24/08/2022
Markets tread water, ahead of the important Jackson Hole Economic Symposium, where Central Bankers and economists gather to discuss monetary policy. Ahead of the keynote address, Federal Reserve Chairman Powell will be the release of the Fed’s key inflation indicator, the PCE. It was 6.8% for June, but the CPI numbers moderated, so expectations are for a softer number. If the PCE number were to increase, then we could see an even more hawkish speech, from the head of the Fed. The key driver of US inflation has been fuel prices, but the US Biden Administration has been pouring oil from their ‘strategic oil reserve’ to push prices lower. US Oil reserves are now dangerously low, the lowest since 1985, following the previous administration’s massive stockpiling when oil dipped to below zero. The strategic reserve is a national security issue, as these need to be strong in case of mobilisation, and in these troubled times, red flags should be waving.
European and US equities markets remained soft overnight, unsupported by economic data and fears over rising interest rates and recession. European flash PMI data was extremely weak, with Australian, Japanese, European, and US PMI data, contracting on many fronts. The energy crisis in Europe is only getting worse, as Russia prepares to shut down Nord Stream 1 completely, at the end of August. This is supposedly only temporary, but enough to see electricity and gas prices spiral into the heavens. This will drive the European economies into a deep recession, unless arrested, which seems unlikely in the near future. Gas prices have gone from EUR$3/megawatt hour, two years ago, to EUR$300/megawatt hour today! This is astounding and not sustainable
What does all this mean? "lower" fuel prices are transitory at best, and will rebound with vigor. Make your purchasing and logistics plans accordingly. North Queensland Customs provides International freight rates, customs brokerage, transport and procurement consultancy services to all our clients. Don't hesitate to contact us.
With kind regards Ben