February 25, 2011

Market Wrap For The Week Ending 25-Feb-2011

Weekly Snapshot
• Saudi Arabia raises oil output as Libyan exports are disrupted (Reuters)
• Ireland's Ten Year bond near record high yield of 9.35% ahead of general elections (AP)
• U.S. consumer sentiment in February rose to its highest level in 3 years (Reuters)
• U.S. Real GDP grew at an annual rate of 2.8% in the fourth quarter of 2010 (ESA)
• The yield on Portugal's Ten Year bond reached a record high of 7.59% (Bloomberg)
• Crude Oil futures price in the U.S. topped $103 on Thursday (Reuters)
• New orders for manufactured durable goods in January 2011 increased 2.7%, to $200.5bn (ESA)
• U.S. new-home sales 12.6% below the revised December level, and 18.6% below Jan-2010 (ESA)
• Moody's downgraded Japan's sovereign rating outlook to Negative (Reuters)
• U.S. national home price index declined by 3.9% during the fourth quarter of 2010 (S&P)
• U.S. consumer confidence index rises to 70.4, the highest level since Feb-08 (Reuters)

Market Barometers

st-2011-0225   fx-2011-0225

Chart Of The Week
Oil prices have been on a big move for the second week in a row.  Crude oil futures rose over 14% since last week.  There is this ongoing price difference between oil futures traded in London (Brent Crude) versus oil futures traded in the US (West Texas Light Sweet Crude Oil).  We have alluded to this price discrepancy in our market wrap of 11-Feb-2011.  The price spread in favor of Brent Crude has spiked above $15 in the past week.
Historically, the two futures contracts have tracked each other extremely closely reaching a correlation of over 99% when comparing the weekly closing prices since 1986.   


In recent months however, the two oil price benchmarks started to drift apart.  Political tensions in the Middle East have been identified as a primary contributing factor.  However, there are additional factors that come into play as we shall discover below.


Recommended Read 
We have been wondering why these two oil futures prices have been diverging in recent months.  Political tensions in the Middle East and possible supply problems may have been the prima facie main factor causing European oil prices to rise much faster than the US counterparts.  There has also been some talk about over-supply of crude oil in the Midwest.  But there are other reasons why the prices have traded so far apart.  Please consider an in-depth write up and find a not so obvious explanation as to Why are WTI and Brent Prices so Different.

Recommended Video 
Back to our favorite subject: banks and interest rates.  Please enjoy this fun approach to lending and interest rates.


Good luck and good investing!

Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration.  Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.

No comments: