Morning Minutes

US Returns To New Oil Sanctions and a Gold Mining Merger




US investors appear to have returned from their long weekend somewhat less enthusiastic than when they left on Friday. The last trading day of May finds US index futures trading down 0.3% to 0.7%, giving back some of their recent rebound gains. The US 10-year treasury note yield has crept back up above 2.8% after Fed Governor Waller suggested yesterday that the Fed may have to raise interest rates above neutral in order to defeat inflation, throwing cold water on last week’s speculation that the Fed could potentially take rates up to 2.5% this summer and then stop. Cryptocurrencies, another indicator of investor appetite for risk, are up this morning with Bitcoin climbing 3.3%.  

European markets are mixed today with the Dax down 0.6% and the FTSE up 0.3% as investors consider the implications of new sanctions on Russia, whereby the EU has agreed to end oil imports from Russia by sea by the end of the year. Oil imports by pipeline and natural gas imports remain untouched for now. WTI crude oil is up 3.0% on the news this morning trading above $118.00/bbl, while Brent crude is up 1.75% and natural gas is down 1.0%.

China reported improved Manufacturing PMI (49.6 vs previous 47.4) and Non-Manufacturing PMI (47.8 vs previous 41.9) numbers for May which helped Hong Kong to rally 1.4%, Shanghai to gain 1.2%, and copper to climb 0.5%.

Canadian GDP increased by more than expected in March (0.7% over month vs street 0.5%), but less than expected for all of Q1 (3.1% over year vs street 5.4%).   Later this morning, the US S&P/Case-Schiller House price index (street 20.0%) is due at 9:00 am EDT, followed by US Chicago PMI (street 55.0 vs previous 56.4) at 9:45 am EDT. Tomorrow brings Manufacturing PMI reports from around the world and a Bank of Canada interest rate decision (street 0.50% increase).  

Although the metal price is down 0.4% this morning, gold is in the news today on reports of a big acquisition. South Africa’s Gold Fields has agreed to purchase Canada’s Yamana Gold for approximately $6.7B in a friendly, all-stock deal that would create the fourth largest gold producer in the world with mines in Africa, South America, Australia, and elsewhere. In premarket action, Yamana is up 14.9% while Gold Fields is down 11.8%, which is not unusual on a merger announcement.   

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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