What are Global Markets Watching Monday?

• Heading into the latest US 3-day holiday weekend, there was a lot of saber rattling from the US president, this time at Iran. 

• However, Russia's Putin voiced his support for Iran's current regime, and the war drums along the Potomac grew quiet. 

• Speaking of war drums, according to one report, Beijing is stockpiling crude oil, seen as a strategic preparation for possible conflict with the US and its “allies”. 

Morning Summary: While US markets are closed for yet another pointless holiday, this one celebrating presidents of the past, global markets continue to register concern over the present president. One investment fund manager I work with sent me a message late Friday with two news stories attached, one from Reuters with the teaser, “US military preparing for potentially weeks-long Iran operations” the other from the Washington Post, “U.S. orders second aircraft carrier to Middle East…”. The message included his editorial comment, “Next file dump must be soon…There was a time when Congress had to approve this…”.  As this past weekend unfolded, the self-declared president of Venezuela was reportedly thinking of pulling recently deployed US warships back out of the Middle East after Russia’s Vlad the Invader expressed his support for the existing regime in Iran. The decision by the wannabe Grand Poohbah of Greenland will eventually come down to how much perceived political damage there could be in the latest files. If nothing else, this past decade has taught us what the word “diversion” means. In other news, China’s Lunar New Year holiday starts on Tuesday, meaning there could be some activity from the world’s largest commodity buyer Monday. 

Metals: Speaking of commodities, the Metals sector took a breather overnight through early Monday morning. March silver (SIH26) dropped as much as $3.39 (4.4%) before stabilizing and was sitting $1.06 (1.4%) lower at this writing. April gold (GCJ26) dropped as much as $64.40 (1.3%) and was still off $20.00 (0.4%). What stood out to me pre-dawn was the low trade volume in both markets with March silver showing fewer than 10,000 contracts traded and April gold 21,000 contracts changing hands. One of the first talking points on CNBC’s Squawk Box Europe, leftover from the weekend, was US Secretary of State Rubio “reassuring” European allies the administration wanted to reform NATO rather than replace it. However, actions speak louder than words, so we’ll see what his boss does next. As for Dr. Copper, the economic indicator market, the March issue (HGH26) was down 1.15 cents (0.2%) to start the week. From a technical point of view, if we can apply this school of analysis these days, March copper posted a new 4-week low two weeks ago, what could be viewed as a move to an intermediate-term downtrend. If so, this could be a warning flag of a slowing economy. We’ll see what happens as this week unfolds with China on the sidelines.

Energies: The Energies sector was also in the red across the board early Monday morning, also indicating missiles haven’t started flying at Iran. Both crude oil markets, the US WTI (CLH26) and global Brent (QAJ26), were down about $0.35 (0.5%) on light trade volume with spot-month issues showing 15,000 and 3,000 contracts respectively. Given this, it wouldn’t take much to spike either market. Distillates (HOH26) was down 1.45 (0.6%) cents after slipping as much as 1.6 cents (0.7%) overnight. I read an interesting piece from John Kemp, formerly of Reuters and now of his own media outlet John Kemp Energy. The piece was titled “China’s oil stocks and readiness for war” and began with, “China has been accumulating crude oil inventories to take advantage of low prices and act as an emergency reserve in any future conflict with the United States and its allies”. Recall I mentioned earlier about the difference between words and actions. According to the US president, he and China’s President Xi are bosom buddies, so much so the idea of a new Axis Alliance including Russia, China, and the US is being formed. As for our old friend natural gas, the spot-month contract (NGH26) is down 25.4 cents (7.8%) as weather remans spring-like across much of the United States. 

Equities: US stock index futures did trade overnight with contracts tied to the three major indexes (ESH26) (YMH26) (NQH26) all in the green early Monday. Going back to last week, the latest US consumer price index for January came in lower than expected, 0.2% versus 0.3%, while the core was as expected at 0.3%. This put the core at a year over year increase of 2.5% as compared to the previous reading of 2.6%. This helped both the S&P 500 and Dow Jones Industrial Average close higher Friday while the Nasdaq was still down 50 points (0.2%). As this week gets under way, with the Lunar New Year kicking off, Asian markets were mostly lower. Japan’s Nikkei was down 135 points (0.2%) while China’s Shanghai Composite was down 52 points (1.3%). The outlier was Hong Kong’s Hang Seng with a gain of 139 points (0.5%). Early trade in Europe shows indexes green across the board, generally up 0.3%. (A side note: As I was typing this segment, CNBC played a snipped of Secretary Rubio’s speech at the Munich Security Conference. Shots of the audience showed disbelief, and a somewhat humorous reaction to what was being said. I have to agree. Again, the president’s actions speak louder than the Secretary’s words.)