Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Overnight reports from across the Atlantic are still better suited to a Bugs Bunny cartoon than real life, but at least today it's entertaining rather than terrifying for investors.
The U.K.'s Leave and Remain camps are re-enacting the Battle of Trafalgar with tug boats on the Thames to hilarious effect. Musician Bob Geldof has been hit with a tug boat water cannon and another of the boats has run aground.
"Nigel Farage and Sir Bob Geldof go head to head in Brexit flotilla 'battle' on the Thames" – Telegraph
"@business Our #Brexit probability index is surging: Monday - 24% Tuesday - 33% Wednesday - 39% bloom.bg/1S7Hw9s pic.twitter.com/a4sBWpcRJ8 " – Twitter
"Brexit Briefs: Our guide to the EU referendum" – The Economist
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Brexit, along with building inventories, is also being blamed for weakness in the oil price,
"Data from the American Petroleum Institute, however, showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, compared with analyst expectations for a decrease of 2.3 million barrels…But the impending vote on the so-called Brexit is dominating everything from currency markets to German Bunds… If Britain votes to leave the EU, investors fear the bloc could slip into a recession that could undermine oil demand."
In addition, energy investors are concerned about a "reverse goldilocks" situation,
"With oil now around the pivotal $50 point, some of this enthusiasm appears to have cooled … there are signs that U.S. shale production, which is nimbler than conventional output, could be about to pick up again. 'It's 'reverse Goldilocks' – it's not hot enough and it's not cold enough. If you're bearish, it's not low enough for the bears and it's not high enough for the bulls. Ergo, ($50) is the one number you don't stick at,'" Paul Hornsell, head of commodities research at Standard Chartered, said."
That's the short-term bearish news for energy investors, but the mid-term is more promising. Global oil demand is still rising, and an expected $1-trillion cut in capital spending in the industry sets up a supply scarcity situation as early as next year,
"Oil and gas companies will spend $1tn less on finding and developing reserves between 2015-2020 because of the crude price crash… The slowdown in investment is expected to cut next year's global oil and gas production by 4 per cent. That will help to temper the oversupply that has driven crude prices down, but potentially lay the foundations for tighter markets and rising prices in subsequent years."
"Oil loses more ground below $50 hit by Brexit, inventory rise" – Reuters
"At $50/barrel, oil risks 'reverse Goldilocks' syndrome" – Reuters
"Oil industry's $1tn spending cut raises fears over future supply" – Financial Times
Related: "@JavierBlas2 Goldman Sachs doesn't buy the #oil rally #OOTT #OPEC $GS pic.twitter.com/UUJJ75xu26 " - (research excerpt) Twitter
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Chinese officials were hoping the country's stock would be added to the MSCI (Morgan Stanley) equity benchmarks but have been denied. The government has reportedly been very active in equity and currency markets overnight to prevent a big sell-off.
" MSCI says domestic China shares still not ready for its global benchmark" – Reuters
"@johnauthers "MSCI A-share decision in 1 tweet: "China - if you want international capital to flow in, you have to be prepared to let it flow out again."" – Twitter
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Tweet of the day: "@BTabrum We have Americans laughing at our politics. Americans! " - Twitter
Diversion: "The full story on Michael Jackson's tragic death" – Washington Post