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Market Wrap
Higher inflation was the theme for the day and the world now waits with bated breath for what the Federal Reserve are going to do about the rise in CPI. The US dollar has fallen away since that unexpected rise to above 4% but yields on the benchmark treasuries are still elevated.
For the first day in a long time, all the major indices across the world are flashing red at the London close.
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The Nasdaq which is trading the most sensitive to interest rate increases found support from the 13,000 level today for the 3rd time in 6 trading days. Economic data releases this morning indicated that the inflation rate in the European Union and the United Kingdom advanced on a monthly basis, seemingly adding to negative market sentiment. In the afternoon session we received the inflation data from Canada.
As per the US CPI earlier this month, Canadian inflation rose to 3.4% in April of 2021 from 2.2% in March beating expectations of 3.2%. It is the strongest reading since May of 2011, with a significant proportion of increase attributable to base effects from April 2020 and the peak disruptions from the coronavirus pandemic.
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As I wrote in the morning brief, my suspicions were that the US dollar would trade inside yesterday’s range, which it did. The Antipodean currencies fared the worst with their close relationship with all thing’s commodity, as did the Canadian dollar.
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Oil dropped a few dollars off the price per barrel and found the $62 level and daily 50 ema as support. Commercial crude oil inventories in the United States reported a build of 1.3 million barrels to 486 million barrels in the week ending May 14, slightly under expectations. The US Energy Information Administration (EIA) report also stated that US crude oil refinery inputs averaged 15.1 million barrels per day, up by 96,000 barrels per day week-on-week. The total for commercial petroleum inventories was a reduction by 200,000 barrels but the fear of a reduction in demand is threatening recovery in prices.
Joseph Blount, Colonial Pipeline chief executive officer, made the decision to pay the hacker gang $4.4 million worth of Bitcoin on May 7 after the company which supplies approximately 45% of the fuel across the East Coast of America fell foul to the hackers. The Federal government recommended that he didn’t but, in a statement, today Mr. Blount said, “I know that’s a highly controversial decision. I did not make it lightly. I will admit that I was not comfortable seeing money go out the door to people like this. But it was the right thing to do for the country.”
The markets are coming back into their trading ranges ahead of the FOMC and it is likely that monetary policy does not change today. The risk event will be during the press conference that follows.
