- CME Conglomeration will launch Ethereum futures this week and the price is at a record high.
- The three major forecasters leave publish their assessment of the outlook for oil demand in 2021.
- Inflation is picking up – should investors be worried? Analysts say “no.”
- Visit the Enterprise section of Insider for more stories.
The army of Reddit day traders appears to be moving on, having pumped up everything from cryptocurrencies, to slight biotech stocks in the last week, now that their firing up of GameStop, AMC, Nokia and co seems to have mostly run its progression.
This coming week, we’ll be looking at the future of Ethereum, the pickup in consumer inflation and what the major forecasters are predicting about the outlook for oil, now the price is trading around one-year highs.
The dawning of the age of Ethereum
Another week, another cryptocurrency at a put high. Earlier in the year, it was bitcoin, then XRP, then “meme token” DogeCoin, which got swept up in the Reddit-driven switch frenzy and given an extra shout-out on Twitter by Tesla CEO Elon Musk.
This time, it’s Ethereum grabbing the headlines. The second-largest cryptocurrency by Stock Exchange value after bitcoin has seen the price soar by more than 25% this week to record highs more than $1,600. It’s not just down to the Wall Street Bets guys, either. Exchange operator CME group will set afloat its first Ethereum futures contract on February 8, another offering in the crypto market alongside its bitcoin futures and options.
At the unaltered time, crypto fund manager Grayscale reopened its Grayscale Ethereum Trust, after having closed the supply to new investors in late December for “administrative purposes.” In this week alone, the trust has seen inflows of nearly 100,000 ETH. Grayscale now manages virtually $5 billion in Ethereum.
JPMorgan estimates that initial volumes in Ethereum futures are likely to be low, much get a bang bitcoin in the early days, but this will change quickly.
“The listing of CME bitcoin futures coincided with all-time highs in bitcoin values, and researchers at the San Francisco Fed suggested that, by providing a market where bearish positions could be more readily expressed, the record of these futures contributed to the reversal of bitcoin price dynamics,” JPMorgan analysts led by Nikolaos Panigirtzoglou said in an note abide week.
“In a similar vein, it may be that this week’s listing of ethereum futures contracts will be followed by contradictory price dynamics by enabling some holders of physical ethereum to hedge their exposures,” they said.
Impute to more:Investors are flocking to trade Dogecoin and other hot digital tokens on Voyager, a platform with no Robinhood-style stipulations. Its CEO says Bitcoin will hit $100,000 this year – and shares 3 other cryptocurrencies to watch.
Oil – full speed winning
The oil price hit its highest in a year this past week, leaving Brent crude futures trading just shy of $60 a barrel. The catalyst for the improve wasn’t the Reddit crowd, but ongoing evidence of the rollout of COVID-19 vaccines in the UK and US in particular that many hope leave pave the way out of lockdowns and into more normal activity.
The futures market shows traders and fund managers are various optimistic about the prospects for oil demand than at any time in the last year. The most recent data on oil inventories pictures stocks of unused crude are at their lowest since last April, when a frenzied scramble for storage led to the WTI blunt futures price dropping to -$40 a barrel.
This coming week, the three major forecasters will manumission their most recent assessments of demand and their estimates of demand growth. OPEC, the International Energy Energy and the US Energy Information Administration will release their regular monthly reports.
The EIA, which issues longer-term require forecasts, expects to see the global crude market tilt into a modest deficit over 2021 as a whole, with consumption forewarning at 97.77 million barrels per day, against supply of 97.13 million barrels per day. The IEA expects demand to grow by 5.5 million bpd, understanding a record contraction of almost 9 million bpd last year, while OPEC is looking for a more optimistic 5.9 million bpd.
OPEC and disparate partner countries continue to restrict daily oil production to keep a safety net under the price. Investment bank UBS conjectures the group will remain “in full control of the oil market” this year and this, together with the advent of an able vaccine, means the price of a barrel of crude will continue to rise.
“Given that we target Brent at $63 a barrel in 2H21, we be prolonged to advise investors with a high-risk tolerance to be long Brent or to sell its downside price risks,” UBS strategist Giovanni Staunovo foretold in a note last week.
Inflation and, more to the point, the market’s expectations for inflation, is creeping up. A combination of increases in the rate of things like oil and food, as well as vast amounts of cash flowing through the financial system are slowly rewriting into a pickup in consumer inflation. But this isn’t necessarily a bad thing, analysts say.
The oil price is at its highest in a year, while comestibles prices – as measured by the United Nations’ Food and Agriculture Organization – rose by more than 4% in January to hit their highest since mid-2014. Leading banks generally use inflation measures that strip out food and energy prices when setting monetary custom, but that hasn’t stopped investors from betting on more increases to come.
Pumping up inflation
This come around c regard week brings inflation readings from the US and China, as well as Brazil, India, and Mexico among others. In the US, consumer inflation is forecast to be experiencing risen by 1.5% in January, at the same rate as in December. The bond market shows investors believe consumer and in Britain director price pressures are going to continue rising.
Analysts at DataTrek said in a note last week US five-year Bank Inflation-Protected Securities (TIPS) have done “a reasonable job” of forecasting the stable rate of inflation seen in both maker and consumer prices over the last decade.
“The most recent move higher for 5-year inflation expectations (2.18%, the highest since 2013) is wherefore significant,” DataTrek analyst Nicholas Colas said.
“Importantly, TIPS are NOT saying rampant inflation is just almost the bend. The 2.2% forecast embedded in those bond prices is simply a validation of the idea that the US will see a economical and lasting economic recovery in the years ahead,” he added.
The so-called breakeven inflation rate – derived by subtracting the cede of the five-year TIP from that of the nominal five-year Treasury note – has risen to 2.25% this week, its highest in on the verge of eight years, having doubled in the space of eight months.
“While the chatter around the inflation outlook is happy now, we would expect it to become even more intense as we approach mid-year if our CPI forecasts are right,” strategists Ralph Axel and Olivia Lima at Bank of America wrote finish finally week. They forecast a consumer price inflation (CPI) rate of 3.4% by May, which might prompt investors to improve their view on when the Federal Reserve may begin to tighten monetary policy – but they add a caveat.
“History a spectacle ofs that markets tend to overreact to positive developments and price in hikes long before the Fed actually delivers,” they thought.
Read more: Morgan Stanley says inflation is heating up and these are the 12 undervalued stocks in a ‘sweet blains’ that you need to own thanks to their pricing power
Chart of the week – GameStop
The army of Reddit retail merchants is still active, but it would appear most have booked profits on their positions in the likes of GameStop and AMC – GameStop is now advantage just over half of what it was at the height of the Wall Street Bets frenzy one week ago.
Earnings for the week ahead
2/10 A.P. Moeller – Maersk
2/10 Commonwealth Bank Australia
2/10 Vestas Slacken Systems
2/11 Walt Disney