Open: London Session | Forex, Metals, Oil, Agriculture June 01, 2021



For instance, over the past few weeks, agricultural commodities (corn, soybeans, wheat) have exploded higher, so commodity ETFs that have larger “Ag” allocations will have outperformed.


less The rupee opens on a flat note tracking the overall weakness of the dollar. Price Pressures | A key estimate of euro-area inflation is due today, and economists expect it will be at 1.9%, ostensibly meeting the ECB s definition of price stability.


Similarly, base metals (steel, copper) also have rallied hard, again favoring those ETFs with more exposure to those sectors. Before, the tie to gold tended to keep inflation concerns under control.


Crude oil exports from Middle East were lower while North African exports were higher w-o-w. Saudi Arabian exports were lower at 5.8 million bpd for the week. With Brent futures rising above $70 a barrel, the meeting is closely watched not just by oil traders, but also by inflation forecasters. Flow ControlOPEC+ is meeting in Vienna today, where the oil producers are expected to sign off on an output increase in July. Commencement of the US summer driving season, dropping gasoline inventories in the US and positive manufacturing data in China for May helped improve demand expectations.
The lack of follow-through into wages in the past decades explains why previous price jumps (such as oil price spikes) have not resulted in sustained inflation. The West African oil exporter is also an importer of refined petroleum products which the country hopes to replace with domestic refined supply. Earlier, the Joint Technical Committee (JTC) of the group agreed on the forecast for a 6 million bpd growth in oil demand in 2021.
OPEC+ meets today to review oil production plans with Brent topping $70 a barrel. The OPEC+ is likely to maintain announced plan of gradual increase in output when the group meets today. Reuters had also earlier reported that at least one European refiner was in talks with NIOC on purchasing crude once sanctions are lifted.

United States

If someone had posited some kind of new Fed model that dividend and bond yields should be equal, the last 10 years might have made that position look sensible. Whether the Fed is right (inflation is temporary) or the inflation hawks are right (inflation is not temporary) will be determined in the next several months. The Fed model compared the earnings yield on stocks (the inverse of the price-earnings multiple), with Treasury bond yields. Today, Wall Street continues to use Zacks research including the Zacks Rank and Zacks Equity Research, which combines the best of quantitative and qualitative analysis.
If the Fed were to end QE and hike rates quicker than it has said, it wouldn’t concern markets much. The Fed was acting to avert deflation, which Japan had shown could be a real possibility. These ratios showed a strong correlation in the US from 1977 to 1997. Unheard of in the days when all Wall Street could say was “Buy”.


In another sign the region is on track toward normality, Germany s Angela Merkel said she s ready to let the country s controversial lockdown law lapse. China International Import Exposition SuspicionFrench President Emmanuel Macron met Angela Merkel to discuss reports of U.S. spying on top European politicians. The powers were set to expire at the end of June, and Merkel confirmed that those can run out now.