From the Chicago Mercantile Exchange:
Oil prices ended the shortened trading week on a positive note as US
equities hit a new record highs. The externals kept oil prices bid as
liquidity was below normal ahead of the long holiday weekend. The
macroeconomic data out of the US was mixed with initial jobless claims
rising for the first time in about a month while the final revision of
the fourth quarter GDP was adjusted upward to 0.4 percent but below the
market consensus of 0.5 percent. A slight improvement in US growth in
the fourth quarter but still a very slow and below normal growth rate
for this stage of the US economic recovery.
So far this has been
an interesting investing/trading year with the major risk asset markets
mixed after just about all of them started the year with strong gains.
The first quarter market pattern has been uneven and strongly impacted
by the cloud of uncertainty still hanging over the global economy. The
outcome for the first quarter is shown in the EMI Investment chart
below.
Unlike
the first quarter of 2012 when Nat Gas was the largest loser on the EMI
Investment Chart this year Nat Gas is actually the largest percentage
gainer for Q1 of 2013. After a mild start to the winter heating season
of 2012/2013 the back end of the winter has been much colder than normal
resulting in a strong level of Nat Gas heating related demand and thus
an accelerated destocking of the surplus of Nat Gas in inventory. In
fact current Nat Gas inventories are significantly below last year and
are just about at the same level as the normal five year average for
this time of the year.
Rounding out the energy complex RBOB
gasoline increased by double digits for the quarter… a positive sign for
the refining sector but a negative for the US consumer… although the
national average US retail gasoline price is currently almost $0.30/gal
below last year at this time. WTI was the only other energy commodity to
show a gain for the quarter as both Brent and HO declined across Q1.
The
big storyline in the energy pricing area was the significant narrowing
of the Brent/WTI spread. The spot spread declined by almost 34 percent
or $6.50/bbl over a timeframe when the North Sea has been operating at
normal to even above normal levels, geopolitics were not currently
impacting the flow of oil and crude oil stocks in the mid-west region of
the US have been declining… although they are still above last year and
the normal historical level. Crude oil inventories in Cushing, Ok seems
to have peaked during the first part of the year and have been slowly
declining since then. The destocking pattern is still a slow and shallow
pattern and could be reversed at any time if refiners in PADD 2
experience any unscheduled issues going forward.
Equities were the other investment area that showed modest gains for the
first quarter of 2013 but all global equity markets did not participate
fully in the rally. The EMI Global Equity Index (an index of 10 global
bourses) actually declined marginally for the quarter with Brazil, China
and Hong Kong leading the EMI Index lower. On the top end of the ladder
Japan's bourse has been one of the high flyers of Q1 as the Yen has
declined almost 8 percent on the quarter… a very positive benefit for
this export driven economy. As shown on the chart the US equity markets
performed well over the quarter with the Dow and S&P indices both
showing double digit gains for Q1 as well as hitting new all-time highs.
The NASDAQ was the laggard in the US as many tech stocks struggled
during Q1 led by a struggling performance by Apple.
Overall
equity markets have performed rather well in spite of the high level of
uncertainty that has plagued many regions of the world. Europe remains
in recession, the US is still struggling to solve its budget and debt
issues and the main economic high flyers… like China are not growing at
the pace that many expected them to expand at. All in all it turned out
to be a decent quarter for equities which was mostly a positive for
energy prices and the broader commodity complex as rising equity markets
tend to be a leading indicator for expanding global economic growth and
thus an increase in commodity demand.
Unlike last year at this
time when metals and agricultural commodities were the high flyers both
of these sectors performed poorly during the first quarter. Metals and
agricultural commodities were lower across the board while the US dollar
firmed over the quarter adding negative pressure on both of these
sectors.
Gold ended the quarter in negative territory after over
a decade of consistent gains. The spot gold futures contract declined
by 4.83 percent. Silver performed even worse than gold falling by 6.4
percent over the quarter as investors viewed both of these safe haven
commodities as not the place to park money with many equity markets in a
modest rally so far this year....MUCH MORE
