Dow dropped 155, decliners modestly ahead of advancers & NAZ fell 54. The MLP index went up 3+ to the 201s & the REIT index was little changed in the 468s. Junk bond funds crawled higher & Treasuries were sold taking the yield on the 10 year Treasury up 10 basis points to 2.25%. Oil jumped 5+ to go over 110 & gold added 4 to 1933.
AMJ (Alerian MLP index tracking fund)
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The Biden administration has flirted with lifting oil sanctions on once-shunned Venezuela to temper surging oil prices, yet it appears unwilling to encourage investment in domestic energy production. Critics slammed this move. White House & State Dept officials traveled to Caracas earlier this month to meet with Venezuela's authoritarian Pres Nicolás Maduro after Biden banned imports of Russian oil over Russian Pres Vladimir Putin's invasion of Ukraine. After some backlash, the State Dept claimed that the visit had merely been about the release of detained Americans & "championing the democratic aspirations of the Venezuelan people." Despite the State Dept's denial, a source briefed on the meeting in Caracas said that a partial lifting of oil sanctions had been on the agenda, after all. Even if the administration were to go ahead with lifting US sanctions on Venezuela with the aim of securing an alternative oil supply, experts say the country is nowhere near being in a position to ramp up production in time to help temper the current price spike. The US produces more than 12M barrels of oil per day on average, while consuming 19.5-20M. Venezuela's output simply is not enough to make up much of what the US economy needs. Furthermore, Venezuela's anemic oil industry is plagued by technical & political problems. So why would the Biden administration even consider the idea while better alternatives – ones that don't empower authoritarian dictators – are on the table? The administration has had & continues to have an icy relationship with the oil industry, whom the pres blames for profiteering off the current energy crisis. On day 1 of his presidency, Biden pulled the plug on the Keystone XL pipeline, which would have transported an estimated 840K barrels a day, displaced more than 600K barrels of Russia's oil & employed thousands of workers in the US & Canada. Canada's oil is also better suited for use in gasoline than Venezuela's.
Biden admin flirts with lifting oil sanctions on once-shunned country
Germany is calling for renewed negotiations over a free trade agreement between the US & EU. "We should resume negotiations on a transatlantic free trade agreement," Christian Lindner, the finance minister of Europe's largest economy, said. "Especially now in the [Ukraine] crisis, it is becoming clear how important free trade is with partners around the world who share our values," Lindner continued. The US embassy in Berlin didn't respond directly to Lindner's comments but said an existing US-EU Trade & Technology Council ensured that current policies support global growth. "The current crisis shows the United States and Germany, and the European Union, are indispensable partners," the embassy added. Previous negotiations over a free-trade pact with Europe, called the Transatlantic Trade & Investment Partnership (TTIP), were halted by former Pres Trump.
Germany calls for new trade negotiations with US as war rages
Treasury yields climbed, as investors remained focused on developments in the Russia-Ukraine war. The yield on the benchmark 10-year Treasury note rose 9.7 basis points to 2.245% & the yield on the 30-year Treasury bond moved 7.9 basis points higher to 2.497%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Meanwhile, the 2-year yield rose above 2%, its highest level since 2019. Ukraine's Pres Volodymyr Zelenskyy warned that if peace talks with Russian leader Vladimir Putin fail, it would mean the start of a global war. “If these attempts fail, that would mean that this is a third world war,” Zelenskyy said. Ukrainian & Russian officials have met intermittently for peace talks, which have failed to progress to key concessions. Meanwhile, a number of talks from Federal Reserve officials are scheduled this week. Fed Chair Jerome Powell is set to discuss the economic outlook at the National Association for Business Economics Annual Economic Policy Conference today. Investors are also monitoring the rise in Covid-19 cases in Europe, stemming from an emerging variant.
Treasury yields climb as focus remains on Russia-Ukraine war
Oil moved higher with little progress on Russia-Ukraine talks. And Treasury yields are back on the rise. It's hard to escape the obvious. Officials who are in charge are in over their heads & don't know what they're doing. starting with oil. That's becoming more apparent to investors!
Dow Jones Industrials
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