Market Express: North America's largest oil refinery shuts down as extreme cold bites Texas
2021-02-18


Investing.com -- Thursday will be dominated by a slew of US housing data and speeches from a number of Federal Reserve officials. Minutes of the Fed's monetary policy meeting, released earlier, showed Fed officials at their January meeting believed conditions for scaling back its massive asset-buying program would be difficult to meet for some time. In addition, all participants supported the decision to maintain accommodative monetary policy. The Fed pledged to keep its benchmark overnight interest rate near zero until inflation was on a path to "moderately exceed" its 2 per cent target.
 
Meanwhile, U.S. retail sales, industrial production and producer prices all beat expectations on Wednesday. This suggests that the US economy's recovery from the pandemic-induced recession is gaining momentum as vaccination advances.
 
Investors will also need to keep an eye on the Eurozone CPI and consumer confidence data, as well as the ECB's monetary policy minutes.
 
In markets, rising optimism about the $1.9 trillion U.S. economic stimulus package, coupled with rising inflation expectations, pushed benchmark Treasury yields higher, which in turn pushed the dollar to its highest level in more than a week.
 
In crude oil markets, oil prices rose more than a dollar on Wednesday as freezing weather in Texas, the largest U.S. oil producing state, shut down oil fields across the state, with unusually cold weather expected to weigh on crude output in the coming days and weeks.
 
Finally, it's important to note that Bitcoin hit a record high on Wednesday, just a day after breaking through the $50,000 barrier. Bitcoin is now the world's largest digital currency, with a market capitalisation of more than $900bn.
 
[Overnight Market Review]
Global currency markets: Rising optimism about the $1.9 trillion U.S. economic stimulus package, coupled with rising inflation expectations, pushed benchmark Treasury yields higher, which in turn sent the dollar to its highest level in more than a week. The dollar index, which tracks the greenback against a basket of currencies, continued to recover from a three-week low hit on Friday and was last up 0.25 percent at 90.933.
 
WORLD GOLD MARKETS: Gold fell for a fifth straight session on Wednesday, falling to its lowest level in more than two months as bets on an economic recovery boosted the dollar and benchmark U.S. Treasury yields. COMEX gold futures fell 1.5 percent to settle at $1,772.80 an ounce.
 
International oil markets: Oil prices rose more than a dollar on Wednesday as freezing weather in Texas, the largest U.S. oil producing state, shut down oil fields across the state, with unusually cold weather expected to weigh on crude output in coming days and weeks. WTI March crude settled up $1.09, or 1.81 percent, at $61.14 a barrel. Brent crude for April delivery ended up 99 cents, or 1.56 percent, at $64.34 a barrel.
 
US bond market: Despite upbeat economic reports, Treasury yields reversed recent gains as selling pressure abated. The 10-year yield fell back to 1.2939% in late trading, from a high of 1.333% earlier in the session.
 
U.S. stocks: The Nasdaq closed lower on Wednesday, while the S&P 500 was little changed as the sector rotation took tech stocks out of favor and worries about inflation added some pressure. In the U.S., the S&P 500 fell 0.03%, the Dow Jones Industrial Average gained 0.29%, and the Nasdaq Composite Index fell 0.58%.
 
European stocks: The pan-European Stoxx 600 closed down 0.74 percent. Germany's DAX30 index closed down 1.10 percent. France's CAC-40 closed down 0.36 percent. Britain's FTSE 100 closed down 0.56 percent.
 
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[Big pound -- market news]
Fed minutes: Conditions for tapering asset purchases will be difficult to meet for some time
 
Fed officials believed at their January policy meeting that conditions for scaling back its massive asset-buying program would be difficult to meet for some time, according to minutes released early Thursday morning. In addition, some investors are starting to focus on the threat of ultra-loose monetary policy stoking unnecessary inflationary pressures. But the minutes show that Fed officials are expected to ignore temporary factors that are pushing prices higher in the months ahead. All participants supported the decision to maintain accommodative monetary policy, the minutes showed. The Fed pledged to keep its benchmark overnight interest rate near zero until inflation was on a path to "moderately exceed" its 2 per cent target.
 
