In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Saudi Arabia Embarrassing The Biden Administration
There are rumblings that Saudi Arabia is trying to influence the 2024 Presidential election by keeping crude oil prices high and embarrassing the Biden Administration after candidate Joe Biden insulted not only leader Mohammed bin Salman but also the entire Saudi royal family. There are also rumors that Russia is also cutting production with Saudi Arabia to hurt the Biden Administration and to try to re-elect Donald Trump.
Normally, I do not participate in election conspiracy theories, but there is no doubt that Saudi Arabia welcomed Donald Trump with an elaborate ceremony when he was president and Russia probably likes the fact that candidate Trump wants to end to war in Ukraine. The bottom line is if crude oil prices remain high throughout 2024, Saudi Arabia and Russia’s production cuts are expected to be cited as one of the primary reasons.
The Wall Street Journal reported on Wednesday that diesel prices have risen more than 40% since May since the median sour crude oil from Russia naturally makes a high proportion of diesel than intermediate and sweet crude oil. As a result, a diesel shortage has emerged in Europe.
The Middle East has the crude oil grade that is most similar to Russian crude, but Saudi Arabia’s production cut means that less median sour crude oil is available to make diesel. Approximately 42% of European vehicles run on diesel, so higher prices at the pump may also impact consumer spending.
Abating Inflation
The Fed released its Beige Book survey on Wednesday in preparation for its September Federal Open Market Committee (FOMC) meeting. The good news is the Beige Book survey acknowledged that inflation pressures are abating and that job growth is slowing. Almost all of the Fed’s 12 districts indicated that businesses “renewed their previously unfulfilled expectations that wage growth will slow broadly in the near term.”
The only inflation warning was a comment in the Beige Book that “contacts in several districts highlighted sharp increases in property insurance costs during the past few months.” So apparently the insurance companies fleeing California, Florida, and other high-risk areas may be hindering some housing markets. Overall, the Beige Book cited slowing economic growth in July and August, so I am not expecting a Fed key rate hike at its September FOMC meeting.
The Labor Department reported that weekly unemployment claims declined to 216,000 in the latest week, compared to a revised 229,000 in the previous week. Continuing unemployment claims also dropped to 1.679 million, compared to a revised 1.719 million in the previous week. Both weekly and continuing unemployment claims are now at their lowest levels since July. So even though the unemployment rate rose to 3.8% in August due to more people looking for work, the Fed is likely less concerned about unemployment due to falling unemployment claims.
China’s Exports Are Still Falling
Meanwhile, China’s overall exports are still falling dramatically. In August, China’s exports declined 8.8% compared to the same month a year ago. China’s imports declined 7.3% in August in the past 12 months, which was a bit better than a 12.4% decline in July. The Chinese yuan has fallen 6% against the U.S. dollar this year and is now at its lowest level since 2007.
Interestingly, Chinese vehicle exports have soared 104.4% this year as its electric vehicles (EVs) invade Europe and other key markets. A weak Chinese yuan is also helping boost China’s EV competitiveness. So far this year, China’s crude oil imports have risen 14.7%, while its soybean imports surged 17.9%.
ECB Pause
The European Union (EU) grew at a 0.1% pace (0.4% annual pace) in the second quarter according to Eurostat. Austria, Italy, and the Netherlands were characterized by negative GDP growth, while Germany’s GDP was unchanged. A manufacturing recession in Italy and Germany likely got worse in the third quarter and is expected to cause the European Central Bank (ECB) to finally pause key interest rate hikes.
Coffee Beans: Leaf Thief.
A koala stole $3,800 worth of plants from a forest nursery in Australia. Many of the seedlings stolen were actually destined for koala food and habitat restoration initiatives. Koala-proof fencing is being installed to protect the plants. Source: UPI. See the full story here.
