inflation will be crucial; sources say it will maintain its view on hitting the target in 2019.

And if Kuroda reassures markets the BOJ is nowhere near an exit from ultra-loose monetary policies, investors will stay unruffled by all the doubts about Abe’s political future.

4/CRUDE: BARRELS OF FUN

European oil majors Shell, Total, Statoil and Eni, and U.S. oil producers Exxon Mobil and ConocoPhilips are all due to report next week.

Crude’s surge to 2014 highs is a boon to oil companies’ bottom line and is supporting share prices but it could also be approaching the point where it starts amplifying inflation.

It is on the radar of U.S. President Donald Trump for sure, inducing him to tweet on Friday that oil prices were being kept “artificially” high by OPEC and this “will not be accepted”. While his tweet sent oil prices lower, they remain just below $73 per barrel, a 9 percent gain in 2018.

Will inflation start to become a concern for investors? They are already hyper-sensitive to any sign inflationary pressures are denting consumer confidence in this late-cycle environment. Bond prices have reacted with minor move upwards but it hasn’t ruffled too many feathers.

Investors in oil stocks, on the other hand, are in a heightened state of anticipation ahead of the big companies’ first-quarter results, which some expect to deliver the strongest cash flow figures in a decade.

5/IT’S A SNAP!

A snap election in Turkey and U.S. sanctions on Russia are seen influencing central bank policy in both countries next week. Turkey is now seen as very likely to raise interest rates at its meeting on Wednesday, while Russia’s Friday meeting may have to hold off cutting rates any further.

With Turkey’s election set for June, expectations are the central bank will at last be able to act on tackling double-digit inflation, the assumption being the government won’t want to go to the polls with a currency in freefall.

The lira has firmed more than 3 percent off record lows since the announcement.
In Russia, inflation is well below target but the rouble’s 6 percent slump to the dollar in the wake of new U.S. sanctions imposed on April 6 has fuelled concerns of pass through to prices.

Having earlier flagged rate cuts, policymakers are now signalling a “hold”, warning of higher inflation expectations. Their take on inflation will be in focus next week as will any comment on the rouble outlook.


 

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Stocks dip, oil gains as Syria fears go on; U.S. bank shares fall

NEW YORK

Oil prices extended recent gains and a gauge of global stocks eased on Friday as concern over a broader conflict in Syria left investors nervous, while U.S. bank shares led Wall Street lower.

The State Department said on Friday that it had proof that Syria carried out a recent chemical weapons attack in the town of Douma.

The prospect of Western military action in Syria that could lead to confrontation with Russia hung over the Middle East.

Oil prices added to recent gains that drove them to highs not seen since late 2014 and posted their biggest weekly gain since July.

“The geopolitical jitters just keep getting priced in here more and more, as we get closer to the moment of the strikes, if there are any,” said John Kilduff, partner at hedge fund Again Capital Management. He noted that Syria poses a large risk to global stability because of its relationship with powerful oil producers.

On Wall Street, fear of broader conflict in Syria further unnerved investors, while financial stocks led the day’s declines.

Shares of JPMorgan Chase (JPM.N) were down 2.7 percent after its earnings missed estimates, while Citigroup (C.N) dropped 1.6 percent despite beating profit estimates. An S&P 500 index of bank stocks .SPXBK fell 2.6 percent.

Weak loan growth weighed on bank shares, said RJ Grant, head of trading at Keefe, Bruyette & Woods in New York. “If you didn’t own financials going into the quarter, there was nothing in the numbers today that would make you excited about owning them,” Grant said.

The banks’ results kicked off the U.S. earnings reporting period. Tax cuts are expected to help corporate America post its biggest quarterly profit growth in seven years. Earnings at S&P 500 companies are estimated to grow by 18.4 percent from a year earlier.

The Dow Jones Industrial Average .DJI fell 122.91 points, or 0.5 percent, to 24,360.14, the S&P 500 .SPX lost 7.69 points, or 0.29 percent, to 2,656.3 and the Nasdaq

Composite .IXIC dropped 33.60 points, or 0.47 percent, to 7,106.65.

