While markets get whipsawed on trade war fears, back in the real economy things are smoking. Not only did we see smoking demand for oil, the preponderance of economic data is signaling even stronger U.S. and global energy demand.
Trade war concerns remain the dominant theme in the markets. Dow futures have collapsed 500 points and other global indices were sharply lower at the time of writing after China retaliated overnight to a slate of trade measures launched by the US government hours earlier aimed at narrowing China’s vast trade surplus with America.
Planes and cars and steel is one thing, but now it’s serious because we are talking soybeans. China decided to hit at the heart of U.S. China trade by taxing the beloved American soybean. The move was viewed by the market as the first real sign that the potential trade war is serious because China loves and need U.S. soybeans. Historically, China introduced the United States to the soybean and we have been happy to sell them back to them.
The crude oil sell-off was just downright crazy. Oil got caught up in trade war fears, tech wreck fears, OPEC/Non-OPEC compliance fears, and a build in Cushing, Okla., oil stocks, as reported by Genscape. Stocks had the worst start to April since 1929, but really the magnitude of this sell off was a big April’s Fools Day joke that just one day late.
Crude oil prices are on the rise after Baker Hughes reported the U.S. oil-rig count fell by 7 to 797 rigs. After recent increases that might not seem like a lot, traders now know that to keep U.S. shale production rising you must keep on drilling. Steep shale decline rates means you can’t let up or production will start to ebb and fall.
The British pound was unsettled and vulnerable on Thursday after reports showed that Britain remains the world’s slowest growing major economy. The Office for National Statistics confirmed that gross domestic product reached 0.4% in the final quarter of 2017, slowing from growth of 0.5% in Q3.
Crude oil ran into tech trouble as the U.S. tech sector is under fire leading to a sell-off in stocks against a backdrop of rising oil inventory. The data breach scandal at Facebook is only one of many quick rising problems for the many tech firms and I am sure somewhere the Winklevoss twins are smiling.
Trade War? What trade war? The fears that President Donald Trump’s threats of tariffs would plunge the globe into a devastating trade war is easing quite a bit. The Wall Street Journal reported that “'China and the U.S. have quietly started negotiating to improve U.S. access to Chinese markets, after a week filled with harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances,' people with knowledge of the matter said."