Resilience of Natural Gas Amid Market Headwinds

Traders' Opinions

Commodity

Summary:

Weather fluctuations and production adjustments affect short-term prices, while pipeline maintenance impacts pricing. Warmer temperatures and ample supply contribute to a bearish market sentiment.

Flat Trade to Open New Week

Natural gas futures are exhibiting minimal movement on Monday, indicating uncertainty amidst consolidation just above a significant long-term low. This price action reflects a blend of short-term weather demand outlook and a longer-term anticipation of production cuts leading to reduced stockpiles.

Last Week’s Performance

Despite a myriad of bearish factors, the U.S. natural gas market showed resilience last week, with futures posting a modest uptick. The primary driver was the expectation of sustained low output in the coming weeks, attributed to ongoing declines in gas rig counts. Settlement for US Natural Gas futures stood at $1.785, marking a 1.25% increase. Notably, there was a significant decline in natural gas production, with average output in the Lower 48 states dropping to 99.1 billion cubic feet per day (bcfd) in April. The reduction is linked to fewer active gas rigs, particularly in the Haynesville shale region. Maintenance activities on key pipelines further contributed to pricing anomalies.

Demand Factors

Weather forecasts indicate a shift towards warmer conditions, potentially reducing heating-related gas consumption. Power outages in the Northeast and the anticipated impact of a solar eclipse on solar generation could also temporarily dampen demand. LSEG projects a decline in gas demand over the next few weeks, reflecting these factors.

Market Influences

Trends in the oil market, including a surge in U.S. oil futures and divergence in LNG and oil trading outcomes by Shell, have indirect effects on natural gas prices. Moreover, global energy dynamics, such as unchanged Asian LNG spot prices and forecasts of an active Atlantic hurricane season, contribute to market volatility.

Short-Term Forecast: Bearish Outlook

Considering the warmer weather outlook, adequate supply amidst reduced production, and broader energy market trends, the short-term forecast for U.S. natural gas prices leans bearish. Traders should closely monitor emerging trends for potential market shifts in the coming weeks.

Technical Analysis

Natural gas futures continue to consolidate near multi-year lows on Monday.

Resilience of Natural Gas Amid Market Headwinds_1

The short-term range is $1.686 to $1.906, making its pivot at $1.796 a key level to watch today for direction.

A trade through $1.906 will change the short-term trend to up. If this creates enough upside momentum, we could see a surge into the 50-day moving average at $1.990. Look for selllers to re-emerge on a test of this trend indicator.

We could see lower prices on a move through $1.686, but it is dangerous to short weakness at current price levels.

Risk Warnings and Disclaimers

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Alex

Economic

The Swiss government is this month due to publish its recommendations for policing banks that are "too big to fail", which could saddle UBS with tougher business rules.

In what is expected to be a several hundred-page report, the capital requirement section will be particularly scrutinised, with UBS potentially having to find tens of billions of extra dollars to safeguard against a Credit Suisse-style meltdown.

"Switzerland simply cannot allow UBS to fail," said Stefan Legge, an economist at the University of St. Gallen. "If it did it would have an absolutely devastating effect on the Swiss economy."

At around $1.7 trillion, UBS's balance sheet is double the size of annual Swiss economic output, giving the bank an exceptional weight for a major economy.

Should UBS unravel, there are no local rivals left to absorb it. And the cost of nationalisation could shatter public finances, experts say.

The Swiss lower house of parliament in May 2023 backed a motion calling for systemically relevant banks to have a leverage ratio of 15% of assets, far more than in the European Union, the United States and Britain.

Based on common equity tier 1 capital of $79 billion, UBS had a 4.7% ratio at the end of 2023.

The higher ratio would likely leave UBS needing to find well over $100 billion in additional equity, said Andreas Ita from consultancy Orbit36.

"This can't be done within a reasonable period by withholding profits, and raising such sums via capital markets is hardly realistic," Ita said.

The bank could, however, shrink its balance sheet and reduce credit supply, he added.

