The Daily Prophet: The Ugliest Chart in Markets

Connecting the dots in global markets.

If misery really does love company, then the bond market has found a soul mate in the oil market. Crude tumbled for a second day again, pushing prices below $50 a barrel for the first time this year. West Texas Intermediate fell as much as 3 percent after losing 5.7 percent the previous three sessions. 

If anything, the latest collapse is another example of the diminished influence of the Organization of Petroleum Exporting Countries. Although OPEC members and other countries have largely stuck to their pledge to trim supply, the resultant rebound in prices prompted America's highly-leveraged, cash-strapped energy companies to ramp up shale-oil production. U.S. stockpiles now total 8.2 million barrels, the most in weekly government data since 1982.

Now there's speculation that some OPEC members may cheat and ramp up their own production to make up for the drop in prices. "Shale is coming back with $50 oil and there’s uncertainty about whether OPEC and its partners are going to roll-over the production agreement," Adam Sieminski, a scholar at the Center for Strategic and International Studies in Washington and former head of the Energy Information Administration, told Bloomberg News's Mark Shenk. The good news is that consumers may soon see lower gas prices at the pump.

Oil's weakness weighed on the broader market for raw materials. The Bloomberg Commodity Index fell for a third day, to its lowest level since the end of November. Copper, often referred to as having an economics Ph.D for its ability to track the economy’s health, slid 3.8 percent as stockpiles tracked by the world’s biggest metals exchange jumped by two-thirds. Corn, wheat and soybeans are all headed for weekly declines. While better U.S. jobs data and rising euro-area inflation point to a stronger global economy, the dollar’s recovery is curbing demand for materials priced in the U.S. currency,

Oil also put pressure on the shares of energy companies, which dragged the MSCI All Country World Index lower for a sixth straight day, its longest losing streak since August. But enough with the bad news. The S&P 500 Media Index was one of the few areas of the market to gain today. In fact, the gauge has surged 17 percent since the U.S. elections on Nov. 8, the fourth-best return out of 24 industries. Donald Trump may rail against what he calls the fake and dishonest media, but the purveyors of newspapers, cable television and websites are benefiting from big M&A deals and speculation the new president will dismantle regulation.

After weakening in four of the past five months, prospects for the euro are suddenly looking better. An index measuring the currency against a basket of peers had one of its better days of the year today. Just listen to European Central Bank President Mario Draghi, who spent almost 10 minutes responding to the first question asked at his press conference on Thursday after the central bank's monetary policy meeting. A large part of the answer was devoted to listing positive economic data in the 19-nation region -- from measures of confidence and output at six-year highs to unemployment at the lowest since May 2009 to the health of credit demand.

At a time when investors are doing a lot of hand-wringing over the lofty valuations of U.S. equities, one major market is starting to attract the attention of prominent investors for its relative value. Japanese stocks are cheap, according to bond guru Jeffrey Gundlach. The head of DoubleLine Capital says Tokyo equities may be a way to play the reflation trade, reiterating the bullish stance he took in 2013. With a Federal Reserve interest-rate increase next week seen as a certainty and traders turning their focus to how many more hikes will follow, Japan’s stock market is primed to benefit from a weaker yen, and foreign investors have bought a net 1.8 trillion yen ($15.7 billion) in Japanese stocks since Trump’s election victory, according to Bloomberg News's  Yuko Takeo, Livia Yap and Min Jeong Lee.

The U.S, Labor Department releases its monthly employment report on Friday, and if past is prologue then investors can expect a better-than-forecast number of jobs created. For five years running, economists have underestimated employment growth in February, according to Bloomberg News's Austin Weinstein. Payroll gains for the month have exceeded the median forecast in Bloomberg’s surveys by 44,000 on average from 2012 to 2016. The median projection for this February calls for a 190,000 increase, in line with the average monthly gain over the past year.

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