Latest Market Commentary

March 8, 2019


China’s exports dropped 20.7% in February as seasonal factory shutdowns and continued uncertainty from the trade war combined to drag on shipments, adding to concerns over a weakening global economy. German factor orders dropped 2.6% in January, where a gain had been expected, with the fall caused by weak demand from outside the Euro area. These reports add to the concerns that the US trade policy may be doing some permanent damage to the work economy. All this from Bloomberg.

China’s Shanghai Composite Index tumbled 4.4% overnight, as $345 billion was wiped off the value of the country’s stocks. The selloff came after the nation largest brokerage issued a rare sell rating, which inventors viewed as an indication that the government wants to slow the recent rally. This update is also from Bloomberg and these items of weaker economic data has pushed energy prices lower overnight and here in early trading.

The equities market have been pulling back the last few days and energy market has been able to hold support despite the weakness from equities. But today with the China news and equities looking to open lower energy price have joined the move lower.

Venezuela’s opposition leader, Juan Guaido, urged Europe to tighten financial sanctions against the government of Nicolas Maduro after it expelled Germany’s ambassador.

The United States’ special representative for Venezuela, Elliot Abrams, said that the US would “expand the net” of sanctions on Venezuela, including more banks supporting President Nicolas Maduro’s government. He said he has been asking European banks to take steps to shield individual Venezuelans’ assets from Maduro’s government.

Other negative economic news came from the European Central Bank, which reported a dramatic cut in the euro zone growth forecast for 2019 to just 1.1% from an earlier forecast of 1.7% in December 2018. The ECB president Mario Draghi, said there had been a sizable moderation in economic expansion that will extend into the current year. He also said the European economy is in a period of continued weakness and uncertainty. The ECB forecast news and Draghi’s comments pushed the Euro way down and the US dollar up. Crude and the dollar are inversely correlated and dollar strength usually puts selling pressure on crude oil. The dollar was up 0.8% to a news 6-week high in yesterday’s trading.
Tim Danze, MFA Oil Company Hedging Manager