The financial week in five charts - Houthis and gilts, wildfires and more
Open Interest (ROI), every Friday, distills the past five days' financial activity into a series of charts that highlight the most important trends, surprises, and missed moves.
1. ALERT RED!
RON BOUSSO is a columnist for ROI Energy. After the war broke out on February 28, the 'Strait of Hormuz' was largely closed. The Saudi Arabian export hub of Yanbu, located on the west coast, relies on the Bab 'el-Mandeb Strait. This became the primary outlet of the kingdom for crude 'exports'. What initially seemed to be a workaround that worked has now been turned into a target by the Iran-backed Houthi militay who have declared a blocking of Saudi vessels trying to cross the strait. It could be one too many crises for the already stressed energy markets.
2. GILT TRIPS MIKE DOLAN is a columnist for ROI Finance & Markets. Even though the benchmark 10-year British 'government borrowing rates are the highest in the G7 nations – around 5% – they have remained relatively calm despite the spectacularly rapid rise of Andy Burnham as Prime Minister.
Burnham's plans could have been tempered by two major potential buffers. First, a lowering of inflation and second, a reduction in UK borrowing as a result of former Chancellor Rachel Reeves adhering to fiscal rules.
Even so, if Burnham does not boost Labour's electoral prospects, there is a risk that the right-wing Reform UK Party will win, which would be a wildcard for investors.
3. JAMIE MCGEEVER, a?ROI Markets columnist: This week the yen fell to its lowest level in forty years against the dollar, as the dollar/yen exchange rate rose over 163.00. There are a number of reasons for this, including the overall strength of the dollar and rising crude oil prices. However, Japan appears to be in a "doom loop" with its policy.
Investors around the world are not impressed with Japan's current policies: fiscal policy is too lax, monetary policy hasn't been tightened enough and, as always, Japan's cozy relationship between the two is fueling market concerns about the Bank of Japan independence. There are few options to escape this situation.
4. CRUDE VS. FUELS RON BOUSSO, ROI Energy columnist: While the price of crude oil may have been in the spotlight, refined products such as?gasoline and diesel, or jet fuel, are under much greater pressure. Global refining is under pressure from many angles, including the latest disruptions in crude deliveries to the Middle East and the curtailed operations of Russian refineries due to Ukrainian drone strikes on energy infrastructure. Indian refiners have increased?production but it may only be a marginal improvement.
5. WILDFIRES COLLATERAL DAMAGE GAVIN MAGUIRE, ROI Global Energy Transition?Columnist. More than 70 wildfires are burning in the United States and causing major problems for power producers. Smoke reduces the amount of solar radiation hitting solar farms. This in turn decreases the?amount generated. It also makes it more difficult to predict the flow of electricity across transmission lines. The fires also cause this disruption at a time when grids cannot afford it, right as heatwaves increase demand.
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(source: Reuters)
