May 15 2016

May 7, 2016 (Commerzbank AG) – In the last three months, commodity prices have staged a sharp rally which raises the question of whether this marks the turnaround or just a temporary recovery in an unbroken downward trend. In the short and medium term, there is a risk of stronger price corrections. In the long term, however, we expect commodity prices to rise again because demand is picking up once more and (over)capacity on the supply side is being reduced.

Outlook for the week of 16 to 20 May 2016

  • Economic data: Although oil is giving upward momentum to US CPI inflation, underlying price pressure is likely to remain moderate.
  • Bond market: Market focus is likely to settle on US and euro area CPI data and central bank minutes from both the FOMC and ECB. Bond trading may prove fairly technical, and major support/resistance marks in 10y Bund yield are in for a renewed test.
  • FX market: In the week ahead, EUR-USD will likely be range bound. No top-tier economic data are up for release and the minutes of the FOMC and the ECB are also unlikely to provide any new impulses. The yen, though, remains interesting, given that it is still trading at high levels with respect to growth and inflation.
  • Equity market: The disappointing DAX trend since the start of this year is still reminiscent of the miserable stock market year 2008. But valuations are much more attractive than in 2008 and the DAX has strong valuation support in the range 8,800 to 9,000.
  • Commodity market: Contracting shale oil production and falling US crude oil stocks will likely support oil, whilst zinc and platinum group metals should also find support.

USA 

May 13, 2016 (Tempus, Inc.) – The British pound weakened overnight, giving back its modest gains from yesterday’s session.  The Bank of England’s “Super Thursday” came and went without much volatility.

The central bank kept its interest rates unchanged.  However, the press conference following the decision showed that all of monetary policy makers expressed concerns over the possibility of a British exit from the European Union.  BoE head Mark Carney maintained that a “Brexit” is the biggest domestic risk facing the economy.

The referendum on whether the United Kingdom remains apart of Europe is slated for June 23rdWhile a “Brexit” remains unlikely, we expect heightened volatility over the next six months as the “Cable” may trade in response to headlines and poll numbers.