Morgan Stanley issues a ‘Petrodollar Tsunami Warning’
Bottom line: High oil prices will obviously increase the flow of petrodollars. But exactly how big are these flows? We calculate that the stock of the world’s proven oil reserves is now worth some US$121 trillion – higher than the combined market capitalisation of global equities and bonds, with annual flows (oil export receipts) of US$2.0 trillion. While up to 10% of these receipts may be spent on infrastructure and other investments, the rest will be invested in the global financial markets. A tsunami is coming.
– Morgan Stanley Economics, 21 Feb
Merrill Lynch assesses data that moves the markets
ML calculates the average close-to-close percentage change in USD/JPY and EUR/USD on days of important US data releases. Findings are presented in the table below. I don’t place much store in this but others may find it more useful.
Most of the most volatile days in USD-JPY and many in EUR-USD have been associated with financial concerns and risk sentiment rather than data in 2007.
This suggests that it is particularly important to gauge the market’s attitude to risk on a daily basis in order to be able to trade both the data and the additional information relating to the financial crisis.
With regard to the data, the release of US non-farm payroll data remains the most volatile trading day, while the real economic indicators have gained in importance. As long as the market remains uncertain about the global outlook, real data in both the US and the Euro area should remain very important.
– Merrill Lynch, 25 Feb