Disappointment out of Doha / Political Unrest in Brazil / Japanese-Ecuadorian Quakes Rattle Markets

The market was greeted with unsettling news out of multiple regions of the world over the weekend.  The major oil producing countries gathered in Doha could not agree on collective production cuts, which triggered a significant drop in oil prices when the markets re-opened Monday.  Also making headlines over the weekend was Brazilian President Dilma Rousseff losing a critical vote in the Lower House of the Brazilian Congress, where over 2/3 of the voting members supported her impeachment.  There is still a lengthy political process required before impeachment would be final, but the social and economic unrest in Brazil is clearly showing through in the country’s dissatisfaction with Rousseff and the rest of Brazil’s political leadership.  Finally, there were several major earthquakes reported out of Japan and Ecuador over the past three days, further unsettling global trading activity Monday morning.

Despite these various concerns, the markets seem to be bouncing back from initial low levels reached at the open.  For instance, WTI oil gapped down over 5% at the open, and is now back close to $40, down just 1 1/2% from Friday’s close.  Similarly, the Dow Jones Industrial Average opened down 50 points, but has since rebounded up 90 points.

US economic data releases Monday are very light, with the bulk of the important economic data due out Tuesday through Thursday, including the release of March Housing Starts, March Existing Home Sales, the Chicago Fed National Activity Index and the March Leading Index release.  Looking a little further out, a week from Wednesday is when the next FOMC Rate Decision is due to be released.

After opening lower in yield as weekend fears supported an initial rally in U.S. bond markets, we have seen that reverse as the morning has progressed, with yields across the curve now up 2 to 4 basis points, while the U.S. dollar is down 0.25% – 0.50% against most major currencies.