In today’s briefing:
- EA: Easing Stagflationary Noise
- US Bear Market: THE TIDE GOES OUT BEFORE THE TSUNAMI HITS THE SHORE!
- Proliferating Political Risks A Feature, Not A Bug, Of The New World Disorder
- Sentiment Signal in Gold
- Global base oils arb outlook: Week of 28 April
- Water Wars: India’s Economic Trump Card in Kashmir Crisis
- Global base oils margins outlook: Week of 28 April
- [IO Fundamentals 2025/17] Stimulus Buzz Fuels Recovery and IO Inventories Expand
- Brazil Financials: Losing Ground Amid Global Financials Rotation
- [US Nat Gas Options Weekly 2025/17] Henry Hub Extended Losing Streak on Mild Weather Outlook
EA: Easing Stagflationary Noise
- Hard economic data must match gloomy sentiment to justify ECB rate cuts reaching a stimulative setting. The little evidence available so far doesn’t show much of a shock.
- Bank lending growth kept rising for companies and households in March as monetary conditions appear to be loosening, not tightening, due to the initial tariff shock.
- Activity surveys only softened slightly in services, while inflation expectations are broadly high. Failure to see much more stagflation eases the likelihood that it occurs.
US Bear Market: THE TIDE GOES OUT BEFORE THE TSUNAMI HITS THE SHORE!
- It is the calm before the storm as US markets move up in a bear market rally.
- China/US container ship sailings are at a standstill. Tariff effects will start to be felt in US retailers within weeks. Temu and Shein pass tariffs costs to the US consumer.
- According to a Deutsche Bank report, foreign buyers of US assets are pulling back quickly. The virtuous cycle turns into a vicious spiral.
Proliferating Political Risks A Feature, Not A Bug, Of The New World Disorder
- The past weeks have seen multiple geopolitical flashpoints emerge in Asia as various state and non-state actors take increasingly brazen steps to pursue their respective agendas.
- The aftermath of the Kashmir terrorist attack has seen New Delhi and Islamabad ramp up retaliatory measures. Meanwhile, Beijing is seizing Sandy Clay and intensifying coercive tactics against Taiwan.
- An inward-looking Washington and an unready China mean that there are no “adults in the room” who can moderate geopolitical risks, making such flashpoints more dangerous.
Sentiment Signal in Gold
- This chart from Sentiment Trader highlights that also gold stocks are quite stretched – which isn’t a sell signal, as a stretched market can always become more stretched.
- Note: We’re long the June contract of Gold since mid of March
- Another interesting thought regarding gold demand going forward: if AI models really become more efficient and less data center usage is needed, demand for gold in tech could be affected as well.
Global base oils arb outlook: Week of 28 April
- US domestic Group I brightstock price outperforms lighter grades and Group II prices.
- US export brightstock prices significantly lag brightstock prices in Europe and Asia.
- Widening price-discount reflects signs of increasingly diverging supply-demand fundamentals between US and Europe and Asia.
Water Wars: India’s Economic Trump Card in Kashmir Crisis
- A limited conflict in Kashmir would have minimal economic impact, as the region is a small part of both economies.
- India’s suspension of the Indus Water Treaty poses a bigger threat to Pakistan’s agriculture and water supply.
- India may seek to isolate Pakistan internationally, possibly affecting Pakistan’s IMF bailout and global support.
Global base oils margins outlook: Week of 28 April
- Global base oils price premium to feedstock/competing fuel prices stays higher at end-April 2025 than a month earlier.
- Higher margins coincide with seasonal rise in demand and plant maintenance work.
- Higher margins follow sharp fall in crude oil prices.
[IO Fundamentals 2025/17] Stimulus Buzz Fuels Recovery and IO Inventories Expand
- PBoC holds the 1-year loan prime rate (LPR) at 3.1% and the 5-year LPR at 3.6%; both historic lows as trade tensions persist.
- China’s Politburo vows faster bond issuance, lose monetary policy, and job protection measures to counter persistent economic challenges.
- Iron ore inventories at Chinese ports increased in late April, ending a three-week decline, signaling softening near-term demand.
Brazil Financials: Losing Ground Amid Global Financials Rotation
- Rotation is underway in the EM Financial sector, with selling in Brazil Financials funding rotation in to Greece, UAE and Argentinian financials.
- Brazil Financials remain an overweight for the majority of EM funds, but conviction is falling, with selling in key names Banco Bradesco and Banco BTG Pactual.
- Itau Unibanco Holding remains the flagship holding, owned by 43.7% of funds, though remains well below its 2010 ownership peak.
[US Nat Gas Options Weekly 2025/17] Henry Hub Extended Losing Streak on Mild Weather Outlook
- For the week ending 25/Apr, U.S. natural gas prices fell by 9.5% on the back of warmer weather forecasts and rising production.
- For the week ending 18/Apr, the EIA reported that U.S. natural gas inventories rose by 88 Bcf, higher than analyst expectations of a 69 Bcf build.
- Henry Hub OI PCR rose to 0.96 on 28/Apr compared to 0.93 on 17/Apr. Call OI decreased by 18.5%, while put OI dropped by 16.1%.
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