LOBBYING

Few analysts expect such onerous terms to be imposed, but it helps explain why UBS has been keen to make itself heard.

"UBS is trembling," said an industry source familiar with the situation, who noted the bank had unleashed a major lobbying drive that would continue until the last minute among the many "open doors" it had found among politicians and officials.

Both UBS and the Swiss government declined to comment.

Finance Minister Karin Keller-Sutter said last year that more demanding capital requirements were coming. However, she also said excessive regulation could hamstring Switzerland's ability to compete with other financial centres like New York, London, Singapore and Dubai.

"If you want to stay in the top league, you won't be able to avoid taking certain risks in future," she said.

For its part, UBS has warned that excessive capital requirements would ultimately hurt the consumer.

"If you have too much capital, you punish shareholders, but also customers, because banking services become more expensive," UBS chair Colm Kelleher told the NZZ am Sonntag paper recently.

Significant changes are not expected to be enacted this year. Parliament must first consider any recommendations before the government submits a draft law. Then consultations begin with banks and other stakeholders.

In the end, said the University of St. Gallen's Legge, politicians are unlikely to create too many hurdles for UBS.

"There is no plan B this time," he said. "The main policy will be hope – hope that UBS doesn't get into trouble. But hope is not a strategy."

Source:Reuters

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Glendon

Economic

Cryptocurrency

Ethereum, often equated with its native cryptocurrency Ether (ETH), is a technological marvel that transcends the realm of digital money. It's a decentralized, open-source platform built on blockchain technology, fundamentally transforming how we interact with data and applications. This deep dive explores the intricacies of Ethereum, its core functionalities, its impact on various industries, and the exciting possibilities it holds for the future.

The Bedrock: Blockchain Technology Explained

At the heart of Ethereum lies blockchain technology, the revolutionary innovation that underpins its operations. Imagine a distributed ledger system, a digital record of transactions securely maintained across a vast network of computers. This eliminates the need for a central authority – like a bank – to verify and record transactions. Every computer on the network holds a copy of the ledger, ensuring transparency, security, and immutability of data. Transactions are cryptographically linked together in chronological blocks, creating an unalterable chain of events.

Beyond Currency: The Power of Smart Contracts

While Bitcoin, the poster child of cryptocurrencies, focuses primarily on facilitating financial transactions, Ethereum unlocks a whole new dimension with its ingenious concept of smart contracts. These self-executing contracts, essentially computer programs stored on the blockchain, automate agreements between parties without the need for a trusted intermediary. The terms of the agreement are written in code, and once certain pre-defined conditions are met, the contract executes automatically. This eliminates the risks of human error, fraud, and the need for third-party verification, fostering trust and efficiency in transactions.

A Universe of Applications: Ethereum's Reach Extends Far and Wide

The potential applications of smart contracts on the Ethereum platform are vast and ever-evolving. Let's delve into some of the most prominent areas where Ethereum is making waves:

Decentralized Finance (DeFi): Imagine a financial system free from the control of traditional banks and institutions. DeFi leverages smart contracts to create a peer-to-peer lending and borrowing ecosystem. Users can lend and borrow crypto assets directly from each other, eliminating intermediaries and potentially offering higher returns for lenders and lower interest rates for borrowers. DeFi also opens doors to innovative financial instruments like decentralized exchanges (DEXs) and algorithmic stablecoins, disrupting the traditional financial landscape.

Non-Fungible Tokens (NFTs): These unique digital tokens have taken the world by storm, representing ownership of digital assets like artwork, collectibles, and even in-game items. Each NFT is one-of-a-kind and resides on the Ethereum blockchain, providing secure proof of ownership and authenticity. This technology opens doors for creators to monetize their work directly, eliminates the risk of counterfeiting, and fosters a new era of digital ownership.

Supply Chain Management: Tracking goods throughout the complex web of a global supply chain can be challenging and opaque. Blockchain technology, with its inherent transparency and immutability, can revolutionize this process. Every step of a product's journey, from origin to final destination, can be recorded on the Ethereum blockchain, ensuring product authenticity, streamlining logistics, and minimizing the risk of fraud.

