Record Deficit, AstraZeneca, Dimon’s letter, Oil lower on AZN news, Gold steady

US stocks edged higher after a record deficit showed that US consumer and business demand is heating up, prompting investors to continue to buying reopening stocks.  Market moves across most asset classes has been somewhat limited ahead of the release of the Fed's Minutes.  Many Fed watchers will look for any indication from policymakers that they are concerned the economy is likely to run too hot and drive up pricing pressures.  The taper tantrum is a big fear for stock investors but these Minutes will likely show continued optimism with the recovery and expectations for an early overshooting of their inflation target due to base effects.  Wall Street might have to wait until the June or July policy decisions to see if inflationary pressures are becoming worrisome.  

AstraZeneca

The AstraZeneca COVID vaccine took a small setback after drug regulators noted a possible link between the Astra shot and blood clots.   The UK’s vaccine advisory board said the UK will offer the Moderna and Pfizer jabs to people under-30 years old.  The AstraZeneca vaccine is still deemed safe, effective and that benefits outweigh the risks.  The MHRA noted that the link between the Oxford-AstraZeneca vaccine and rare blood clots is extremely rare.  The British pound was initially dragged down over the AstraZeneca vaccine headlines, but the hit to vaccine distribution seemed to be only a couple of weeks.  

Dimon

JPMorgan CEO Dimon’s annual letter provided another bullish case for US stocks.  The key takeaway from his 60+ page note is that the economy is booming and that could easily run into 2023.  The risks to the Goldilocks scenario remains that the new COVID-19 variants may be more virulent and resistant to the vaccine and an increase in inflation that may not be temporary and force the Fed to raise rates. 

Gold 

Gold prices are little changed ahead of the release of the FOMC minutes that could provide further reiterations that policy is on hold for the foreseeable future and that they are not ready to discuss reducing asset purchases.   Gold pared earlier losses after the Hungarian central bank tripled their gold holdings in March.  The Fed might think inflation will be transitory, but many emerging market central banks are fearful of runaway inflation and that could trigger steady central bank bullion purchases going forward.  

Gold is waiting to see if the Fed minutes triggers a catalyst for the bond market rout to resume.  If Treasury yields remain capped, gold could continue appreciating.  

Oil

Crude prices remained heavy despite a larger-than-expected draw as demand outlook took a small hit after the AstraZeneca COVID vaccine was halted in the UK for people under 30 years old.  Europe’s COVID vaccine rollout has been very disappointing and today’s announcement that the UK will offer alternatives to people under 30 could lead to further vaccine hesitancy.  

The EIA crude oil inventory report was mixed and hardly provided any reason to become more optimistic with the short-term outlook.  The headline crude inventory draw of 3.5 million bpd was larger than the 1.6 million forecasted drop, and the prior drop of 876,000 bpd.   Jet fuel demand is still weak, but that will change quickly as Americans get the travel bug once they are fully vaccinated.  Gasoline demand was steady but considering Spring Break finished, that is probably somewhat a bullish indication.  

US crude production fell 200,000 barrels to 10.9 million bpd, a welcome sign for OPEC+ members who are concerned about conceding market share to the Americans.  

WTI crude seems poised to consolidate a while longer between the $57 and $62.50 range. 

Cryptos

It appears that my daily note can no longer just focus on Bitcoin.  Yesterday, the cryptocurrency market value tentatively rose above $2 trillion, but has since pulled back slightly.  The surge was mainly attributed to record gains in Ether and after XRP recaptured the $1 level for the first time in three years.  

The highly anticipated Coinbase IPO seems poised for April 14th and the buzz is growing following a better than expected first quarter trading update.  Coinbase saw revenue skyrocket to $1.8 billion and anticipates net income to grow between $730-800 million from $31.9 million a year ago.  

Bitcoin continues to drift lower and will likely need a new massive endorsement for prices to recapture the $60,000 level.