Higher Oil Prices Help Buoy Riskier Assets

European stock markets are posting broad gains, with the DAX underperforming, but still up 0.75% on the day, in early-afternoon trade. The FTSE 100 is 1.4% higher than at Friday’s close. U.S. stock futures are also supported after most Asian markets closed in positive territory.  A rebound in oil prices is underpinning gains, although WTI has fallen back from earlier highs close to USD 44 per barrel and is currently trading at USD 44.23. Oil and metal producers nevertheless remain supported and markets are going optimistic into this week’s key central bank decisions. Expectations that the Fed will keep its powder dry for now and leave policy unchanged is helping to boost risk appetite.

Oil prices have rebounded, with both the Brent and WTI benchmarks showing gains of over 1%. The rise was sparked by comments from Venezuelan president, Maduro, that an agreement to curtail production could be reached as soon as this month among Opec and non-Opec nations. Iran’s president Rohani, who had meet with Maduro over the weekend during a meeting of the Non-Aligned Movement, also said that Tehran would welcome any move aimed at stabilizing markets. What Iran does is seen key for any plan to freeze production to succeed, as this will dictate the stance of revival Saudi Arabia.

The EU Current Account Surplus Narrowed in July

A narrowing of the goods supply surplus helped narrow the EU Current account.  According to reports the Eurozone current account surplus narrowed sharply in July. The Eurozone posted a current account surplus of 21.0 billion Euros in July, down from 19.5 billion in the previous month. This reflects mainly a sharp narrowing of the goods surplus as well as a move of the secondary income balance further into negative territory.

The unadjusted financial account showed direct and portfolio investment inflows of EUR 72.1 billion in July, up from EUR 6.0 billion in June and with the accumulated total in the 12 months to July reaching EUR 597.9 billion, up from EUR 368.5 billion in the 12 months to July last year. July data will be heavily impacted by the reaction to the Brexit referendum, also on currency markets, but the narrowing of the trade surplus as well as the current account surplus could also suggest some healthy rebalancing.

In the U.S., Household net worth rose at a 5.0% rate in Q2 to an $89.1 billion which is a record-high, from an $88.0 trillion prior record-high in Q1, according to the Fed’s Z.1 report. An 8% growth rate in net worth in Q3 is expected, given stock and home price gains that should allow a 7% asset value rise after the 4.9% Q2 increase, alongside an assumed 3% liability rise after the 4.6% Q2 climb.

Net worth in Q2 sat 62% above the $55.0 trillion cyclical-trough in Q1 of 2009. Asset value growth in Q2 included 7.8% growth pace for real estate, alongside a 4.1% growth pace for financial asset values. Total liabilities are still just 8.2% above the $13.6 trillion cycle-low in Q1 of 2012 that marked a hefty 7.0% decline from the $14.6 trillion cycle-high in Q3 of 2008 that we have yet to exceed.