The Perfect Storm for Oil is Far From Clearing

Oil prices surged at the end of last week off the back of President Trump’s tweet that signalled production cuts had been agreed with Saudi Arabia and Russia. Despite the +40% move, Brent is still down 50% on the year. Longer-dated futures contracts haven’t reacted to...

Markets Vulnerable to Shock of Higher Food Prices

The sharp slide in agricultural commodity prices this year has squeezed long trades, with net non-commercial futures positioning in corn now close to neutral (bottom-left chart). Corn has suffered the most precipitous drop, with high planting rates driving futures...

Rising Pressure on BCB for FX Intervention

The BCB reportedly stepped into the FX market last week with a spot sale of dollars that was not accompanied by a repurchase commitment or other intervention measures – the first time this has happened in a decade. The move to stem the slide in the BRL has been...

Silver to Continue to Outperform Gold

Low real interest rates and geopolitical uncertainty have helped fuel gold to being the best performing currency this year, returning over 10% against the USD. While we think gold remains a good investment in the current environment, we re-iterate our idea from our...

Money markets show no faith in ECB to hike

This post was taken from our December 4th weekly report. While attention will inevitably be focused on the upcoming ECB monetary policy meeting in December and the expected end to asset purchases, money markets are increasingly pushing back against higher policy...

Support for Gold rally is building

Gold has been in a narrow range since mid-August, and is down about 6% YTD in USD terms. It has had several opportunities to sell off more given a hawkish Fed, a rising USD and speculators going net short, but tellingly it has remained quite well supported. Today...

The Italian Doom Loop

With Rome appearing to square off with Brussels over its contentious budget, BTPs have faced considerable pressure and bank stocks have been hammered. This is the nefarious doom loop: Italian banks own a large chunk of Italian government debt and, given the lack of...

US Inflation Fears Overblown

A key risk for investors remains an US inflation overshoot. US inflation breakevens have been rising since the start the year (top-left chart), however we believe this is more a reflection of market pricing returning to fair value than the start of a self-perpetuating...

MLP Diverges from Crude and Credit Markets

There is a notable divergence between how energy Master Limited Partnerships (MLPs) are trading in the US compared with the crude oil and high yield markets. Energy MLPs tend to be highly sensitive to credit market conditions as well as commodity prices. The top two...