A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
OPEC leaders are expected to announce the continuation of production quotas, but markets didn't like the news very much as crude prices turned sharply lower. This could just be the usual "buy the rumour, sell the news" or a sign that major speculative market players were hoping for deeper production cuts. Energy consulting firm Wood Mackenzie was expecting the negative reaction,
"'A nine-month extension would have little impact on our price forecast for 2017, which is for an annual average of $55 per barrel for Brent,' the report read. 'Into 2018, we expect Brent would average at least $55 per barrel on a monthly basis.'"
"Wood Mac: Don't expect an OPEC-fueled rally in crude oil prices' - UPI
"OPEC extends oil output cut by nine months to fight glut" – Reuters
"OPEC Poised for 'Safe Bet' of Nine-Month Extension of Oil Cuts" – Bloomberg
Counterpoint: "@SBarlow_ROB Citi: "The month of May should provide a turning point for petroleum markets" – (research excerpt) Twitter
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With a somewhat alarmist tone, Bloomberg details the likelihood of a "natural gas apocalypse" in parts of the United States,
"There isn't nearly enough electricity demand to support all the new capacity [ in natural gas electricity generation]. And as wholesale electricity prices plunge, industry experts are anticipating a fire sale of scores of plants in the region. Many, in fact, have already been sold along the PJM Interconnection LLC grid, the nation's largest, encompassing 13 states from Virginia to Illinois."
"`Gas Apocalypse' Looms Amid Power Plant Construction Boom" – Bloomberg
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The brilliant Matt Levine finds ample reason to believe that the CBOE Volatility Index is being manipulated by option underwriters and traders,
"John Griffin and Amin Shams of the University of Texas … find a lot of trading in the S&P 500 options underlying the VIX during these settlement auctions, trading that pushes the settlement price of the VIX up or down. So for instance in months where the trading pushes the VIX up, the prevailing price of the VIX-influencing options will jump during the auction, peak at around 8:15 a.m. (the deadline for VIX-related bids in the auction), and then drop seconds after the auction ends when the options start trading normally"
"VIX Trading, Hoaxes and Blockchain" – Levine, Money Stuff (Bloomberg)
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Citi credit strategist Matt King has long argued that equity valuations and corporate debt spreads are expensive largely because of global central bank monetary stimulus. If he's right, investors might be in for a rough ride ahead,
"Peter Praet, the [European Central Bank's] chief economist, said earlier this month that "after so many years of accommodation, you cannot change the stance very abruptly." His colleague Benoit Coeure, who runs market operations, warned of "larger market adjustments" if signaling a change of stance is delayed too long. "
"The End of Easy Money" – Gadfly
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Tweet of the Day: "@themotleyfool When a Dividend Aristocrat suffers an ignoble stock price plunge, attention must be paid. $TGT $XOM $GWW fool.com/investing/2017… " – Twitter
Diversion: "A Design Engineer Explains Exactly Why Your Car Is So Boring" – Jalopnik
Scott Barlow