Decentralized Applications (DApps): Imagine applications that operate independently of a central authority like Facebook or Google. DApps, built on the Ethereum platform, empower users with greater control over their data and privacy. These applications can range from social media platforms that value user privacy to innovative gaming experiences with true digital ownership of in-game assets.

Ethereum 2.0: A Sustainable Future for a Thriving Ecosystem

One of the major criticisms of Ethereum in its early years was its energy consumption due to the "proof-of-work" consensus mechanism used to validate transactions. This mechanism involved a vast network of computers solving complex mathematical puzzles to secure the network. However, a major upgrade, Ethereum 2.0, implemented a more sustainable "proof-of-stake" system. Here, validators lock up a certain amount of ETH as collateral, and the network randomly selects validators to verify transactions. This significantly reduces energy consumption, making Ethereum a more environmentally friendly platform.

Challenges and Considerations: The Road Ahead for Ethereum

Despite its remarkable advancements, Ethereum still faces challenges. Scalability, the ability to handle a high volume of transactions, is a critical concern. The network can become congested during periods of peak usage, leading to slow transaction speeds and increased transaction fees. Additionally, regulatory uncertainty surrounding cryptocurrencies and blockchain technology can create hurdles for mainstream adoption.

However, the vibrant Ethereum developer community is constantly innovating. Scaling solutions like sharding, a technique that distributes the workload across multiple blockchains, are being actively explored. Regulatory frameworks are also evolving, with governments and institutions recognizing the potential of blockchain technology.

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Warren Takunda

Economic

If investors were looking to the gods for Wall St's next move, the portents all look a bit ominous.

A rare total solar eclipse over swathes of North America later on Monday follows one of the largest earthquakes on the East Coast of the United States in the last century on Friday.

For those less superstitious, the financial backdrop was similarly anxious. Odds on a Federal Reserve rate cut in June are lengthening - with the chances of a move by then now just 50-50 following another bumper U.S. employment report on Friday.

Only two quarter point cuts this year are now fully priced in futures markets, with full-year easing bets ebbing to just 63 basis points on Monday.

Even though Wall St stock indexes (.SPX), opens new tab staged a decent rally after the jobs report - which packed twin positives of above-forecast job creation and moderating wage growth - a negative first week of the new quarter left a sour taste.

Stock futures were in the red again first thing on Monday as the S&P500 (.SPX), opens new tab recoiled almost 1% for the whole of last week.

The March consumer price inflation report is due Wednesday, there are 10- and 30-year Treasury auctions through the week, the European Central Bank and Bank of Canada hold important policy meetings, Fed meeting minutes are released on Wednesday and the first-quarter U.S. corporate earnings season kicks off with some of the big banks on Friday.

While there's a lot to unpack in all that, it's hard to get away from the overarching brake on markets from ebbing Fed easing expectations. And fearful of a correction, the VIX, opens new tab volatility gauge remains elevated near its highest close for the year to date.

And it's another bruising period for bonds, with U.S. two- and 10-year Treasury yields hitting their highest since November at 4.79% and 4.45% respectively first thing on Monday.

It's not just juggling the date of the first rate cut either. With Fed officials mulling higher estimates for their neutral interest rate assumption, given the ongoing strength of the economy, rate futures now only see about 150bp of easing for the entire cycle.

Since the end of last year, the assumed "terminal rate" in March 2026 has risen almost 100bps to 3.90%.

A noted Fed dove - Chicago's Austan Goolsbee - and a recognized hawk - Minneapolis Fed boss Neel Kashkari - both speak later on Monday.

The dollar (.DXY), opens new tab is pumped up again as a result - chomping at the bit against Japan's yen again just under 152 yen despite residual fears of Japanese government intervention.

Payrolls aside, part of the problem last week was the jump in oil prices - as building global demand meets supply disruptions and geopolitical worries.

