Market News

Goldman Sachs cuts its 12-month US recession probability to 25% from 30%, with chief economist Jan Hatzius citing resilient activity and easing financial conditions despite the Strait of Hormuz closure.

Summary:

• US recession probability cut to 25% from 30%, with economic activity holding up and financial conditions easing back below pre-war levels
• Three factors cited for the moderate growth impact: oil prices rising less than feared, demand destruction absorbing physical shortages, and supportive fiscal policy, AI momentum and financial conditions
• High pre-war inventories and market confidence that extreme consumer price rises would force a US policy shift have capped the oil price response
• Physical shortages in jet fuel and similar products…

President Trump has called off the war dogs.

Trump was to meet with the War cabinet tomorrow regarding the next attack on Iran, but Trump is posting that the Crown Prince of Saudi Arabia and the Pres. of the UAE, asked him to hold off on the planned military attack citing serious negotiations are now taking place.

Crude oil is back down to $102.37 currently. That is down from $105.21. The price is still above the 100 hour MA at $101.23 and the 200 hour MA at $98.92. There is a swing area between $97.34 to $98.58 as well. Get below those levels and stay below, and we can talk about the potential for more selling.

The Nasdaq index has seen a bounce off the lows, but the Nasdaq and the S&P still remain down on the day. The S&P is down…

The jury ruled against Elon Musk against Sam Altman and OpenAI

• Jury unanimously dismissed Elon Musk’s lawsuit against OpenAI and Sam Altman.
• Case was thrown out because the claims were filed after the statute of limitations expired.
• Jury deliberated for less than two hours.
• Musk alleged OpenAI “stole a charity” by shifting from nonprofit to for-profit.
• OpenAI argued Musk knew about and supported the for-profit structure.
• OpenAI claimed Musk turned against the company after failing to gain control.
• Musk’s legal team said it reserves the right to appeal.
• Musk sought removal of Sam Altman and Greg Brockman from leadership roles.
• Musk also sought reversal of OpenAI’s governance changes and more than $180 billion in damages.
• Trial…

Japan's finance minister Katayama says:

• Seeing speculative moves in the financial markets
• volatility in oil prices is affecting Forex market
• Told G7 we needed to take action to correct global imbalances.
• We need to address risks regarding Mythos
• Told G7 that we should be united against China's export control of critical materials.
• Need to closely monitor financial markets
• No comment on whether Japan intervened in the FX market.
• Japan will take appropriate action against Forex volatility

The USDJPY remains near the middle of the 158.00 – 160.00 swing area that confined most of the trading going back to March 11 through April 29. Since the tumble lower on April 30 on speculation of intervention, the price remained below that area until last…

Earlier reports suggesting the United States had agreed to lift oil sanctions while negotiations continue have now been denied by a U.S. official, helping reverse the sharp selloff seen earlier in crude oil trading. The clarification quickly shifted sentiment back toward tighter supply concerns and renewed buying interest in the energy market.

As a result, crude oil prices have rebounded strongly and are now trading up around 2% on the day near $103.00. Earlier in the session, prices had fallen sharply to a low of $98.60 as traders reacted to the initial headlines. However, that decline stalled at a key technical support zone.

The low price held near the 200-hour moving average at $98.88 and just above the 50% midpoint of the trading range…

Axios is reporting:

• US rejects the most recent proposal from Iran
• White House considers it not to be a meaningful improvement
• Iran not making meaningful concessions on its nuclear program.
• Calls the improvements only "Token improvements" on the last version.

US senior official says that " We are not making a lot of progress. We are at a very serious place today. The pressure is on them to be responsive in the right way"

The squeeze continues.

Crude oil is trading sharply higher, with the July contract up $1.76, or 1.74%, at $102.84. The session has been volatile, with prices trading as low as $98.60 before surging to an intraday high of $104.37 as geopolitical tensions and supply concerns continue to support the market.

Meanwhile, US Treasury…

• Prior month 34
• NAHB housing index rises 3 to 37 vs 34 estimate
• Sales conditions rose by +3 to 40
• Buyer Traffic was also up +3 to 25
• Sales expectations rose +3 to 45.

The latest NAHB Housing Market Index survey showed builders were slightly less aggressive on outright price cuts in May, with 32% reducing prices versus 36% in April. However, the average discount increased to 6% from 5%, suggesting that while fewer builders are cutting prices, those who are may be offering deeper reductions to attract buyers.

Meanwhile, the use of sales incentives remained elevated at 61%, up slightly from 60% in April. That marks the 14th straight month in which at least 60% of builders have used incentives, underscoring continued pressure on the housing market…

erAl Arabiay is reporting:

• Iran agrees to a long-term nuclear freeze in lieu of a complete dismantling
• They have withdrawn demand for compensation. Instead demanding economic concessions
• Would like to transfer enriched uranium to Russia instead of the US
• Seeking multiple international guarantees
• Want a gradual and safe opening of the Strait of Hormuz

A solution comes with dialogue. Of course the "Long term nuclear freeze instead of a complete dismantlement" is a key phrase. What does that mean specifically?. How is it monitored? Or is it too much like Obama's JCPOA and therefore a non-starter for Trump.

Crude oil has moved lower and trades near $99, down over $2 or 2%. Getting and staying below $100.

Stocks have moved higher with the Dow now…

Headlines:

• US reportedly to temporarily waive Iran sanctions in new draft proposal
• Iran's ForMin Spokesperson says process of talks through Pakistani mediation is ongoing
• IEA chief warns that commercial oil inventories are depleting rapidly
• Gold remains under pressure amid worries of Fed rate hikes, prolonged US-Iran stalemate
• Surging bond yields are a major pain point for equities at the moment
• Japan government likely to issue fresh debt to fund extra budget - report
• BOE policymaker Breeden says no need to rush in taking next policy step
• BoE's Greene: We should not be looking through negative supply shocks

Markets:

• WTI crude down 0.2% to $100.80 on the day
• S&P 500 futures down 0.2%, DAX up 0.7%, CAC 40 down 0.4%
• US 10-year yields at 4.58%, France…

This is coming from the Iranian camp, as reported by Tasnim News agency. THe report says that the US has agreed to propose a temporary waiver of Iran oil sanctions during negotiations, with this set to be administered via a temporary OFAC exemption until a final agreement is reached between both sides.

Iran is trying to push for all sanctions to be removed but so far, the report suggests that the US is only willing to go this far.

S&P 500 futures briefly erased losses but is now back down by 0.2% on the day. Meanwhile, we are also seeing the dollar lose a bit of ground while oil prices are being knocked lower. WTI crude (July contract) is now down 0.2% to $100.85 on the day but fell to as low as $100.16 moments ago. It was trading around…

• Release of strategic oil reserves have added 2.5 million bpd to the market
• However, they are not endless
• There is a perception gap between the physical oil market and futures
• Commercial oil inventories are depleting rapidly, only a few weeks left

This continues his warning from last month, in saying that Europe could run out of jet fuel in about six weeks. So, we're starting to push towards the edge of the situation caused by the Middle East conflict now.

Even if it may not be entirely evident, make no mistake that global oil inventories are falling at a record pace.

The point about there being a "perception gap" between physical prices and futures is a key fact that market players might not be factoring in. That especially if you consider how…