Julius Baer: sobre la reunión del BCE, Brasil y petróleo

Redacción - Jueves, 20 de Octubre

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ECONOMICS An uneventful ECB meeting

There is little to be expected from the European Central Bank (ECB) Council meeting which will end today with a press conference by Mario Draghi. Positive economic data surprises out of the eurozone allow the ECB to refrain from announcing new policy measures or ramping up rhetoric in order to weaken the currency or drive interest rates and yields lower. Hence, we expect a strong commitment to the measures which are in place and a reminder that March 2017 is not the deadline for the EUR80bn monthly asset purchases. The ECB Council has been committed from the beginning of the extended asset purchasing programme to continue to buy beyond March 2017 as long as inflation is nowhere near the target. According to the ECB projections, which we deem plausible, this will only transpire in 2019. Hence any speculations about tapering asset purchases appear premature. A remark to the most recent signs that banks in the eurozone are tightening their credit conditions, according to the latest bank lending survey, could be the most interesting part in the ECB press conference as interest rates and unconventional policies will remain unchanged.

The ECB will remind markets that tapering speculations are premature as the central bank sticks to its outcome-dependent commitment to buying bonds at the current pace beyond March 2017.The support for the EUR from tapering speculation will crumble as a result.

 

David Kohl, Chief Currency Strategist and Head Economist Germany, Julius Baer

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FIXED INCOME

 

Brazil: Starts monetary easing cycle with 25 bps rate cut

 

After keeping interest rates at a high 14.25% for more than 15 months, the Brazilian central bank decided yesterday to cut them by 25 basis points, slightly less than the 50 basis points expected by the market. Even though inflation remains above 8%, it has declined substantially since the beginning of the year, which together with progress in fiscal reforms, still weak economic activity and a stronger Brazilian real provided room for monetary easing. Yesterday's decision is likely to be followed by further small rate cuts at upcoming meetings that should accelerate the economic recovery.

 

Alejandro Hardziej, Fixed Income Analyst, Julius Baer

 

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COMMODITIES

 

Oil: Surprising US storage decrease backs the bulls

 

US West Texas Intermediate (WTI) oil prices gained more than 2% yesterday following a surprisingly large inventory decrease, pulling up Brent oil prices in their slipstream. US inventory levels showed unexpected declines as of late in part due to subdued imports. Pipe-line outages and adverse weather conditions delaying tanker arrivals are said to have weighed on imports. US inventories are the oil market’s most watched thermometer given their size and the availability of accurate and highly frequent data. We do not see the recent storage decreases heralding a tightening market and thus do not expect any lasting support to prices. The driving season has ended, refineries are cutting activity, and storage levels are set to increase seasonally. We see more downside than upside from today’s levels and stick to our cautious view. Oil prices should continue to trade range-bound within the low 40s and low 50s. Meanwhile, the market remains optimistic on the OPEC announcement to present supply restrictions at their coming meeting at the end of November. Futures market positions held by hedge funds have increased to extraordinarily bullish levels, warranting the risk of profit-taking going forward. Rising Libyan and Nigerian exports could well become a trigger. Reuters reports an interesting anecdote this morning. The head of the largest listed oil company told a conference audience that fears of a global supply crunch are overblown, a view we share, contrasting the Saudi energy minister’s words minutes earlier.

Another surprising storage decline supports the bullish sentiment and maintains oil prices at the upper end of the recent trading range. Storage declines unlikely herald a market tightening not least because fundamentals soften seasonally. We see more downside than upside from today’s prices.

 

Norbert Rücker, Head Commodities Research, Julius Baer

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