Global markets have not regained a “risk on” tone, but they are showing signs of looking beyond the turbulent events of the past few weeks.
The Fed symposium in Jackson Hole failed to offer any distinct direction on the state of the US economy, but recent Fed commentary suggested that a government shutdown off the budget ceiling battle and the possible effects from Hurricane Harvey could impact policy decisions next month.
From a positive perspective, the latest US nonfarm payroll readings have extended the slow, gradual improvement in the economy.
Commodity markets appear to have put in a significant low on June 22nd, right into the crude oil low and also in line with the first day of summer.
In retrospect, the recent sharp declines in equity prices and significant pressure on industrial commodities were justified by disappointing US scheduled data and the Fed’s move to notch interest rates upward.
By many measures the world economy continues to recover. The pace is apparently disappointing to commodities but not to equity markets.
While the markets always present a wide range of potentially impactful issues, the current list seems to be unusually broad.
Consumer spending in the US grew at a 0.3% rate in the first quarter, the smallest increase since the fourth quarter of 2009.
The spec and fund net long of 20 nonfinancial commodities has come down significantly in March (down roughly 650,000 contracts), but it remains at lofty levels.
The most important developments of last week were 1) indications that world oil producers were poised to extend production cuts (or even expand them if it becomes necessary to reduce global oil stocks to five year average levels) and 2) percolating fears of bird flu in Asia.