Oil Price Fears Weighing On Sentiment

Another day, and more oil price concerns. Iranian oil shipments are dropping in the face of western sanctions, with President Obama expected to confirm on Friday that sanctions aimed at cutting off Iran’s central bank from the oil market will take effect from late June. The US, UK and France are said to be considering the release of strategic oil stocks in order to ease supply pressure, with the prospect of a fuel tanker drivers’ strike in Britain adding to supply pressure. ICE Brent crude is up 0.23% to $124.44 a barrel at 10am GMT. Metal prices have trailed off, with the gold price down but still above support at $1,650.

Though US durable goods orders came in below expectations, JPMorgan thinks that the American labour market is “transitioning to strong job growth” as a result of businesses’ strong profit margins and “relatively easy financing”, with the company’s CEO Jamie Dimon saying that “you could come up with a pretty bullish case” for the housing market. The Federal Reserve’s money printing efforts are starting to bear fruit.

The trillion-dollar question remains whether or not the people at the Marriner Eccles building will engage in more money printing. Some think that rising inflation and an improving economy will stop the Fed from doing this – and may even force some cautious rate rises. Others are more pessimistic about the economy, and think that the Fed will ease further in order – so the theory goes – to solidify the recovery. Bernanke is said to fear a 1937 rerun if the Fed tightens too soon.

The latter seems the more likely scenario, given the intellectual inclinations of Fed officials, as well as the views of those close to them. Few have insider credentials as good as PIMCO’s Bill Gross, who is described by James Bianco as “so plugged into the FOMC it is as if he is the de facto Federal Reserve Chairman.” Gross thinks that the Fed is “likely to hint” at more QE at its April 25 meeting, leading to the start of new easing measures in early summer.