Weak Employment Data Does Not Deter Oil, Copper
January trading ended today with a U.S. initial unemployment claims report that saw the seasonally-adjusted number of those newly-sans-paycheck rise by 38,000 to 368,000 well over expectations of 350,000. Now, one would think in this environment with tomorrow’s all-important unemployment guesstimate hanging over the commodity markets that there would be some heavy profit taking on risk assets like oil and copper especially since all of them have rallied in recent days. Copper sold off briefly but then rebounded to spend the entire day attempting to put in a monthly close over $3.736 per pound which would have constituted a very bullish initial trending signal.
West Texas Intermediate crude shrugged off reports of 5 year high inventories to hang out near $97.50 per barrel, while Brent crude made it clear that it was now coupled with the Euro and pushed past $115 per barrel with ease. Brent priced in Euros has been falling since last summer and is now trading in a range between €83 and €85. Gold has as well and is now more than €140 off its peak after briefly touching the €1370 level last July.
Why is this happening if the macro-economic data in the U.S. is deteriorating? Money. Money. Money. The FOMC is going to make sure we drown in it before too long. Gas will be $5.00 a gallon this summer and Brent will likely trade north of $150. There’s so much money sloshing around we can’t even get a proper sell off in equities anymore.
Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.
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