The big story to start the week is another breakout for crude oil with Brent and WTI trading up to their highest levels this year. Goldman Sachs upgraded its price outlook and moved up its forecast for when the oil market could come back into balance. This improvement comes on a combination of stronger demand and supply disruptions where the biggest issues have moved from Canada and Libya (which appear to be heading toward coming back on line) to Nigeria where a group called the Niger Delta Avengers has been attacking pipelines, knocking production, exports and refineries off line and threatening further attacks.

Stock markets are mixed to start the week, US index futures are trading pretty much flat so far while European markets are listless with Germany closed for a holiday. The UK is down 0.4% while Spain’s IBEX is down 1.2% on uncertainty heading toward a late-June election. Asia Pacific indices traded higher with the Hang Seng rising 0.8% despite retail sales and industrial production misses plus sluggish lending data as the PBOC indicated it would continue to support the economy with monetary liquidity.

Resource currencies are climbing today with CAD, NOK and RUB following oil prices higher with AUD and NZD in the green as well. Poland’s Zloty, PLN is up over 0.5% after Moody’s maintained the country’s credit rating, after a cut had been speculated in some quarters.

It’s another Merger Monday in the US with mid-size deals ($5B area) being announced over the weekend in the oil patch and the Pharmaceutical sectors. The Empire Manufacturing Survey may also attract attention with traders looking for more confirmation of a strengthening US economic following Friday’s surprise retail sales report which beat the street by a wide margin. Over the weekend, SF President Williams (a non-voter this year) suggested we could see 2-3 rate hikes this year and warned that if the Fed delays it would need to act more aggressively to catch up in 2017. This morning, Richmond Fed President Lacker also suggested there’s a case for the Fed raising rates in June and also noted that the Fed should be thinking about tightening more quickly and catching up, a more hawkish tone than previous comments from him.  In Canada existing home sales may spark some chatter but the main focus may remain on the resource sectors and commodity price action.


Corporate News

Range Resources        to merge with Memorial Resource Development in a $4.4B deal

Pfizer                agrees to acquire Anacor Pharmaceuticals for $5.2B


Economic News

Significant announcements released overnight include:

China industrial production     6.0% vs street 6.5% and previous 6.8%
China retail sales        10.1% vs street 10.6%
China fixed assets        10.5% vs street 11.0%

UK Rightmove house prices    7.8% vs street 7.3%

New Zealand service PMI    57.7 previous 54.8
Japan producer prices        (4.2%) vs street (3.7%)
Japan machine tool orders    (26.4%) vs previous (21.2%)

Announcements due later today include:


8:30 am EDT        US Empire Manufacturing    street 6.50 vs previous 9.56

9:00 am EDT        Canada existing home sales    previous 1.5%