Stock markets take a hit; yields rise and the future pricing for interest rate cuts in the likes of the CME FedWatch Tool are evaporating at a rate of knots. With confidence in the wider representation of risk falling away, the all too familiar seeking of a haven is sought and the USD Dollar, using the Dollar Index, makes a year-to-date high. Only a little of these moves can be sourced back to the posting of the US CPI yesterday. Indeed, given that core CPI, which excludes volatile food and energy prices, rose 0.2 percent month-on-month in February, slowing from the 0.3 percent increase recorded in January, there might have been a softer landing for the data. However, with headline CPI holding steady at 2.4 precent, the readings have been deemed a baseline in which the troubles in the Persian Gulf may only exacerbate.

The February reading has not been subject to effect from ballooning oil prices, therefore most of the drop in the value of investment assets is due to the increasing threat to global economies from the expanding war between the US/Israel alliance and Iran. After another day of rampaging bombers over Iran and missiles or drones over its neighbours, the overnight news shows no sign that any sort of oil will soon be coming through the Strait of Hormuz. Explosive-laden boats, according to Iraqi sources, have slammed into two tankers in Iraqi waters. This not only brings realisation to fears of an elongated war but makes a mockery of the US claims that it has wiped out Iran’s naval capability. Brent front month futures have taken a run through $100/barrel this morning as the market braces itself for supply disruption. Heating Oil is eyeing 4c/gallon again, RBOB is in the vicinity of 3c/gallon and Gasoil is poking at $1200/tonne. Products are looking down the barrel of China further banning refined oil exports. According to Reuters, a source familiar with the National Development and Reform Commission reports the NRDC has ordered an immediate ban of exports in March.

The market pricing is taking the IEA’s herding of the G7 into releasing 400mb of SPR with a pinch of salt. The timeline for the release is not established, but there is a presumption that it will be over a 90-day period. That equates to some 4.5mbpd, whereas the bottleneck of Hormuz is depriving the globe of and estimated 10mbpd. What now frightens exporting nations of the region is without being able to move oil, supplies will be backed up toward well heads which might have to be ‘shut in’ with the incredible ramifications of having to restart them. We are all accustomed to taking a view that the price of oil will be completely subject to the length of this war, but at present, that equation does not allow for lower levels.

One rule for one.....

In the handbook of the Financial Conduct Authority (FCA), Market Abuse Regulation (UK MAR): Article 12(1)(c) prohibits the dissemination of information via the media, including the internet, or by any other means, which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of a financial instrument. Part of the Individual Conduct Rules states that “You must act with integrity,” and “You must act with due skill, care and diligence.” Where then is adherence to such high maxims in the post from the US Secretary of Energy, Chris Wright, that the U.S. Navy had escorted an oil tanker through the Strait of Hormuz, only to be deleted later and only after it had caused utter carnage in the prices of oil instruments? It is difficult to work out, or even prove, if this was another case of total incompetence or more seriously, shenaniganry, but if those of us who hold licenses to conduct business in investment markets were so remiss in our market duty, we would be hauled up so quickly and stand before our regulators ere the company we represent even had the opportunity to say “you are fired.”

Adding insult to injury by blaming staffers is as deeply offensive as the manipulative post itself. A spokesperson said the video clip posted by US Energy Secretary Chris Wright was deleted from his official X account after it was determined that it was incorrectly captioned by department staff. That some poor intern, with the idea of service in their mind, be made scapegoat to this modern form of propaganda is disgraceful. It was in times before that a gold-braided, medal weighed-down General or Admiral would face the press and describe in details and check-worthy data, how any military action was faring, its targets achieved, the hardware used, and sadly any losses. Now it seems that any old member of the US Administration can wander into the densely populated airwaves of social media and drop cluster bombs of controvertible, verbal ordnance. We, the market fraternity, live and die by information. Sorting through data and sifting opinion is all part of everyday life. However, data must be accurate, and opinion need have a level of honesty, not necessarily truth because in markets that is only available retrospectively, but open in bias.

There are now too many examples of the Trump Administration’s attempts at obfuscation and sometimes the telling of outright untruths. There has been a serial undermining of US institutions such as the Federal Reserve and the Bureau of Labour Statistics. The deal or no deal issues of tariffs can in some ways be heaped upon the excuse of a transactional President. Yet, to come out, only during market open hours, and put into the public domain heraldic and attention-grabbing statements, is a cynical turn of events. This is the most market-savvy White House there has ever been, it tracks markets as would a Wall Street institution. Armed with such knowledge, it will also know of the word-tracking algorithms able to trade on utterances it sees on newsfeeds. These unfettered robots along with any style of high-frequency traders (HFTs) have been open-armed welcomed by exchanges who hide behind a reasoning that such business is essential as liquidity providers. Therein itself lies another story, but when those in power float sensational statements, ‘bots’ give sensational reactions and it becomes a race to the bottom of bringing markets into disrepute. A return and further comment on this matter is more than needed, but until then, our markets know what these people are doing, even though we probably have no power to do anything other than protest.
 

Overnight Pricing