February 25, 2011
Sheraz Mian
Director of Research
Concerns about the staying power of the U.S. economic recovery in the face of surging oil prices finally appear to be easing. Assurances from the Saudis that they are willing and able to shoulder Libya-induced shortfalls went some way in moderating oil-price gains. Also helpful are comments from the U.S. and International Energy Agency officials about the adequacy of strategic stockpiles.
This is likely to help the market shift its focus, for the first time this week, to developments on the domestic economic scene. And despite this morning’s disappointing revision to last quarter’s GDP growth rate numbers, the shift in focus should help the market reverse some of the losses from earlier this week.
Other than the negative GDP revision report, which is by all means a lagging number, other recent reports have been showing a lot more vibrancy. Reports showing manufacturing strength and gains in consumer confidence and spending bear this out. The labor market appears to be showing signs of the long-awaited turnaround as well, as yesterday’s Jobless Claims data showed.
We shouldn’t lose sight of developments in the Middle East, however. With about a third of global oil supplies coming from that region, the ongoing unrest will remain a source of uncertainty and volatility in the market.
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