Energy Chaos, Commodity Supercycle, Bitcoin Record - What's up in Markets

By Geoffrey Smith

Investing.com - Risk appetite is on the loose again as the U.S. reopens after the Presidents Day holiday. Stocks, Bitcoin and metals prices are all higher amid increasing talk of a new commodity ‘supercycle’. CVS and AIG (NYSE:AIG) report earnings, but the same icy blast that has disrupted the U.S. energy complex has also led Occidental to delay its report. Here's what you need to know in financial markets on Tuesday, February 16th. 

1. Arctic freeze causes chaos with energy supplies

The blast of Arctic weather that hit the U.S. continues to wreak havoc across the country’s energy complex, thanks to the rolling blackouts imposed by Texas grid operator ERCOT as it tries to meet surging demand.

Extreme cold forced shut-ins across Texas on Monday, both upstream at fields in the Permian basis and downstream at many of the state’s biggest refineries. Pipeline operators Enbridge (NYSE:ENB) and Kinder Morgan (NYSE:KMI) also both reported constraints on shipping.

Oil prices have already started to come off their highs, however. By 6:30 AM ET (1130 GMT), U.S. crude futures were up 0.5% at $59.80 a barrel but still more than a dollar away from Monday’s 13-month high. Brent futures were down 0.3% at $63.13 while natural gas futures were still well supported at a three-month high of $3.08 per million British thermal units.   

2. Miners’ payouts bolster supercycle talk  

Metals prices extended their strong run, with platinum hitting its highest since 2014 and copper futures hitting their highest since 2012, on expectations of buoyant global demand and only a lagged reaction from the supply side.

The surge of the last few months is increasingly leading to talk of a new supercycle in commodities, although analysts caution that demand has been too narrowly based in China and warn that the trend towards electric mobility, which is helping industrial metals, has long-term negative consequences for oil, coal and agricultural commodities used in biofuels.

Supercycle talk was reinforced overnight as BHP Billiton (NYSE:BBL) and Glencore (OTC:GLNCY), two of the world’s biggest miners, made big dividend announcements. BHP is paying a special dividend of over $5 billion for the first half of its fiscal year, while Glencore is reinstating its dividend after a slew of measures to conserve cash last year. Both have made big impairments to their coal businesses in recent months (due also to China’s unofficial ban on Australian thermal coal).

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U.S. stock markets are set to reopen clearly higher after the Presidents Day holiday, with participants firmly focused on the prospects for economic recovery later in the year.

By 6:30 AM ET, Dow Jones futures were up 185 points, or 0.6%, while S&P 500 futures were up 0.5% and Nasdaq futures were also up 0.5%. All three hit new record highs overnight but were slightly off their intraday tops.

CVS, Zoetis (NYSE:ZTS) and Ecolab (NYSE:ECL) top the billing for early earnings updates. Occidental Petroleum (NYSE:OXY) has however rescheduled its report due to weather disruptions.

4. Bitcoin hits new record as dollar weakens

Bitcoin prices hit another new record high of $49,951 overnight amid sustained speculation that the world’s asset managers will increasingly allocate a fraction of their vast assets under management to cryptocurrencies.

As often, the move was accompanied by fresh weakness in the dollar, which the twin factors of loose fiscal and monetary policy continue to push lower. The yield on the 10-year U.S. Treasury note rose as high as 1.24% overnight to a 12-month high, while the 30-year yield is back above 2%. The spread between 2- and 10-year yields, at over 109 basis points, is now the widest since 2017.

The dollar index, meanwhile, fell 0.4% to a three-week low of 90.10, with the risk-sensitive Australian and New Zealand dollars making the biggest gains.

5. Goldman jumps on robo-advisor bandwagon

Goldman Sachs (NYSE:GS) is set to dive into servicing the small investor. The Wall Street blue-blood will unveil details later Tuesday of its new Marcus Invest product, an add-on to its existing Marcus consumer banking product, according to reports.

Unlike the online brokerages such as Robinhood and Webull that have burgeoned in the last two years, Goldman’s robo-advisor won’t allow clients to buy and sell individual stocks and isn’t set up to drive user engagement and inflate order flow. Instead, according to The Wall Street Journal, it will focus on the construction of diversified portfolios.