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Bombs fly but oil prices unresponsive

Published Friday, October 2nd, 2015

It is Non-Farm Payrolls day which means that everyone sits on their hands and speculates on whether the number will be 200,000+ or 200,000-. If it is the former a US interest rate increase this year is firmly on the table, if it’s the latter it is less firmly off the table or so the theory goes. Someone who must be praying for a poor number is Christine Lagarde and her IMF colleagues who believe that a rate increase will have a catastrophic impact on emerging market financial stability.

At the end of the day the decision comes down to whether the US is an island, all but immune to what is going on elsewhere or, if the Fed  thinks it is not, whether it believes economies elsewhere are as vulnerable as claimed. The numbers coming out of Japan, China, Brazil, Russia et al make very uncomfortable reading with Europe 50/50 on whether it is on the brink of a recovery or falling back into the abyss. Janet Yellen’s decision would be made easier if the job numbers are poor, following yesterday’s disappointing manufacturing numbers from the ISM coming in at 50.2 from 51.51 in August.

Someone not sitting on his hands is Vladimir Putin. With Ukraine relatively quiet his pilots need some practise so Russia has joined the Syrian circus. Russia and Iran want Assad to stay. America and Saudi Arabia want Assad gone. The US and Saudi support anti-Assad rebels and are providing funding and weapons. Russia and Iran see them as the enemy and are bombing them. On the principle that your enemy is my enemy Russia and American are at war on two fronts – Ukraine and Syria – and so are Saudi Arabia and Iran – Syria and Yemen.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.