The risk of losing energy supplies | 16 September 2022

#SP500:

Federal Reserve Chairman Jerome Powell reiterated his stance that the U.S. central bank’s priority is to tackle soaring price pressures. The yield curve between two-year and 10-year notes flattened by 3 basis points to minus 23 basis points. The inversion is seen as a possible indicator that a recession is likely in the next one to two years. U.S. rate futures have priced in an 90% chance the Fed will hike by another 75 basis points at this month's meeting, which would increase the Fed funds rate to a 3.0%-to-3.25% range. That probability is up from a week ago. Traders and Investment bankers expect the Fed will stop rising rates once the policy rate gets a bit above 4.00%.

Trading recommendation: sell 4155 and take profit 4041.

#Alcoa:

Two European aluminium smelters are powering down as the region's energy crisis shows no signs of abating. Close to 1 million tonnes of European primary aluminium capacity is now offline and more may follow as a notoriously power-hungry sector struggles to cope with soaring energy costs. Western European production slumped by 11.3% year on year in January to July and annualised run-rates are now consistently below the 3 million tonne-mark for the first time this century. European factory activity contracted for the second consecutive month in July under the weight of high energy prices and a broader slump in consumer confidence. This is a positive signal for American aluminum producers.

Trading recommendation: buy 51.55 and take profit 54.63.

#WTI:

Oil prices rose, supported by real and threatened cuts to supply. Russian President Vladimir Putin has threatened to halt oil and gas exports to Europe if price caps are imposed and a small cut to OPEC+ oil output plans announced this week also supported prices. Over the coming months, the West will have to contend with the risk of losing Russian energy supplies and oil prices soaring. The Group of Seven is trying to find ways to limit Russia's lucrative oil export revenue in the wake of the invasion. A price cap that G7 countries want to impose on Russian oil to punish Moscow. A U.S. Department Of Energy official said the White House was not considering new releases from the U.S. Strategic Petroleum Reserve at this time beyond the 180 million barrels that President Joe Biden announced months ago.

Trading recommendation: buy 85.59 and take profit 87.61