U.S. crude prices hit their highest in almost six months last week above $87 per barrel. Their retreat on Monday to about $86 may calm the horses a bit as Middle East tensions eased after Israel withdrew more soldiers from southern Gaza and committed to fresh talks on a potential ceasefire in the six-month conflict.

Overseas, stocks were generally buoyant on Monday. Japan's Nikkei (.N225), opens new tab outperformed in Asia, while European stocks were higher too.

With the ECB meeting due on Thursday, there's growing speculation the ECB will cut rates in June even if the Fed doesn't.

The mood in China was more downbeat, however, as stock benchmarks there fell on Monday. Chinese property developer Shimao (0813.HK), opens new tab tumbled 18.7% after China Construction Bank filed a liquidation petition against it in Hong Kong over its failure to repay loans of HK$1,579.5 million ($201.8 million).

U.S. Treasury Secretary Janet Yellen warned China on Monday that Washington will not accept new industries being decimated by Chinese imports as she wrapped up four days of meetings to press her case for Beijing to rein in excess industrial capacity. Yellen told a media conference that U.S. President Joe Biden would not allow a repeat of the "China shock" of the early 2000s, when a flood of Chinese imports destroyed about 2 million American manufacturing jobs.

Key diary items that may provide direction to U.S. markets later on Monday:

* NY Fed inflation expectations survey, U.S. March employment trends

* Chicago Federal Reserve President Austan Goolsbee and Minneapolis Fed President Neel Kashkari both speak; Swiss National Bank chair Thomas Jordan speaks

* U.S. Treasury Secretary Janet Yellen in Beijing

* US Treasury sells 3-, 6-month bills Morning Bid: Wall St Eclipsed as June Fed Cut in Balance_1

Morning Bid: Wall St Eclipsed as June Fed Cut in Balance_2

Morning Bid: Wall St Eclipsed as June Fed Cut in Balance_3

Morning Bid: Wall St Eclipsed as June Fed Cut in Balance_4

Source: Reuters

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Samantha Luan

Economic

A steep increase in US tariffs on Chinese imports — which presidential candidate Donald Trump has vowed to impose if he’s elected — would hobble the domestic economy and push inflation up, according to Goldman Sachs Group Inc.

Every percentage point increase in the effective tariff rate would reduce US growth by as much as 0.15% if China retaliates, Goldman analysts said in a note on Saturday. Even if Trump used the resulting revenue to finance tax cuts that would spur spending and investment, the hit to gross domestic product would still be a minimum 0.05%.

It also would raise core consumer prices by just over 0.1% because firms would pass on the higher cost of imports to consumers while some domestic producers would opportunistically lift their prices, and the result would be higher inflation for a year, Goldman said.

Trump imposed tariffs of up to 25% on more than $300 billion of Chinese imports while he was in the White House — triggering a retaliation from Beijing — and President Joe Biden has largely kept them in place. The two men are set to fight a rematch in November’s presidential vote and they’re vying to appear tougher on China. Trump has floated an increase in China tariffs to at least 60% if he’s elected.

The effective tariff rate across Chinese imports increased by 1.5 percentage point between 2017 and 2019, and Trump’s proposals could boost it “much more substantially,” according to Goldman.

Even though each percentage-point rise in China tariffs would lift government revenues by about $30 billion per year, or 0.1%, the overall effect wouldn’t be positive for the economy, according to senior economist Ronnie Walker.

“The direct impact of higher tariffs on GDP is likely to be modestly negative, with the hit to real income and consumer spending from higher prices outweighing the decline in the trade deficit,” Walker wrote in the report. There are also uncertain indirect effects, such as a hit to business sentiment and supply-chain upheaval, that could heighten the negative effect, he said.

Source：Bloomberg

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Glendon

Economic

The Shiba Inu, a breed known for its internet fame and "wow" factor, has inadvertently lent its name to a cryptocurrency that has taken the world by storm. But Shiba Inu (SHIB), the Dogecoin counterpart featuring the adorable Shiba Inu dog, is much more than just a meme coin. This article explores the origins of SHIB, its functionalities within the Shiba Inu ecosystem, its potential applications, and the considerations surrounding its future.

