A few thoughts on oil

Yesterday’s EIA numbers reported the smallest amount of Saudi Imports in 2 years

Overall oil Imports last week were lowest in almost a year,thus more demand for domestic oil

Valero not taking any Venezuelan Crude to run refineries.Have to turn to other suppliers to get oil

Cl Dec/Dec spread continues to rally indicating supply worries
June/Dec Cl cal spread another example of Supply worries

Morning 1-31

After yesterday’s Dovish Fed, meeting the probability for a RATE CUT in December is 13% January 2020 23%. Gold trading at 9 month, working 4th consecutive monthly gain highs helped by the weaker dollar/ dovish fed. U.S. Indices NDX, SPX, and Russell roughly at 6-week highs. Per Mizuho “As of 5PM ET yesterday, 180 S&P 500 companies have now reported 4Q18 results. 72% beating EPS ests on +17.7% growth. 62% topping sales ests on +5.9% growth. “

 Out of the Eurozone GDP in line with expectations but German retail sales missed badly, continuing the run of below consensus economic releases for EZ largest economy. A narrow range in Euro trading little changed, Bunds a bit higher and European Stock markets mixed. Crude oil trying to break out to upside currently trading at 2-month highs as Lower OPEC production finally pushing prices higher. Yesterday’s EIA oil data showed the least amount of Saudi Arabian oil imports to the USA in months. Natural gas little changed to higher. Copper trading at 6-week highs as the Less fed rate lifting all “risky assets”

Event risk for today is the U.S. / China trade talks, President Trump already out with a few tweets “China’s top trade negotiators are in the U.S. meeting with our representatives. Meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal.” In addition, “No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points. Very comprehensive transaction” Slim possibility anything definitive to come from these meetings but if a trade deal was announced it would give a nice boost to risk

 Chinese markets closed all next week

Today’s Calendar

  • 7:30 Q4 employment cost index
  • 8:45  Chicago PMI
  • 9:00 new Home sales

Rate hike probabilities

Fed rate hike Probabilities on 1-15

Rate Hike Probabilities 1-29

A slightly higher Chance for rate hikes as earnings season progresses and Global slowdown narrative already run its course.

If Inflation ,as usual could maintain and upward trajectory the above probabilities will change.A Few Inflation metrics to see what Inflation has been doing, it has not been trending higher.

U.S. 5-year breakeven Rates bounced to start the year but now have moved sideways
the 5y5y Inflation swap also bounced at beginning of this year,But unlike the BE 5 yr it ha started to move lower.
UIG The NY Fed published underlying Inflation gauge captures sustained movement in inflation from information contained in a broad set of prices , activity and financial data. This metric encompasses more then just prices as you would see in CPI.Trend is turning lower.

Nervous

Markets so for this morning this trading with a bit of nervousness a bit of risk off or flight to safety.less the Steller Consumer confidence Report impacted by Shutdown so lets hope next month recaptures some of the Lost Confidence, report is trending lower last 3 months.Comments from the Director of national Intelligence Coates not very uplifting , saying “U.S. intelligence officials traveling around U.S. meeting with companies to discuss threats from China”. Also “China and Russia more aligned against the U.S. than any point in ‘Decades’ ,Lastly ” Looking to see if Chinese Gov’t is using Technology Firms to spy on U.S. . “

FAANG Stocks a bit heavy, worries about apple earnings after close,Amazon price target cut and Fedex working a new next day delivery method option all weigh on the stock, AMZn -2% ML fang index -1.7%,NDX -1%,Sp

Dollar small bid Gold higher and the weaker Stocks ,Nasdaq=Stronger bonds.