For the week, the S&P 500 was up 2 percent, the Dow rose 1.8 percent and Nasdaq gained 2.8 percent.

The pan-European FTSEurofirst 300 index .FTEU3 rose 0.10 percent and MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.15 percent. The MSCI index ended the week with its strongest performance in five.

In the oil market, U.S. crude CLcv1 rose 32 cents to settle at $67.39 a barrel, while Brent crude LCOcv1 rose 56 cents to $72.58.

The dollar was little changed against a basket of major currencies as traders waited for more clarity on a possible Western military intervention in Syria.

The dollar index .DXY, which measures the greenback against a basket of six major currencies, was 0.03 percent higher at 89.78.

The Japanese yen weakened 0.01 percent versus the greenback at 107.36 per dollar.
Aluminium hit a six-year high on Friday and posted its biggest weekly gain since the current contract was launched after the United States imposed sanctions on Russia’s UC Rusal (0486.HK), the world’s second-biggest producer.

London Metal Exchange aluminium CMAL3 hit its highest since March 2012 at $2,340 a ton before retreating to close at $2,285, down 1.7 percent.

Spot gold XAU= added 0.7 percent to $1,345.01 an ounce. U.S. gold futures GCcv1 gained 0.50 percent to $1,348.60 an ounce.

In the bond market, the U.S. Treasury yield curve hovered at its lowest level in more than decade as short-dated yields have risen more than longer-dated ones this week on expectations of further interest rate increases from the Federal Reserve.

The Hong Kong Monetary Authority (HKMA) stepped into the currency market and bought another HK$3.368 billion ($429.08 million) in Hong Kong dollars late in the U.S. session on Friday, as the local currency hit the weaker end of its trading range.

Benchmark 10-year notes US10YT=RR last rose 3/32 in price to yield 2.8248 percent, from 2.834 percent late on Thursday.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author’s Caroline Valetkevitch, Rodrigo Campos

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IEA says “mission accomplished” for OPEC as oil stocks shrink

LONDON

OPEC and its allies appear to have accomplished their mission of reducing global oil stocks to desired levels, the International Energy Agency said on Friday, signalling that the market could become too tight if supply remains restrained.

The IEA, which coordinates the energy policies of industrialised nations, said stocks in developed countries could fall to their five-year average – a metric used by OPEC to measure the success of output cuts – as early as May.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its monthly report.

Vienna-based OPEC has reduced production in tandem with Russia and other allies since January 2017 to prop up oil prices, which soared above $70 per barrel this month, giving a new boost to booming U.S. output of shale oil.

Reuters Graphic

 

GRAPHIC: OECD stocks vs. five-year average

Reuters Graphic

GRAPHIC: Stocks as days of forward demand vs. five-year average

But as oil production has collapsed in OPEC member Venezuela and still faces hiccups in peers such as Libya and Angola, the oil exporter group is producing below its targets, meaning the world needs to use stocks to meet rising demand.

On Thursday, the Organization of the Petroleum Exporting Countries said in a monthly report that oil stocks in the developed world were only 43 million barrels above the latest five-year average. The Paris-based IEA put the figure at just 30 million barrels as of the end of February.

The IEA said that even though non-OPEC output was set to soar by 1.8 million barrels per day this year on higher U.S. production, it was not enough to meet global demand, expected to rise by 1.5 million bpd or around 1.5 percent.

OPEC was producing 31.83 million bpd in March, below the call on its crude for the rest of the year at 32.5 million bpd.

“Our balances show that if OPEC production were constant this year, and if our outlooks for non-OPEC production and oil demand remain unchanged, in 2Q18-4Q18 global stocks could draw by about 0.6 million bpd,” the IEA said.

The figure would represent 0.6 percent of global supply or around half of OPEC’s current production cuts of nearly 1.2 million bpd.

The output-limiting pact runs until the year-end. OPEC meets in June to decide its next steps. The organisation’s de facto leader, Saudi Arabia, has said it would like the agreement to extend into 2019.

