Today, oil rose above $70 for the first time since 2014 and looks likely to rise further. Low inventories, increasing geopolitical risks and a chance that the U.S. will withdraw from a 2015 international agreement with Iran are considered to be the main reasons for oils surge in recent weeks.
The surplus of oil now stands at 55 million barrels down from 340 million barrels at the start of 2017. The increase in oil price should lead to a number of rigs in the U.S. to commence production. It should also see more lending by banks to drillers as profitability should rise in line with the increase in oil prices.
Argentina is back in the news again for all the wrong reasons. Argentina unexpectedly raised rates on Friday leaving the cash rate at 40%.
However, for markets the most important piece of information will be what stance Trump takes with regards to China tariffs and the ongoing Mueller investigation. The Trump team is certainly creating a lot of noise and red herrings are abundant. And all of this is designed to distract the media.
The danger is that markets may take the red herrings seriously. For the Trump supporters, this is yet another series of fake news and Trump loses little in the way of support from his supporters.
For the ongoing Russian investigation, it undermines Mueller further and will probably result in Trump not meeting with Mueller and avoiding a court confrontation as the lines become more and more blurred.
This week, the big day is Thursday when the market gets a read on the CPI. The Treasury will be refunding about $73 bio for the month of May and this is up from $66 bio in April. Most of the increase is in shorter dated maturities.
The Treasury will sell $31 bio of three-year notes, $25 billion of ten-year notes and $17 bio of thirty -year notes. Yields rose slightly on the day with the 10-year closing at 2.95% up marginally on the day.
The big news for bond markets, however, was that the BOJ would remain with its existing easy monetary policy for years to come. The BOJ remains concerned that inflation remains low and is losing confidence in its price outlook.
Trump will make his announcement regarding Iran on Thursday and the Administration looks set to address China tariffs next week.
Equities: The S&P 500 rose 0.39% The Dow rose 0.35%. THE Stoxx gained 0.6%.
Currencies: The Bloomberg Dollar Index was up 0.2%. The euro fell 0.3%, and the pound gained 0.2%.
Bonds: The ten-year closed around at 2.95%. The 2-year closed at 2.50% and the 30-year closed at 3.12%. The ten-year bund closed at 0.53% and the UK gilt closed at 1.40% and the OAT closed at 0.767%.
The U.S. curve closed the day with the following closes 2/10 at 44.90p, 2/30 at 62.1bp and the 10/30, closed at 17bp. The U.S. 5-year closed at 2.789%.
Commodities: WTI rose 0.4%.
Bitcoin is trading around $9,364.
Aussie Market Today.
The Aussie market should see equities rally whilst bonds will be a little weaker on the day.