Author: Peter Nurse
Investing.com – Crude oil rising on Capitol Hill consensus on infrastructure spending, recovery in the European economy, optimism in focus and second-half demand.
Here are five developments that could move the markets on Friday, June 11:
1. Compromise on infrastructure spending
The idea of compromise still seems alive after 10 bipartisan senators in the US agreed on a framework for the proposed infrastructure spending bill.
The group of senators, which includes both parties, agreed on a bill that would cost 974 over five years, $1.2 trillion over eight years, would include $579 billion in new spending, payable in full, and would not include a tax increase, according to Reuters.
Democratic President Joe Biden has proposed a $1.7 trillion package to renovate roads and bridges, solve other issues such as education and home health care. But after Republicans insisted on the cost and suggested that tax increases fund it, the two sides disagreed.
We’ll see what the framework will look like, but such a proposal is a nice reminder that the two sides can really work together, given the fragile nature of US politics these days.
A US House committee on Thursday voted to allow an additional $547 billion spent on surface transport over five years; this is mostly a plan to repair existing US roads and bridges and increase financing for rail and transit passengers.
2. The stock market is largely quiet; Michigan sentiment index expected
The US stock market will open largely calm near record highs on Friday. Investors ignored the high inflation rate as the economic recovery continued.
It increased by 35 points, rose 0.1% and fell 0.1%.
All three major indices closed high on Thursday: they rose 0.5%, breaking a new record in the regular session, and ending 0.1% and 0.8% higher.
These returns came despite the US experiencing the largest increase in 13 years in May, at 5% year-on-year. Despite a larger-than-expected increase, the response was relatively weak. The index included the big impact of short-term increases in airline ticket prices and used cars, supporting Fed Chairman Jerome Powell’s persistent assumption that high inflation will be temporary.
On the other hand, the recovery in the labor market continues. Last week, the number of first unemployed people in the US fell to the lowest level in nearly 15 months.
The economic calendar on Friday is limited to consumer sentiment reading. The first June reading is expected to come in at 84.2 points, up from 82.9 points in May.
In corporate developments, some stocks that have been in demand for months may attract attention.
AMC Entertainment (NYSE:), GameStop (NYSE:), and Clover Health (NASDAQ:) suffered double-digit losses on Thursday, interrupting large gains, and are likely to share real losses on a weekly basis.
Chewy (NYSE:) may also attract attention. The pet products supplier, which shared a surprise profit in the first quarter, warned of shortages in its workforce and supply problems.
3. Recovery in Europe
It’s not just the US economy that is showing signs of recovery from the pandemic. There is also improvement in the European data.
Britain quickly recovered in April. Monthly, 2.3%, it experienced its fastest growth since July. With this increase, production came to only 3.7% below its pre-pandemic level.
Prime Minister Boris Johnson wants to completely lift the quarantine restrictions in the UK on 21 June, but this plan may be delayed due to the rapid spread of the Delta variant of Covid-19, which was first detected in India.
also recovering from the setback caused by the epidemic. On Friday, the Bundesbank raised its growth and inflation forecasts for this year and next.
The country’s central bank now expects the German economy to return to pre-pandemic levels in the next quarter, with growth of 3.7% this year, 5.2% next year and 1.7% in 2023.
The bank also raised its inflation forecasts, but downplayed the extent of the increase, mainly blaming the effects of energy prices and taxes.
On the other hand, at its meeting on Thursday, it decided to continue its fast-paced bond purchases while maintaining the generous incentive flow in order to maintain the still fragile recovery.
Perhaps this improved outlook was the reason for the massive influx into one of BlackRock’s European market tracking funds earlier this week.
The iShares MSCI Eurozone ETF pulled in about $1.1 billion in new money on Monday, increasing its holdings to $8.1 billion, according to data compiled by Bloomberg.
According to a report by Bloomberg, Greg Bassuk, CEO of AXS Investments, said, “We are starting to see more bullish outlooks in Europe, with figures well above expectations.” “We urge investors to avoid this.”
4. Bitcoin classified as very risky by Basel
Bitcoin, the world’s largest cryptocurrency by market capitalization, has been classified as a very risky asset by the Basel Banking Supervisory Committee.
Basically, the committee that regulates international banking recommended that a bank apply a 1,250 risk weight to its transactions with Bitcoin and certain other cryptocurrencies.
The decision could be seen as double-sided: while drawing cryptocurrencies further into the mainstream financial world, it also made them extremely costly for banks to keep on their balance sheets and potentially delaying wider adoption.
On Thursday, Bitcoin gained support from El Salvador’s decision to adopt the digital currency as legal currency. El Salvador was the first country to do so. But doubts about the decision arose after the IMF said the move could raise legal and financial concerns.
An IMF team will meet with President Nayib Bukele on Friday, after the agency approved emergency funds related to the pandemic last year, IMF spokesman Gerry Rice said.
Bitcoin has been trying to break out of the $30,000-40,000 range since it started falling from the $65,000 it saw in April, and was largely unchanged at $36,816.00 lastly. However, we can see a volatile trade on Friday, with a total of $565 million in Bitcoin options expiring.
The US SEC (Securities and Exchange Commission) on Thursday warned investors about trading Bitcoin futures, citing market volatility, lack of regulation and fraud.
5. Crude oil rises, IEA expects higher output
Crude oil prices rose on Friday, heading for the third week in a row on expectations of a recovery in fuel demand.
Brent rose 0.2% to $72.69 while it was $70.44, up 0.2%.
Both are on track to gain more than 1% weekly.
The overall tone in the crude oil market was optimistic. OPEC continued to support its forecast for an increase in demand by 5.95 million barrels per day in 2021.
In its monthly report on Thursday, OPEC said that “global economic growth in general, and hence oil demand, is expected to accelerate in the second half.”
Goldman Sachs (NYSE:) also agrees with this view. He expects oil to reach $80 this summer as vaccinations bolster global economic activity and commodity demand.
“Increased vaccination rates are driving high activity in the US and Europe, and global demand is thought to have increased by 15 million bpd to 96.5 million bpd last month,” the bank said in a Thursday post.
The world’s largest oil producers will need to increase their production to meet demand, which will return to pre-pandemic levels by the end of 2022, according to the International Energy Agency (EIA).
“OPEC+ has to turn on the taps to fill the world oil market with adequate supply.”
“The 24-member OPEC+ group led by Saudi Arabia and Russia has scope to increase crude oil supply by 1.4 million barrels per day in 2022, above the July 2021-March 2022 target.”
Investor interest on Friday will be in ‘s weekly tower count report and ‘s weekly investor commitments report.