Oil Rally amid Sales of Risky Assets

19 sty 2022

Perhaps it is too early to say with certainty that the wind in the financial markets has changed and turned from the north to the south, but the feeling that something is happening does not leave. One of the signs of a change in market reality is the formation of a desynchronization in the price dynamics of assets.

The stock market, and the crypt, continue to crumble against the backdrop of the oil rally. Which is somewhat unusual, since in 2021 they usually grew at the same time.

Although from the outside it looks quite logical. The stock market and the crypto are frightened by the outflow of liquidity due to the tightening of the Fed's monetary policy (a steady increase in the yield of Treasury bonds is a clear confirmation of this). Considering that these markets are the most overvalued, profit-taking first of all on the bottom looks quite logical.

And the reporting season in the US started not so confidently. JPMorgan and Citigroup disappointed, while Wells Fargo confidently beat earnings and earnings forecasts. In any case, it is too early to draw conclusions, but the very fact of the heterogeneity of the results is definitely not in the treasury of buyers.

The reporting of Goldman Sachs became indicative (shares lost almost 7% yesterday). The bank clearly demonstrated what we wrote about earlier: the growth of salaries provokes an increase in the costs of companies, and it will not be possible to endlessly shift them to consumers. So, Goldman's operating expenses grew by 23%, which naturally hit profits. So it is likely that this is one of the first swallows, and there will be more to come.

The main event for the US stock market yesterday was the information that Microsoft will buy video game giant Activision Blizzard for $68.7 billion.

The year started most successfully for the oil market. This was facilitated by the unabated energy crisis, which was also facilitated by frost, as well as the expectation of a further rapid recovery of the global economy, which will stimulate growth in oil demand. In addition, the Middle East is again restless (referring to the attack by the Yemeni Houthi group associated with Iran on the capital of the UAE, Abu Dhabi). Despite such convincing dynamics, we continue to believe that this is the last attempt to grow before a powerful correction, which will be caused by the transition of the oil market from a state of deficit to a state of surplus.

In terms of news, today's day is interesting primarily for inflation data from the UK, the Eurozone and Canada. Another confirmation that inflation does not think to subside may provoke a new round of sales of risky assets.