COMMODITIES: This Week's WTI Rally Considered Corrective
A bearish trend structure in WTI futures remains intact and this week’s gains are considered corrective. The contract has recently traded through a key support at $75.45, the Apr 17 low. This strengthened the bear theme and opens $65.95, 76.4% of the Dec 16 - May 18 bull leg. Note too that moving average studies remain in a bear-mode position, highlighting a dominant downtrend. Initial firm resistance is at $79.51, the 50-day EMA. The trend set-up in Gold is unchanged, it remains bearish and the latest shallow recovery is considered corrective. Note that MA studies are in a bear-mode position - this highlights a dominant downtrend. Furthermore the recent breach of $4024.0, the Jun 11 low, confirmed a resumption of the medium-term downtrend. A continuation of the bear leg would open the $3900.00 handle next. Firm resistance is at the 50-day EMA at $4318.0.
- WTI Crude down $0.09 or -0.12% at $72
- Natural Gas down $0.04 or -1.2% at $2.977
- Gold spot down $25.71 or -0.62% at $4096.7
- Copper down $0.25 or -0.04% at $626.4
- Silver down $0.46 or -0.76% at $59.4867
- Platinum up $0.84 or +0.05% at $1616.31
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IRAN: Iranian Foreign Ministry Notes That U.S. Talks To Be Reviewed
Full details of earlier comments from Iranian Foreign Ministry spokesperson Baqaei via IRNA:
- "The continuation of the negotiation process will be reviewed considering recent developments"
- "The Foreign Ministry spokesperson, in response to IRNA's question about the latest status of negotiations to end the war between Iran and the United States, said: Considering last night's developments, we need to review the current situation. The diplomatic process does not happen in a vacuum, and to advance any diplomatic process, a minimal space is required to be able to move forward."
- "Diplomacy and the battlefield are not two separate matters; these two together are tools to protect Iran's national interests and security."
- "Wherever necessary, our armed forces respond to the enemy with power."
- "What happened last night showed that Iran's brave armed forces do not hesitate in defending the country."
- "In the field of diplomacy, the pillars of governance are fully coordinated, and wherever necessary, they will use diplomatic tools and wherever required, military force to defend the country."
SWEDEN: New 3-year EUR Benchmark: Final Terms
- Size: E2bln (The NDO aimed to raise SEK19bln from foreign currency issuance as per its May borrowing report. At current EURSEK levels, this would have corresponded to around E1.75bln).
- Books above EU7.5b (including JLM interest): Leads
- Spread: MS-5bps (Guidance was MS-3 Area)
- Maturity: June 18, 2029
- Coupon: Full first
- Settlement: June 18, 2026
- ISIN: XS3408819749
- Bookrunners: BNPP, Danske, SEB, Swedbank
Source; Bloomberg/MNI Colour
IRELAND: Fiscal Advisory Council Takes A Critical Stance On Strong Finances
This morning, the Irish Fiscal Advisory Council released its bi-annual Fiscal Assessment Report
- The report notes that Ireland remains “heavily reliant on corporation tax paid by a handful of foreign-owned multinationals. Excluding excess corporation tax, an underlying deficit of €11 billion (3% of GNI*) is forecast for this year.”
- The Council notes that “the planned pace of net spending growth is faster than the sustainable growth rate of the economy” and that “only €1 out of every €6 collected will be set aside, with the remaining €5 used for ongoing spending commitments”
- The implication of this is a higher borrowing requirement to finance planned contributions to savings funds.
- The report concludes by recommending Ireland adopts a domestic guide/rule to manage medium-term finances.
It’s not too surprising to see a fiscal advisory board take a critical view on public finances, even if Ireland’s headline metrics are extremely strong relative to Eurozone peers. Reliance on corporate tax receipts is a known quantity, so should already be embedded in market pricing.
Although increased borrowing to finance saving seems counter-intuitive, it should be viewed in the context of attractive domestic bond yields relative to German counterparts (the 10-year IRISH/Bund spread is just ~17bps at typing) and the expected return on SWF investments.
Figure 1: Ireland vs Germany Curve (Source: Bloomberg Finance L.P)
