Central Banking 2014 Upgrades & Arab Uprising Part II

Good evening to all

The month of July has been rather amusing in market volatility and global economic indicators balancing out each other, mixed in with the typical political cocktail of civil unrest.

ECB and Bank of England Harmony

 With the markets losing some of the power and confidence in tactic decision making, today they looked to the words of Mark Carney (Bank of England) and Mario Draghi (ECB). The Outlook of both and interest rate decision remained unchanged, though new weapons such as market guidance are becoming more weighted on market volatility.

A Central bank’s words are one the most secretly kept letters before an announcement, as these words are the recurring power mover of any market. Previously a central bank would never try to give their opinion on forward assumptions of market growth, though the new Bank of England governor changed the norm.  So these words are now a typical aspect for market makers to expect in the medium term.

Liberalisation of the ECB was also in discussion; the idea of releasing the minutes of the ECB, could be seen as a more accurate way of the market valuing the future. Though in the Gothic economist’s opinion this will only produce more wild fire, and take less value of the central bank’s overall decision.

Vertigo Markets

So with the last month being pinned to fallout part 2, of the financial crisis shows that the wounds slowly are healing, for now... The patient is still in intensive care.

The redbull juice of quantitative easing, unfortunately could be working. Grumbles for the Gothic economist, as his positive monetarist views against Keynesian borrowing malarkey as being the devils work could succeed, as the S&P climbed today. However... These growth patterns with an over capitalised market, may bring future worries, to the mix.

Today the US market saw growth patterns that had not been seen since 2011, amongst these positive movements, there has also been frailness at the midpoint, due to fears of reduced growth within in china and liquidity worries for domestic and medium sized businesses.

The Brent crude benchmark has been on rapid brinks of decline and ascension. The Chinese downturn in GDP forecast, and the US growth results have been players on this. Since July continuing into August has seen many Middle Eastern civil problems affect oil output, and with US sanctions on cutting Iranian oil exports have been also implemented this week. Hence this fall going into the winter season for the northern hemisphere could see prices above $112 a barrel.

Positives that can be seen are controlled inflation position within Europe and US, also boosted exports in some of the sovereignly constrained Euro zone countries.

Burn Baby Burn

The Middle East and North African political process is still far from maturing in stability. With Nigerian tensions, the Egyptian political problem and summer maintenance schedules, the fall could haunt the price yet.

Libya has been flooded with protests and shut down of its ports, leaving the OPEC state with no oil and in some cased more than 50% fall in refining, giving August and September contracts a rise.

The markets could possibly become more active in their discontent with the Arab uprising, as foreign direct investment thoughts to Africa becomes less desirable.

The biggest problem is that due to these cuts in production, you cannot stop oil extraction straight away, so all you can do is flare. The burning of fuel in some parts of Africa have forecast to total over $100m a month, and with Flaring already being a major issue within Northern Canada, more investment and maintenance is demanded within the Oil & natural gas sector.

This week saw oil spills in Thailand, Nigeria and evidence of manufacturing faults with an Exxon pipeline in Canada. Enough said on future prices and environmental damage.

Closing Black Words

The energy sector will continue to climb, as middle east tensions are predicted to continue , if  US continues to give out low unemployment data and growth support. Though this highly unlikely, and in the fall, markets will become more volatile, as the deadline for the US borrowing limit comes closer.

Buy while you still can...