S&P/TSX Composite index: Bullish Start for North America on BOJ, Oil

The S&P/TSX Composite index (INDEXTSI:OSPTX) is poised to head sharply higher if index performance in Asia and Europe is any indication. The SSE Composite Index (SHA:000001) in Shanghai closed up 3.09 percent to close at 2,737.60, while the Hang Seng Index (INDEXHANGSENG:HSI) finished the day 2.54 percent higher, or up 487.28 to close at 19,683.11.

This despite PetroChina Company Limited (ADR)(NYSE:PTR) receiving a market downgrade from Credit Suisse after the company predicted a $40 ceiling on the price of oil for 2016. The company expects profits to slide by up to 70 percent this year.

The primary driver of the exuberance was the shocking revelation by the Bank of Japan that it would institute a negative interest rate policy whereby it will charge depositors a fee of 0.1 percent to hold cash.

U.S. Stock Futures are pointing to a higher open wit the Dow Jones mini (DM1:IND) up 0.60 percent for March delivery, and the S&P 500 mini (ES1:IND) up exactly the same.

Gold was volatile in overnight trading as Asian bulls drove the spot price to just under US$1,130 again despite repeated dumping of futures contracts that ultimately settling down around US$1,112 as of 7 am ET on Friday. Gold has risen over 6 percent since the beginning of the year, reflecting a 6 -7 percent drop in global equities markets. It is still down 45 percent from its 2011 high of $1923.70.

According to a Bloomberg article, ‘Among 24 traders and analysts surveyed by Bloomberg News, 17 are bullish on gold. A handful of global investors predict the end of U.S. growth and a stock market crash similar to the 2008 disaster. The world’s largest gold exchange traded fund, SPDR Gold Shares, saw a 3.8 percent inflow increase during the past four weeks after $2 billion of outflows in 2015, or 7.6 percent of its total market capitalization.’

Oil meanwhile is enjoying a bit of a recovery as Russia and OPEC comments suggesting they may move to limit production – neither nation is historically credible in this regard – seems to have trumped news that Iraq and Iran will both be producing record quantities of oil in Q1 of 2016.

Saudi Arabia especially, with a budget deficit in the neighbourhood of US$100 billion, can hardly afford to curb oil production, which provides 45 percent of its GDP and 90 percent of export revenue.

US GDP numbers are expected to come out this morning at 8:30 am ET, as well as Employment Cost Index numbers, Chicago PMI, and Consumer Sentiment numbers by 10:00 a.m., all of which have the potential to offset the bullish indicators of Asian and European markets and oil.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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