Macro and Events in Brief Last week was not very interesting regarding events or numbers. However, oil prices surged by a substantial USD 7/barrel on Tuesday due to Syria worries. Equities went lower on Syria concerns, but worries eased at the end of the week. Tuesday we got a strong IFO-index supporting a pick-up in the German economy, and Thursday the revised Q2 GDP from U.S. provided a lofty surprise. The revised numbers were better-than-expected, up 0.8 percentage points to an annual rate of 2.5%. Despite few international figures, Norway released some key data. The LFS were down, while the registered unemployment were up, but in total unemployment seems to be in line with Norges Banks view. Furthermore, weak retail sales for July, which were down -1.3 %, were probably due to unusually nice weather. This week we are waiting for key data relating to Fed?s decision on a September tapering of QE3. Key figures and events this week are ISM (Tue.), U.S. trade gap (Wed.), a number of interest rate meetings (Thu.) and non-farm payrolls (Fri.) Interest Rates The US 10-year Treasury yield rose for the fourth month in a row in August, driven by continued improvements in data and speculation of Fed tapering during the autumn. Looking ahead, there are a number of important events that will be pivotal in terms of yield direction. First, this week´s NFP number will be the last one before Fed´s September meeting. Any surprise could alter the expected start date of reduced bond purchases. Second, tensions in Syria could result in flows into safe assets, thus favoring US Treasuries. Finally, of the two top candidates for Fed top-job, the choice of Summers (instead of Yellen) would likely lead to somewhat higher and possibly more volatile rates. Foreign Exchange EURUSD went for the downside the day after the GDP-figures last week. The positioning in EURUSD is actually quite long, and looking at the skew in the option market it seems like this could be the start of something. We still see downside potential in EURNOK. Today?s PMI-figures took the cross down by 6 bf, though we don?t see that index as very reliable. The important figure will be next week?s inflation number and we think it will stay high enough to take Norges Bank from easing bias back to hold. Oil and Fuel This week, all eyes were on Syria as a potential military strike created headlines all over the market place. This event is very important for oil prices as a full blown conflict in the region could lead to devastating supply disruptions. The fear of this happening made Brent crude rally almost 6 % during 24 hours, starting Tuesday morning. This increase can be interpreted as an isolated risk premium being priced in on the back of Syria tension. Prices corrected some after the peak of USD 117 during the morning hours and continued to do so during the week as a potential short term attack became less likely. The close on Friday was approximately USD 114. The fuel oil crack weakened significantly due to the increase in crude, now trading at USD -19. The arbitrage window to Singapore is still closed even though the E/W continues to strengthen. Dry Freight The cape index corrected a touch lower during the week, initially resulting in a negative correction in the FFAs. The positive sentiment and optimism regarding the fourth quarter prevailed however resulting in a volatile week with rates overall supported. Hedge buying for the upcoming grain season continues to lend support to panamax and supramax FFAs but with little news emerging from the physical market the indices remaining relatively flat. The sentiment in the cape FFAs continued to spill over to the smaller sizes which continued to mimic the moves in the capes intraday. Credit Teekay LNG Partners issued a NOK 900m five-year senior unsecured bond last week at NIBOR +435bps.
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