A Doge Offspring: The Rise of Shiba Inu

In 2020, amidst the Dogecoin (DOGE) frenzy, a new cryptocurrency emerged – Shiba Inu (SHIB). Created by an anonymous person or group known as Ryoshi, SHIB was launched as an "experiment in decentralized spontaneous community building." Unlike Dogecoin, with a capped supply of 120 billion coins, SHIB boasts a quadrillion (that's 1 followed by 15 zeros) total supply. This vast supply initially raised eyebrows, but it also fueled its rapid growth through its perceived affordability.

The Shiba Inu community, affectionately called the "ShibArmy," played a crucial role in its early success. Leveraging social media and online forums, the community rallied behind SHIB, driving its price upwards. A key factor in its rise was a strategic burn mechanism, where a portion of SHIB tokens are sent to a dead wallet, effectively removing them from circulation and potentially increasing the value of the remaining tokens.

However, SHIB remains highly volatile, susceptible to market fluctuations and social media hype.

Beyond the Meme: Unveiling the Shiba Inu EcosystemSHIB is the foundation of the Shiba Inu ecosystem, which aims to expand beyond the realm of a simple meme coin. Here's a glimpse into its evolving functionalities:

ShibaSwap Decentralized Exchange (DEX): This allows users to swap cryptocurrencies in a peer-to-peer manner, eliminating the need for intermediaries.

LEASH: This is the second token within the ecosystem, with a limited supply of 107,649 tokens. LEASH serves as a governance token, allowing holders to vote on proposals that shape the future of the Shiba Inu ecosystem.

BONE: This is the third token, with a total supply of 250 million. BONE functions as a reward token within the ShibaSwap DEX, incentivizing users to provide liquidity.

Shiba Inu Incubator: This initiative aims to foster innovation within the decentralized finance (DeFi) space by incubating promising projects.

The development of these functionalities suggests a move towards a more comprehensive ecosystem, aiming to provide utility beyond its meme coin origins.

Potential Applications and Considerations for the Future

The future of SHIB hinges on its ability to provide real-world utility. Here are some potential applications:

Integration with Payment Systems: If SHIB gains wider adoption, it could be used for online and even offline payments, similar to other cryptocurrencies.

Store of Value: As SHIB's burn mechanisms reduce its total supply, it could potentially become a more stable store of value over time.

Community-Driven Development: The strong and active ShibArmy can play a crucial role in driving future development and adoption of SHIB within various applications.

However, significant challenges remain:

Market Volatility: SHIB's extreme volatility makes it a risky investment for those seeking stability.

Competition: The cryptocurrency market is fiercely competitive, with established players and innovative new projects vying for attention.

Regulation: Evolving regulations surrounding cryptocurrency could pose hurdles for SHIB's widespread adoption.

Conclusion

The Shiba Inu coin, born from a meme, has garnered significant attention and community support. While its vast supply initially raised concerns, the burn mechanisms and the development of the Shiba Inu ecosystem suggest a move towards greater utility. However, the road ahead is paved with challenges. Investors should approach SHIB with a cautious and informed perspective, understanding its inherent volatility and the uncertainties surrounding the cryptocurrency market. Despite the challenges, SHIB's potential for innovation and its dedicated community make it a project worth watching as it continues to evolve.

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Cohen

Economic

European Central Bank interest-rate setters are starting to position themselves for the next debate as a first cut in June becomes increasingly certain and inflation continues to slow.

The question the members of the Governing Council eventually need to settle is whether to follow their initial foray into monetary easing with another move at their July policy meeting — or wait at least until September.

Even if President Christine Lagarde downplays any talk of such a step after Thursday’s gathering, the discussion is already under way. A few officials have spelled out their preference directly, while others may be shaping the path ahead more indirectly by insisting that a move on this week remains an option, according to Kamil Kovar, an economist at Moody’s Ratings. ECB Jostling Over Back-to-Back Summer Cuts Has Already Begun_1

ECB Jostling Over Back-to-Back Summer Cuts Has Already Begun_1

“We believe that the doves are preparing the ground now to get the July cut later on,” he said. “That’s why they fight now, to make the appearance that they will be compromising. Like this they can say we compromised, and now it’s really time to cut rates properly.”

