Analysis

Risk on morning as bond yields stabilize

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Brexit – May fights to the end

Stocks – Yields rise driving stocks higher

Trump – Wants courts to abolish Obamacare

Oil – benefits on risk-on move; inventories seen falling by 1.2M barrels

Gold – stock rally triggers profit taking

Brexit

Parliament took control over the Brexit process, but if they can’t agree on anything, PM May could get another chance to push her deal through.  Yesterday’s late 329-302 defeat in the House of commons set up Parliament’s chance on Wednesday to vote on anything, including a second referendum, staying in the customs union, or even cancelling a Brexit.  The risk of a no-deal Brexit still exists, but financial markets appear to believe that as the least likely outcome.  Today, MPs will decide what alternative Brexit options they want to suggest for tomorrow’s indicative votes.

PM May did receive some good news after Brexit hardliner Jacob Rees-Mogg noted he is willing to support her deal.  After consecutive humiliating defeats, if PM May does get a third meaningful vote, she may stand a chance of getting this divorce agreement finally pushed through.

Stocks

US equities are poised to open sharply higher as global bond yields stabilized.  Today’s rebound is supporting the growing belief that this yield curve inversion is not a definitive sign a recession is coming and more importantly that the current economic cycle is not over.  The key spread between the 10-year and 2-year Treasuries widened to 15.8 basis points.

Today, housing data came in softer than expected, confirming weakness with the housing market. Housing starts for February came in at 1.162 million, missing the analysts’ consensus of 1.3 million and lower than the prior 1.27 million reading.

Trump

Fresh off his victory of Mueller not finding enough evidence of collusion with Russia, President Trump is trying to have courts abolish Obamacare.  A controversial move, that has the potential of removing healthcare from millions of Americans.  Trump is claiming the Affordable Care Act (ACA) is unconstitutional, this may be more of a campaigning angle he will take to appease his base, but he could lose votes as many senior citizens are rely on ACA to save money on Medicare.

Oil

Crude prices rose sharply, benefitting from the last night’s risk-on rally.  Last week, West Texas Intermediate crude plunged after inventories plunged by almost 10 million barrels.  This week, we could see inventories draw 1.9 million barrels.

Oil prices are supported by the OPEC + production cuts, but once we see the next wave of the US shale revolution, we could see OPEC lose some relevance.   Current expectations are for US crude exports to rise to a  record 5 million barrels by late 2020, a near 70% jump from current levels.

Gold

The precious metal pulled back as investors used the positive trading environment to lock in some profits.  While gold has been stuck in a very wide trading range over the past few years, we could see the dovish stances delivered by

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