I don’t know how many times politicians, regulators, august bodies and investors need to be told – THE MARKET IS ALWAYS RIGHT! So however much interested parties want to chuck their two cents worth in, markets will only respond when they believe the input or hysteria is valid. Some of the headlines today – “THE POUND PLUNGES AS BREXIT NARROWS THE GAP!” – Steady up! It’s not Armageddon! Cable is now up at $1.4432. To all those great luminaries of life, I send you all good wishes – “Get on with your job and the market will get on with its modus operandi!
The commodity and oil space was always going to react positively this morning on news of higher prices. There was also a note out from JP Morgan Chase inviting investors to take a bolder stance towards ‘black gold.’ – the sector is up about 1.8% on average The mining sector has blazed the trail this morning – up 6% with Anglo-American leading the charge. Glencore is not a million miles behind – up 7% with Rio’s 6% to the good. Though little is expected from Sainsbury’s trading update on Wednesday, shares are up 2p – circa 0.7%.
The Kingdom of Saudi Arabia has sunk in to a measurable budget deficit. It is believed to have sold an unspecified amount of five, seven and 10-year floating rate notes at the top end of the pricing guidance it set last week. The country also sold fixed-rate debt, which was priced at the middle-to-lower end of the guidance.
So far the government has funded its deficit by drawing down savings and tapping local banks through monthly debt sales. It raised 98 billion riyals ($26 billion) from selling bonds to local institutions last year and will probably sell about 120 billion riyals of debt in 2016. Fixed rate notes were priced at 1.9%, 2.35% and 2.72% for the five, seven and ten year notes respectively.
This does not really come as any great surprise. Saudi Arabia’s debt is growing and apart from these bond issues, there are plans afoot to sell perhaps 5% of Aramco for about $20 billion.