Greece’s Yannis Stournaras has been most explicit about favoring two consecutive reductions before the August summer break. ECB Executive Board member Piero Cipollone has said there’s scope to cut rates “swiftly” despite strong wage gains, which have worried policymakers for the last few months.

Malta’s Edward Scicluna and Bank of France Governor Francois Villeroy de Galhau are among those who haven’t ruled out starting monetary easing this week. Others, like Portugal’s Mario Centeno, have emphasized that lower borrowing costs are necessary to prevent harming the euro area’s feeble economy.

None of the economists polled by Bloomberg expect any lingering desires for a cut this Thursday to be fulfilled. They widely predict easing to commence in June, though a majority expects a pause the following month. Investors currently see the chance of a second step down before the summer break at just over one-in-two.

Dutch central-bank chief Klaas Knot has expressed a preference to focus on meetings when new quarterly forecasts are available — suggesting he might favor September over July for a second move. Bundesbank President Joachim Nagel told investors they shouldn’t conclude that after a first cut, the same will happen at every subsequent meeting.

While Villeroy has said the same, he also added that “we will need to keep that option open.”

Most have stressed the need to have an open mind — a sentiment captured by Lagarde last month when she said the ECB “cannot pre-commit to a particular rate path” even after a first cut.

Key to the debate will be how quickly inflation continues its descent toward — and possibly below — the 2% target. In March, consumer prices rose an annual 2.4%, slightly less than economists had predicted, and further deceleration is predicted in the coming months. ECB Jostling Over Back-to-Back Summer Cuts Has Already Begun_2

ECB Jostling Over Back-to-Back Summer Cuts Has Already Begun_2

“We think that for the ECB, inflation outcomes would have a bigger bearing on the likelihood of having back-to-back cuts,” said Fabio Balboni, an economist at HSBC. “Unless growth surprises significantly to the upside – which seems unlikely – the case to remove the restrictive part of policy, as Ms Lagarde put it at the March meeting, would remain strong.”

That also means that two consecutive moves needn’t necessarily set the tone for the rest of the year and raise the expectation that cuts will follow at every single meeting. Framing the first reductions as removing some of the drag on the economy “would be perfectly consistent with moving faster earlier on, to slow down later,” according to Balboni.

What Bloomberg Economics Says...

“Since the ECB’s last meeting, the debate among policymakers appears to have moved on from the timing of the first interest-rate reduction, which now seems like a done deal for June, to how many cuts will follow this year.”

—David Powell, senior euro-area economist.

So far, inflation has developed broadly in line with the ECB’s March forecast, according to Bloomberg Economics. But it expects a dip below target in August, a scenario the Frankfurt-based central bank so far only sees in the second half of 2025.

On the other hand, services inflation held steady at twice the ECB’s target last month and wage gains remain a concern. If evidence of a sustainable slowdown remains scant, officials might prefer to remain cautious.

“The ECB may be in a tricky position in June – not only could unit labor cost growth surprise to the upside, but economic activity and confidence may also be on the rise,” said Anatoli Annenkov, an economist at Societe Generale. “This should limit the ECB’s options to quarterly 25 basis-point cuts with the staff forecasts adjusting for the incoming data.”

The return of trust in those projections makes them even more important, and a clear message could reduce the need to wait for official data that only arrives with a long lag — especially as some officials worry about falling behind the curve in lowering borrowing cuts.

“The ECB will start cutting rates in 2024 but remains highly data dependent in deciding on the pace of cuts,” said Ann-Katrin Petersen, senior investment strategist at the BlackRock Investment Institute. “Over time, actual data of underlying inflation and financial conditions might become somewhat less important given the ECB has indicated that its confidence in its own inflation forecast has increased.”