Dow was off 4, decliners over advancers 3-2 & NAZ fell 38. The MLP index pulled back 1 to the 217s & the REIT index rose 3+ to the 412s. Junk bond funds were little changed & Treasuries were heavily sold, bringing higher yields (more below). Oil slid lower in the 86s & gold declined 7 to 1715.
AMJ (Alerian MLP index tracking fund)
Treasury yields surged higher as investors responded to strong US economic data. The yield on the benchmark 10-year Treasury note traded higher by more than 14 basis points at 3.328%, while the yield on the 30-year Treasury bond gained nearly 13 basis points to 3.472%. The yield on the 2-year Treasury note jumped 9 basis points to trade at 3.493%. The short-term note climbed to 3.55% last week, notching its highest level since 2007. Yields move inversely to prices & a basis point is equal to 0.01%. On the data front, the Institute for Supply Management’s non-manufacturing PMI figure for Aug came in better-than-expected at 56.9, rising month over month. The forecast was expecting a reading of 55.5. Yields extended their gains for the session after the report was released. The data points come amid persistent worries about an economic slowdown, with investors monitoring whether the Federal Reserve is likely to continue hiking interest rates at an aggressive pace in a bid to tame soaring inflation.
U.S. Treasury yields rise sharply following strong economic data
German energy giant Uniper owarned the worst is still to come as concerns over Russian gas supplies to Europe thru fall & winter continue to push up prices. “I have said this a number of times now over this year and I’m educating also policymakers. Look, the worst is still to come,” Uniper CEO Klaus-Dieter Maubach said in Milan. “What we see on the wholesale market is 20 times the price that we have seen two years ago — 20 times. That is why I think we need to have really an open discussion with everyone taking responsibility on how to fix that,” he added. Russia's state-owned energy giant, Gazprom, on Fri indefinitely halted gas flows to Europe via a major pipeline, stoking fears that parts of Europe could be forced to ration energy thru winter. Uniper, as Germany's biggest importer of gas, has been hit hard by vastly reduced flows via pipelines from Russia, which have sent prices soaring. The German gov agreed in Jul to bail out Uniper with a €15B ($14.9B) rescue deal to provide the embattled company with some financial relief. Maubach said today that some of the details still needed to be ironed out with this stabilization package. Russia's halt to supplies via Nord Stream 1 & the subsequent spike in European gas prices are likely to exacerbate the situation for the company.
German gas giant Uniper says the worst is still to come after Russia halts flows to Europe
OPEC+ plans to cut global oil supplies by 100K barrels
per day next month, which an industry expert claims is more of a
"political statement." The
Oct cut essentially reversed the group's Sep increase by the
same amount. Yesterday's move also comes after comments from Saudi Arabia's
energy minister that the group could reduce output at any time. "With
OPEC+ production already running nearly 3 million barrels per day less
than their agreed to quota, the announcement is more of a political
statement," Lipow Oil Associates Pres Andy Lipow said.
"Saudi Arabia wants to talk up prices and the burden of any production
cut will rest predominantly with them and to a lesser extent with the
United Arab Emirates and Kuwait." Although
oil prices were rising yesterday, Lipow said it is mainly due to Russian
energy giant Gazprom's shutdown of Nordstream 1 natural gas supplies. "OPEC+ announcement had little effect on oil prices as the market had
been expecting no change in production and OPEC+ actions for October
basically mean no discernable change," he added. Prices are still significantly down from Jun peaks of over $120 per
barrel, which is good news for motorists given the fact that oil
accounts for over 50% of what consumers pay at the pump, according to
the US Energy Information Administration. Since Jun, pump prices have eased after hitting a record of over $5. As of yesterday, the average for a gallon of regular gasoline< is sitting at $3.78.
OPEC+ accused of making ‘political statement’ after global oil cuts
Yields & energy are of the greatest interest for investors. Soaring interest rates will crimp the economic recovery & energy futures continue too be in high demand. Meanwhile the inverted yields curve keeps flashing its recession warning signal.
Dow Jones Industrials
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