The U.S. economic recovery has gained momentum amid a slew of better-than-expected economic data
 
Data on retail sales, industrial production and producer prices on Wednesday all beat expectations. This suggests that the US economy's recovery from the pandemic-induced recession is gaining momentum as vaccination advances. Marc Chandler, chief market strategist at BannockBurn Forex in New York, said: "The retail sales numbers were not only stronger than expected, they were much better than expected. The same is true of industrial production data."
 
Energy producers in the U.S. state of Texas are in unprecedented trouble
 
North America's biggest refinery has been shut down as the coldest weather in 30 years hit Texas, the largest crude oil producer in the United States, the world's largest oil producer. Energy prices have soared to record levels and at least 5m people in the US have been hit by rolling blackouts to avoid a complete collapse of the grid as the energy crisis paralyses the power system in Texas. From North Dakota to Texas, hundreds of homes and businesses lost power amid unprecedented cold. More than 1 million barrels a day of oil and 10 billion cubic feet of natural gas production were shut down, pipeline companies declared force majeure and large refineries halted gasoline and diesel production. U.S. President Joe Biden has approved a state of emergency in Texas, making more resources available to help.
 
Bitcoin hits record high of $51,721, but analysts warn now is not its' mainstream moment '
 
Bitcoin hit a record high Wednesday, just a day after breaking through the $50,000 mark, though analysts warned about the sustainability of its price amid such volatility. Bitcoin hit a record high of $51,721 amid signs that the cryptocurrency is being embraced by mainstream investors and corporations such as BlackRock, Tesla, MasterCard and Bank of New York Mellon. Bitcoin is the world's largest digital currency, with a market capitalisation of more than $900bn. While Bitcoin has been embraced by a wave of mainstream investors and companies this year, some analysts warn that it is still far from becoming a widely used form of payment. Mark Haefele, chief investment officer at UBS Wealth Management, said: "We advise investors not to view this phenomenon as a 'mainstream moment' for cryptocurrencies and to exercise caution before specalizing, as cryptocurrencies are not a currency."
 
[Voice -- Investment Banking Institution Perspective]
Rick Rieder, chief investment officer of global fixed income and head of the global allocation investment team of multi-asset strategies at BlackRock: BlackRock has already entered the bitcoin space. "It's unusually volatile, but people are looking for value, looking for places to appreciate on the assumption of higher inflation, and the debt is building up, so we've started to get a little bit involved." In January, BlackRock listed bitcoin futures as a potential investment for two of its funds, according to a filing with the Securities and Exchange Commission. The two funds are the BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund.
 
JP Morgan: Bitcoin's record-breaking break above $50,000 is unsustainable unless the wild price moves cool down quickly. Bitcoin's three-month effective price volatility is 87%, while gold's volatility is 16%. Bitcoin's backers say it will threaten gold. The value of all Bitcoins in circulation has risen to $900 billion from $200 billion in September. At a time of $700 billion expansion, institutional investors have poured just $11 billion into key trust and futures markets.
 
Eric Rosengren, president of the Boston Fed: Inflation is unlikely to reach the Fed's 2% target on a sustained basis until at least 2023, and he's not worried that prices will immediately jump when the epidemic eases. We will see inflation picking up a bit in the coming months, but it will not reach 2 per cent consistently this year or even by the end of next year. "I would be very surprised if the Labour market were as weak as it has been and inflation remained at 2 per cent for the next year or two."
 
Iraqi Oil Minister Ihsan Abdul Jabbar: OPEC+ will keep its output cut policy unchanged at the March meeting, but Saudi Arabia may abandon its voluntary output cut of 1 million b/d after the meeting as oil prices recover. He expects oil prices to be between $58 and $63 in 2021.