OPEC Secretary-General Mohammad Barkindo told Reuters on Thursday OPEC and its allies were poised to extend the pact into next year even as a glut of crude should evaporate by September.

“OPEC is within rapid reach of its first announced goals and will have to come up with a new metric for the June meeting if it wants the agreement to last into the second half of the year,” said Olivier Jakob from Petromatrix consultancy.

Qatar’s energy minister told Reuters last week that even though stocks around the world were falling, an investment drought continued to afflict the oil industry and hence the price of crude could spike in the long run.

Analyst John Kemp argues that recent statements from OPEC members indicate the organisation appears to be reformulating its target in terms of upstream investment rather than inventories.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author Dmitry Zhdannikov

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What Happened to the Oil Glut?

Stored oil is at its lowest level in more than three years, partly due to OPEC and Russia’s output cuts

A glut of stored oil that helped keep prices low for years is almost gone, thanks to production cuts by OPEC and Russia, a humming global economy and a series of small but meaningful supply disruptions.

Excess inventories of stored oil by the world’s industrialized economies are now at their lowest level in more than three years, based on a five-year running average, according to data released Thursday by the Organization of the Petroleum Exporting Countries. After months of steepening declines, the cartel said commercial inventory levels shrunk a further 17.4 million barrels in February, to about 2.85 billion barrels.

That represents a surplus of just 43 million barrels, based on the five-year average. Two years ago, the storage surplus hit 400 million barrels.

The drain on storage is partly a consequence of a concerted effort by Saudi Arabia, its OPEC colleagues, and Russia, to throttle back output to bolster prices.

“The rebalancing process is well under way,” OPEC Secretary General Mohammed Barkindo told an energy summit in New Delhi on Wednesday.

The quickening depletion of excess stored oil has analysts throwing around a word they haven’t had to use that often in the past few years: shortages. Without much cushion in storage, the threat of supply outages can more quickly drain inventories—and boost prices.

Venezuelan crude output has been hobbled by political and economic instability there, and rising tensions between the U.S. and Russia over Syria have also contributed to worry over supply. President Donald Trump has threatened a missile attack against Syria, in retaliation for an alleged chemical attack by Syria’s government, which Moscow has backed during the country’s long civil war.

Syria doesn’t pump much oil itself, but the new tensions have raised the specter of bigger production outages across the oil-rich Middle East, should military action escalate. Many similar supply-shock worries have had only muted impact on oil prices in the recent past, thanks to the glut of oil in storage. With that cushion gone, analysts say geopolitics may again start playing an outsize role in oil markets.

“Global oil supply and demand are quickly approaching a balanced position after spending several years in an excessively high inventory mode,” said Dominick Chirichella, co-president of New York-based Energy Management Institute, in a report Wednesday. “Geopolitical risk is bubbling up in the oil pits.”

Saudi Arabia has indicated little appetite for opening up the spigots. In its report Thursday, OPEC said its collective production fell by an average 201,000 barrels a day. Part of the decline came from fresh, voluntary cuts by Saudi Arabia. Earlier this week, the kingdom said it would keep its overall crude-oil exports below 7 million barrels a day next month.

Saudi Oil Minister Khalid al-Falih told the New Delhi conference this week that “we will not sit by and let another glut resurface in the coming years and bring the market through the roller coaster that we have seen.”

Thinning inventories isn’t just down to OPEC-led cuts. Oil demand has been growing amid a rare, synchronized economic expansion by the world’s biggest economies. OPEC said it now sees demand for this year growing by about 30,000 barrels a day more than it had previously forecast. That growth is now expected to come to an average 1.63 million barrels a day for the year.

Amid that new appetite, a series of production outages are already sapping supply. Last month, OPEC says it lost about 100,000 barrels a day because of the crisis in Venezuela and disputes by rival political groups in Libya and Iraq.

All that has translated into higher oil prices. Brent, the international oil benchmark, has been hovering above $70 a barrel—levels not seen in three years.

The big question for markets now is whether, amid the tightening market, North American shale producers swing back into action. These smaller, nimbler producers have in previous periods of oil-price strength, ramped up output to take advantage of the higher prices.

