Axios Markets: No end in sight

Plus, watching Japan and the EU | Tuesday, May 18, 2021

Open in app View in browser   Presented By OurCrowd   Axios Markets By Dion Rabouin ·May 18, 2021 Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,031 words, 4 minutes.) 🎙 "My own philosophy is that you don't really belong to yourself. You have an obligation to the society which protected you when you were brought into the world, which taught you, which supported you and nurtured you. You have an obligation to repay it." - See who said it and why it matters at the bottom.     1 big thing: No end in sight for rising oil prices Illustration: Sarah Grillo/Axios   Oil prices have continued to rise, gaining again on Tuesday after rising to the highest in two years on Monday. Why it matters: Inflation worries and concerns that prices have run past reasonable valuations have weighed on equities recently but bullish oil traders continue to be handsomely rewarded this year. Prices for diesel (up 39.6% year to date), crude (36.6%) and gasoline (53.2%) have all delivered strong returns along with the stock prices for oil majors like ExxonMobil, Chevron and Occidental Petroleum. The S&P 500 energy index has been by far the best performing of the index's 11 sectors, delivering a 43.5% YTD gain. (That's more than 15 percentage points better than the No. 2 sector, financials.) The big picture: Rising oil prices have become a major concern for businesses and a common pain point listed by consumers, especially in recent weeks following the Colonial Pipeline hack that came in the face of already booming demand and rising prices. Gasoline demand in the U.S. hit a new pandemic high last week, according to GasBuddy data released Sunday and national gas prices at $3.045 a gallon are the highest since October 2014, according to data from AAA. 11,667 gas stations were without fuel as of Monday, Reuters' Stephanie Kelly reported. U.S. crude exports fell last week to around 1.8 million barrels per day, their lowest since October 2018, while crude inventories declined 0.4 million barrels versus an expected 2.8 million barrel draw, according to weekly government data. The number of total oil products supplied saw the biggest weekly decline and lowest weekly demand since January. On the other side: Expectations continue to grow that demand will pick up, further adding to the supply/demand mismatch. The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to a forecast for a strong recovery in world oil demand in 2021, with growth in China and the United States outweighing the impact of the coronavirus crisis in India. United Airlines announced it will add 400 daily flights to July for European destinations and plans to fly 80% of its U.S. schedule compared with July 2019. The airline also said that summer travel bookings rose 214% from 2020 levels. What's next: Many hedge funds and money managers are betting oil prices have further to go and are packing into long oil and long commodity positions. In a recent note to clients, Goldman Sachs asserted that it expects economic growth and easy monetary policy to help oil demand realize its biggest jump ever over the next six months, with prices hitting $80 a barrel this summer and commodities overall to rally by another 13.5% over the next six months.     2. Catch up quick Prominent hedge funds like Ray Dalio's Bridgewater bought value stocks and SPACs and sold tech stocks in the first quarter. (Reuters) Michael Burry's Scion Asset Management disclosed a $530 million put option position betting against Tesla's stock. (Bloomberg) Amazon is in negotiations to acquire MGM for around $9 billion, unnamed sources say. (Variety)     3. Influential manufacturing survey shows record high prices Data: New York Fed; Chart: Dion Rabouin/Axios Visuals The New York state manufacturing index fell from its April level and missed economists' expectations but the prices component jumped to the highest level on record this month. Why it matters: It's the latest in a long line of local business surveys that show prices rising to yearslong or record highs. The Empire State report also is seen as a leading indicator of national trends. Watch this space: The record high price reading caused little-to-no reaction in the Treasury market, which may suggest that traders already have factored in significant inflation and are growing confident that even record-high readings will not move the Fed to change course and raise interest rates or reduce its bond-buying program.     A message from OurCrowd OurCrowd helps you add top startups to your portfolio     Problem: Startups are staying private longer, keeping investment growth behind closed doors. Solution: OurCrowd is changing that. They have 73K members and have invested $1B+ in companies like Lemonade and Beyond Meat — pre-IPO. Get in early on tomorrow's big deal - with OurCrowd.     4. Yellen wants business to help foot infrastructure bill Axios' Hans Nichols writes: Treasury Secretary Janet Yellen is heading into the belly of the beast today and asking the business community to support President Biden's $2.3 trillion infrastructure plan during a speech to the U.S. Chamber of Commerce. Why it matters: By trying to persuade a skeptical and targeted audience, Yellen is signaling the president's commitment to raising corporate taxes to pay for his plan. Republican senators, critical to a potential bipartisan deal, oppose any corporate tax increase. "We are confident that the investments and tax proposals in the (American) Jobs Plan, taken as a package, will enhance the net profitability of our corporations and improve their global competitiveness," Yellen plans to say, according to excerpts from her speech obtained by Axios. "We hope that business leaders will see it this way and support the Jobs Plan." The big picture: The administration is working to build support for the plan both in and out of Washington as it awaits the second counterproposal from Senate Republicans. Their initial offer of $568 billion could climb as high as $800 billion. The other side: Congressional Republicans have declared President Trump's 2017 corporate and individual tax cuts are off-limits. The Business Roundtable prefers a mix of deficit spending, repurposed money from Biden's $1.9 trillion COVID relief bill and user fees to fund infrastructure projects. Between the lines: Yellen's speech to the Chamber will take an economic history tour. The secretary will argue previous periods of economic uncertainty were met with government investments in infrastructure, education and research and development. She'll note legislation that was controversial at the time spawned institutions now part of everyday American life, including the Federal Reserve, the Federal Deposit Insurance Corporation and the Social Security Administration. "It is the time to recommit our government to playing a more active and smarter role in the economy," she'll say. "We're proposing smart investments — to make our economy more competitive and sustainable, to provide opportunities for all families and workers and to make our tax system fairer." Driving the news: Yellen will be introduced by Suzanne P. Clark, the chamber's president and CEO. The two will kick off the Global Forum on Economic Recovery, a two-day virtual event sponsored by Google, Amazon and UPS.     5. Japan and Europe's economic contractions weigh on global recovery Japan's economy shrank by 5.1% in the first quarter, government data showed, putting the world's third-largest economy again at risk of falling into recession. Where it stands: With Japan's economy shrinking by more than expected in Q1 and at risk for another contraction in Q2, the global recovery theme looks to be at risk. Already, the European Union said its economy shrank by nearly 2% year over year in Q1 and by 0.4% from the fourth quarter of 2020. India also is facing tremendous growth challenges as a result of the coronavirus pandemic. What it means: Three of the world's five largest economies are facing significant challenges at the start of what was supposed to be a breakout year for global economic recovery after 2020's malaise.     A message from OurCrowd Proven VC platform helps you add top startups to your portfolio     Problem: Startups are staying private longer, keeping investment growth behind closed doors. Solution: OurCrowd is changing that. They have 73K members and have invested $1B+ in companies like Lemonade and Beyond Meat — pre-IPO. Get in early on tomorrow's big deal - with OurCrowd.   Thanks for reading! Quote: "My own philosophy is that you don't really belong to yourself. You have an obligation to the society which protected you when you were brought into the world, which taught you, which supported you and nurtured you. You have an obligation to repay it." Why it matters: On May 18, 1904, Jacob K. Javits, an American lawyer and politician who represented New York in both houses of Congress, was born. Javits is the man for whom New York City's Javits Center is named. ************** This newsletter is written in Smart Brevity®. Learn how your team can communicate in the same smart, clear style with Axios HQ.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Suite 1300, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. Change your preferences or unsubscribe here.   Was this email forwarded to you? 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