Busy Week Ahead - Investec
Research Team at Investec, suggests that with London out yesterday for the Spring bank holiday, and the US on holiday for Memorial Day, yesterday was a quiet start to what will be a busy week for financial markets.
“The Japanese Yen lost some ground with talk of the Japanese government planning to not only to add further stimulus but also to delay the implantation of its previously planned sales tax hike.
The US Dollar continued its recent gains against most G10 currencies (excluding the Pound where EU referendum risk unwind is still the key theme). The latest trigger for Dollar buying was Federal Reserve Chair Janet Yellen's speech on Friday, where she said an interest rate increase is likely in the coming months. Japanese shares led gains among Asian equities and the greenback consolidated its gains yesterday.
Oil prices continue to consolidate around $50 a barrel. Gains of only a few more cents would see the oil price approaching the Shale break-even production cost, which could see abandoned Shale gas projects restarted, potentially causing further oversupply. This could cap oil prices for now, without a significant driver for further gains. The next OPEC Oil producers’ meeting is on June 2nd in Vienna, Austria.
Finally, overnight another 'flash crash' took place, this time in Chinese stock-index futures, following a similar unexplained drop in Hong Kong stock market earlier this month. Contracts on the CSI 300 Index fell around 10% (the daily limit) then recovered almost all of the losses within the same minute. The reason for the crash is unknown, but with the US and UK on holiday, algorithmic trade in illiquid conditions could have caused this incredibly volatile move. This acts as a stark reminder of the current computer-age in financial markets.”