For the first time since the 2011 Arab Spring, a meaningful gap has opened up between Brent Crude and US Crude. Once again, this appears to be driven by concerns about Middle East supply as attacks against energy facilities on both sides of the Persian Gulf increases.
Overnight, Brent Crude took another run at $120.00/bbl before settling back toward $113.50, a 5.5% gain. US Crude, meanwhile, is stable near $97.00/bbl. Natural gas is up 3.4% today, while Gasoline is up 2.5%.
Overseas equity markets have been under pressure with the Nikkei falling 3.4%, the Hang Seng losing 2.0%, the Dax dropping 2.5% and the FTSE falling 2.4%. US index futures are down a more moderate 0.4% to 0.6%, adding to yesterday’s US index losses of 1.4%-1.6%.
Yesterday and this morning, the Bank of Canada, Federal Reserve Board, Bank of Japan, Swiss National Bank and Bank of England have all maintained their current benchmark interest rates. The European Central Bank is expected to follow suit shortly. The Fed had one dovish dissenter and the dot plot Fed Funds forecast remained unchanged with the majority of FOMC members forecasting 0-1 interest rate cuts this year.
An increase in the Fed’s inflation forecast, however, appears to have rattled investors. Metals are in retreat again this morning with Gold down 5.7%, Silver down 10.8%, and Copper down 3.4%. Bitcoin is down 2.2%. Meanwhile, traded interest rates are on the rise with the US 10-year treasury note yield up above 4.3% and the 10-year German Bund yield back up above 3.0%.