Beyond Forex - Metals, Oils, Indices, Bonds, Equities March 27th

Keep up to date with metals, oils, indices, bonds, equities and agricultural commodities in our Beyond Forex analysis. With a lot of news coming out of the United States and the UK, there have been some observable trends developing, some more beneficial than others. Gold might soon make a move up, but with Article 50 on the horizon markets might not fair as well.


Metals

There’s mounting concern that the tax revolution promised by Donald Trump won’t materialise, and on the basis this is seen as having been instrumental in inflating equity valuations since his election back in November, a stock market sell-off could be on the cards. If this was to reignite talk of a possible recession across the Atlantic, then there’s also the question as to where investors should put any resulting cash. Gold – which has been beaten down significantly over the last five years – could well start finding more support.

Oil

As the US continues to extract shale oil at a pace, crude prices may be falling but the other consequence is that oil supply reserves are filling up fast. The Cushing reserves are around 350,000 barrels short of the all time high, which was hit in May 2016, so the tanks are around 79% full. There has been much debate as to what happens when storage runs out – the Opec quotas cut the market some slack here, but that question is very much back on the table. The next Cushing data is released on March 29th, but with the maximum capacity limits nearing, we could see more divergence between UK and WTI crude prices, making for some interesting pairs trades.

Indices

On Wednesday, the UK will formally invoke Article 50, the process by which the country can start unpicking its relationship with the European Union. Clearly there are no surprises here and this has all been priced into the market but the uncertainty that lies ahead could result in some jitters for the FTSE-100.

Bonds

Sunday sees elections being held in Saarland, a state on the Western border of Germany. Critically the outcome here is being seen as something of a precursor for what will happen in the national elections later this year. With a swing to the left, away from Angela Merkel’s Christian Democrat party being forecast at the local level, markets could be poised to react. The Social Democrats have promised higher unemployment benefits, so the natural implication here is more borrowing and as such we may see some movement on German bonds, with yields having the potential to tick higher as a result.

Equities

Fiat Chrysler could be a stock worth keeping an eye on in the coming weeks, after French prosecutors announced that they would be launching an investigation into the company over possible cheating in emissions tests on some of its diesel vehicles. Fiat is adamant that it meets all requirements in its home Italian market, but any hint that weighty fines may be on the way could see the share price take a dive. The company is already under investigation by UK and US regulators.

Agricultural commodities

Cocoa prices are falling on the back of soft demand and favourable weather conditions in West Africa. A relatively calm geopolitical situation is also keeping the market in check, so the question is just how much further can we expect prices to fall? The main harvest season isn’t until September, but early indications suggest that again this will be plentiful. Prices may have bounced off recent multi-year lows, but excepting any climatic or political changes, there’s arguably little to justify much more support being seen on the upside.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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