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“Don’t count the days, make the days count.” -Muhammad Ali

Morning stock market summary

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There’s still 20% of the trading week left, but we’re almost at the finish line.  With all the hemming and hawing over how this week’s inflation data would be higher than expected given the surge in oil prices, the major averages are all on pace for a positive week.  In September no less!

Equity index futures are generally higher, although the Nasdaq is basically unchanged, even as yields are higher again.  The 2-year yield is back above 5% while the 10-year is above 4.3%. There’s a decent chunk of economic data to deal with even after the release of Import Prices and Empire Manufacturing which were both higher than expected.  At 9:15, we’ll get Industrial Production and Capacity Utilization, and then at 10, Michigan Sentiment will be the final release of the week..

Over in Europe, major benchmark indices in the region are sharply higher adding to what has been an already strong week.  The STOXX 600 is on pace for a gain of over 2% despite an ECB rate hike that some said was a surprise but shouldn’t have been. The key reason for the optimism in Europe, though, is that there’s a very strong likelihood that the ECB is done for the current cycle after taking the benchmark rate to a record high.

As crude oil topped $90 per barrel for the first time since last November, it’s interesting to see how prices of natural gas have seen little movement.  It used to be that the two commodities moved somewhat in unison with each other, but that has not been the case this year.  As shown in the chart below, since crude oil really started to take off at the end of Q2 it has rallied more than 28%.  Nat gas meanwhile not only hasn’t rallied, but it’s down over 3%!

As a result of the recent divergence between the two, the ratio of crude oil to natural gas has surged this year and currently sits at over 30.  Besides earlier this year, the only time since 1990 that the ratio between the two was as high or higher was back in the period spanning late 2011 through early to mid- 2013.

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