Commodities Week Ahead: Sanction Waivers Threaten Oil; USD To Hit Gold?
Oil bulls will be fighting to keep the rally in crude alive this week as prices retreat from 2014 highs and risk falling further on reports of possible US waivers on sanctions against Iranian exports. Traders also await key supply-demand reports from the world’s top energy agencies that might further dilute the bullish narrative on oil.
On the precious metals front, investors will have to decide on whether to defend gold at above $1,200 an ounce as the dollar shows signs of a breakout on persistently hawkish Federal Reserve language and soaring 10-year Treasury yields.
Opportunity for profit-taking, meanwhile, looms in sugar after last week’s eye-popping gain of 21% that landed the sweetener in overbought territory.
Natural gas is another market that could be targeted by bears after a large increase in weekly inventories that might complicate efforts to keep prices above $3 per million metric British thermal units.
Oil began the week lower in Asia after a US official said Friday that Washington might consider granting waivers on sanctions against Iran’s oil exports due to start on November 4. Exemptions would be for countries that had shown effort to reduce imports from Tehran, the official said.
In gold, a stronger dollar and rising US government bond yields could represent a significant headwind despite Friday’s gains, as the precious metal’s inverse relationship to the greenback continues to offset safe haven demand.
Concerns over Italy’s rising debts and strains in emerging markets will remain in focus this week, while investors will continue to monitor the effects of rising US government bond yields on markets.
Australian Dollar Beset By Low Interest Rates, Trade-War Worries
By David Cottle
Fundamental Australian Dollar Forecast: Bearish
The Australian Dollar market will receive plenty of economic data in the coming week, but none of it is likely to shake the currency out of its deepening downtrend against the US Dollar.
Snapshots of consumer and business confidence will top the domestic data bill on Tuesday and Wednesday, respectively. Meanwhile a look at China’s private service-sector performance and overall trade both stand a good chance of influencing AUD/USD at least in the aftermath of their release thanks to Australia’s strong export links to China.
The underlying reason for this weakness remains of course the widening interest-rate gulf between Australia and the US.
The Reserve Bank of Australia for its part continues to hold its own key Official Cash Rate at a record-low of 1.50%. This has been unchanged since August 2016 and, according to futures markets, is still expected to stay put for the rest of this year and all of next.
2 Stocks To Watch In The Coming Week: JPMorgan Chase, Tesla
1. JPMorgan Chase
JPMorgan Chase & Co. (NYSE:JPM), the largest American investment bank, will be among the first companies to report their third-quarter earnings this coming Friday. Analysts on average expect $2.23 EPS for the period ending September 30, up from $1.76 from the same period a year ago. As well, the consensus expectation is for $27.53B in revenues when the multinational lender reports on October 12, before the market open.
At a time when the economy is strong and interest rates are on an upward trajectory, bank shares are likely to perform better. Investors will wait to see whether any of these factors are helping the US’s largest lenders improve their bottom line.
Elon Musk, the embattled CEO of Tesla Inc. (NASDAQ:TSLA) is at it again. Even after his recent brush with the Securities and Exchange Commission (SEC) he’s not giving his Twitter finger a rest long enough to let shares of his electric car maker trade on their fundamentals. Soon after settling with the SEC regarding his reckless tweet in August about taking the company private, he was back on Twitter this past Friday, now criticizing both the SEC and short sellers (whose expanding positions in Tesla shares have been plaguing his company’s stock for some time now).
His latest tweets may trigger fresh action from the SEC, which is still in the middle of finalizing last week’s settlement which bars Musk from serving as chairman of the carmaker for three years. As part of the deal, the company also has to implement procedures and controls to oversee Musk’s communications. Investors should brace for another tumultuous week in Tesla shares.
Citigroup to report third-quarter results
Citigroup (C) will report its third-quarter numbers before the market open October 12 with the consensus calling for earnings of $1.67 per share.
Of the 17 analysts who cover the stock 11 rate it Strong Buy, 1 rate it Buy, 4 rate it Hold, 0 rate it Sell, and 1 rate it Strong Sell.
Citigroup has trended higher over the last four months, but the stock has yet to manage crossing into positive territory for the year. The bank has posted better than expected profits the last 14 quarters, but sales were slightly weaker than expected last quarter. The company has a great earnings track record, and the street expects another beat this quarter with a whisper number of $1.73 versus the consensus $1.67. With interest rates on the rise, bank stocks will likely be strong moving forward, and Citigroup’s recent strength should continue as long as there are no signs of weakness in the quarterly report. Analysts have an $86.68 average price target on the stock.
GBP: Sterling Building a Base on Brexit Hopes
By Nick Cawley
Fundamental Forecast for GBP: Bullish
Sterling remains better bid and bullish in the short- to medium-term after the Conservative Party conference passes without any challenge to PM Theresa May, while talk out of Brussels turns firmly to getting a trade deal in place, despite ongoing differences over the Irish border. GBPUSD is getting back to its best level of the week, and will likely extend this move, as the uptrend off the August 15 low at 1.2662 continues.
Looking ahead, Sterling remains a ‘buy on dips’ as long as the positive trend continues, although should be cognizant of a raft of medium-importance data on the slate next Wednesday.
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