Daily Market Commentary 18th October 2021

US equities continued to post gains, to close out a strong week of positive sentiment. The prevailing winds continue to blow monetary and fiscal largesse through markets, inflated asset bubbles to dangerous levels. Energy prices continues to soar, with Oil prices now bursting though USD$82/barrel. The fossil fuel industry, which is going to be absolutely hammered by politicians, in the upcoming Glasgow Climate summit, is defying the narrative. Coal prices surged to an incredible USD$250/T! How come the fossil fuel industry is being closed down and yet the demand and prices are at record highs? How come there a power blackouts across Asia and Europe? Perhaps there is a wide spread between the bid (political narrative) and the offer (market reality)?

Surging equity markets are a product of global Central Banks ‘modern monetary policy’ and political fiscal largesse, until it isn’t. Inflation is the dragon-slayer. Look to CPI/PPI data, in the coming week, to define the market narrative. Chinese markets continue to operate under the threat of collapse of the property sector, while Geo-Political threats remain an option for diversion. European and US PMI data may provide some interest, although the energy crises and inflation provide more furtile ground. Commodity currencies continue to benefit demand pressure, with the NZD jumping to 0.7050, while the AUD has broken above 0.7400.

The one conundrum is the Yen, which has blown out to above 114.00, with no apparent reserve currency influence? The Bank of Japan has mirrored Federal reserve positions but the Japanese Yen has been the underperformer of major currencies.