The past week saw two surprise announcements that caused stocks and oil to rally for the week. Russia made the first overture to other oil producing nations to curtail production. The amount of excess global production of oil is still significant, with roughly 1.5 million barrels produced per day. This excess production is on top of the several hundred million barrels in storage around the world.
The Bank of Japan reduced interest rates to negative 0.10%. The decrease to negative rates was unexpected by markets. The move will continue to put pressure on the Japanese Yen and support Japanese equities. In the short term, the Japanese central bank’s additional accommodative monetary policy supports risk assets, but the weakening Yen will put more pressure on the Chinese Yuan.
The next few days will be interesting to see if the market can sustain the momentum from last week. My guess is that additional upside will be difficult given the global cross currents.
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