That new production typically boosts supply, and eases prices back down again. In its report, OPEC upgraded its non-OPEC oil supply forecast for the year, saying Canada and the U.S. will pump about 90,000 barrels a day more than expected.

 


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Author: Benoit Faucon
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Oil, stocks slide on Trump’s new trade salvo

NEW YORK

Crude oil and global equity markets tumbled on Friday after U.S. President Donald Trump upped the ante in a trade dispute with China, reviving investor jitters about the impact a tariff war could have on the world economy.

MSCI’s gauge of worldwide equity markets fell more than 1 percent and stocks on Wall Street skidded more than 2 percent after Trump threatened late on Thursday to add another $100 billion of tariffs on Chinese goods.

China warned it was fully prepared to respond with a “fierce counter strike” of fresh trade measures if the United States follows through on Trump’s latest threat.

The U.S. equity rout picked up during a speech by Federal Reserve Chairman Jerome Powell in Chicago on the U.S. economy. Powell said it was too early to tell if the threatened tariffs would materialise or the effect they might have.

“What Powell is signalling to market participants is that the Fed is not swayed or rattled by equity market volatility at this point. That’s the reason for the additional selling pressure,” said Chad Morganlander, a portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.

“The Fed has the intestinal fortitude to wait until it creeps into credit conditions and causes financial stress,” he said.

The pan-European FTSEurofirst 300 index, which closed before Powell’s speech, fell 0.4 percent but ended the week 1.15 percent higher.

The STOXX Europe index of companies in 17 European countries fell 0.35 percent, with the trade-exposed auto sector the leading sectorial loser, down 1.7 percent.

Earlier in Asia, Japan’s Nikkei nudged down slightly to regain a measure of calm after an initial knee-jerk reaction to Trump’s latest tariff proposal.

Defensive stocks such as utilities or telecoms were among a handful of European sectors to end the day in higher.

MSCI’s all-country index of stock performance in 47 countries fell 1.2 percent, led lower by Apple, Microsoft, Amazon.com and JPMorgan – the same as on the benchmark S&P 500 index.

On Wall Street, the Dow Jones Industrial Average closed down 572.46 points, or 2.34 percent, to 23,932.76. The S&P 500 lost 58.37 points, or 2.19 percent, to 2,604.47 and the Nasdaq Composite dropped 161.44 points, or 2.28 percent, to 6,915.11.

The market’s decline is due more to its current vulnerable state than the prospect of a trade war, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

“It’s got higher values; financial liquidity is contracting. You came into the year with a little too much optimism. You got rising rates going on, you got rising inflation fears,” he said.

Powell said the U.S. central bank will likely need to keep raising interest rates to keep inflation under control.

A weak U.S. unemployment report, which nonetheless highlighted underlying labour market strength, helped push U.S. Treasury prices higher as the economy created the fewest jobs in six months in March.

Oil prices tumbled, with U.S. crude falling more than 2 percent.
Brent crude futures fell $1.22 to settle at $67.11 a barrel, while U.S. West Texas Intermediate (WTI) crude futures settled down $1.48 at $62.06.

U.S. Treasury and euro zone government bond yields dipped as the trade spat raised the prospect of a full-blown trade war between the world’s two largest economies.

The yield on 10-year German government debt, the euro zone benchmark, dipped 2.7 basis points in late trading to 0.494 percent, erasing much of Thursday’s rise.

Benchmark 10-year notes last rose 15/32 in price to push yields down to 2.7753 percent.
Mike Terwilliger, portfolio manager of Resource Liquid Alternatives for the Resource Credit Income Fund, said nearly every news event seems to register on the market’s Richter scale, though investors have been dealing with some relatively weighty challenges this year.

“The recent decline in Treasuries is largely ‘Tweet related’ versus some fundamental shift in the view of inflation or economic growth,” he said.

The dollar index fell 0.37 percent, with the euro up 0.36 percent to $1.2282. The Japanese yen firmed 0.45 percent at 106.90 per dollar.

U.S. gold futures for June delivery settled up 0.6 percent at $1,336.10 an ounce.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author Herbert Lash

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