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Market review 20 May 21

20 May 21

Oil steadies after sell-off as U.S. stockpiles rise less than expected

Oil prices steadied on Thursday after a two-day slump, reflecting the world’s mixed economic recovery from the pandemic, with U.S. demand expected to keep rising, while a second coronavirus wave raging in India has led to more curbs on movement.

Brent crude was up 11 cents, or 0.2%, at $66.77 a barrel by 0657 GMT, having fallen 3% on Wednesday. U.S. oil gained 25 cents, or 0.%, to $63.61 a barrel, after a 3.3% drop in the previous session.

“U.S. gasoline demand is holding up well ahead of the driving season,” ANZ Research said in a note. Also, “U.S. airport footfalls increased to 1.85 million, boding well for jet fuel demand.”

Crude inventories in the United States increased by 1.3 million barrels last week, against analysts’ expectations in a Reuters poll for a 1.6 million-barrel rise. [EIA/S]

Dollar bounces as Fed minutes revive tapering jitters

The dollar bounced off three-month lows against European currencies on Thursday after minutes from the Federal Reserve’s last policy meeting revealed there was more talk of tapering its bond purchases than investors had expected.

In the Fed minutes, several policymakers said that a discussion about reducing the pace of asset purchases would be appropriate “at some point” if the U.S. economic recovery continues to gain momentum.

That surprised investors, given Fed Chair Jerome Powell had said right after that meeting last month that it is not time yet to begin discussing any change in policy.

“The minutes contained wordings that appear to seek to start discussion on tapering at an earlier timing than expected,” said Takafumi Yamawaki, head of fixed income research at JPMorgan (NYSE:JPM).

“If the next jobs data due on June 3 is strong, markets will start bracing for the Fed making a specific mention on tapering at its next meeting in June.”

Gold Holds Near Four-Month High as Investors Weigh Fed Minutes

Gold steadied near the highest level in more than four months as investors assessed the minutes from the Federal Reserve’s meeting in April that flagged the possibility of a debate on scaling back asset purchases.

“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” according to minutes published Wednesday. Treasury yields and the dollar rose after the release. In a press conference following last month’s meeting, Chair Jerome Powell had said that it was premature to start talking about tapering.

Rising inflation expectations and a resurgence of coronavirus cases in some countries has revived interest in gold as a hedge and haven asset, with a rebound seen in holdings in bullion-backed exchange-traded funds. While U.S. policy makers have signaled they intend to maintain an accommodative stance for a prolonged period, any hints of a timeline for paring back exceptional stimulus could weigh on the precious metal.


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