Risk On But In A Very Laid Back Way

Oil retuned to higher prices today during the U.S. trading session, permitting American equities to take advantage of the situation.

West Texas Intermediate crude was up over 1.00% while Brent was up just under 1.00%  at the close of regular trading. In after hours, prices seem to be holding.

Asia was immune to the gravitational pull of oil and so experienced a mixed session although Shanghai was the hero of the day (up 2.20%) while the Nikkei was the goat (off 1.25%).

China was up largely on the perception that the central government was keeping up a host of stimulus moves although those cut both ways in the minds of investors. The entire country is top heavy with debt – public, private, internationally, internally – everywhere you look.

Europe’s equities fared poorly, indeed, getting knocked around by lower oil prices. As oil pared its losses it was too late for the DAX, FTSE and CAC to get out of the red. The French CAC performed worst of the three majors.

U.S. stocks were very modestly higher as of 4PM in New York, but nevertheless up is up and momentum does count. And it especially counts on a day when there is negative, but not disturbing data.

In economic news, existing home sales declined 7.1% in February to a yearly rate of 5.08 million units, the lowest level since November of 2015, according to industry surveys.

Ahead of the opening bell in New York, the Chicago Fed’s national activity index posted a decline to negative 0.29 in February from positive 0.41 in January. That is not a percentage reading, but rather an index reading. It sounds much worse than it actually is.

On a day that was mildly risk on in the U.S., gold certainly took a rough hit. Spot is off $11.80, with regular trading doing the most damage, although a 0.20% rise in the U.S. dollar against the euro added loss onto gold’s back. (The dollar is weaker in late trading.)

The other three metals in the precious complex were up, palladium most impressively. It rose over 2.00%.

The dollar’s strength against the yen also indicated a risk-on sentiment among traders. The greenback was up 0.30% against the Japanese currency. The dollar rose very robustly against the British pound – 0.75%. (Again, the dollar faded very late in the day.)

The 10-year U.S. treasury was up in yield and down in face price. That too is an indication of a risk-on direction.

Recklessly, Dennis Lockhart, President of the Atlanta Fed, and a non-voting member of this year’s FOMC, said he believed the Fed could actually raise rates in April. Look, Mr. Lockhart, the Fed just came out a few days ago with its current stand. Being contradictory in your statement seems to undermine Fed credibility.

Yet Lockhart supported last week’s FOMC statement wholeheartedly. He particularly noted then and today in his speech the fact that inflation is not moving substantially in the direction that the Fed wants it to move.

So, a contradiction… Lockhart’s statements make it seems as if he’s merely seeking attention and not really very serious about steady analysis. The dithering in his speech was uncalled for today.

Wishing you as always, good trading,