Equities and the Economy:

• U.S. stocks on the defensive yesterday on hard Brexit.
• Still range bound trading.

While you were sleeping Monday night UK Prime Minister Theresa May gave her much anticipated speech regarding the UK leaving the European Union stating Britain is looking for a clean break from the EU. Investors viewed this as a “hard” Brexit which sent UK stocks tumbling with London’s FTSE 100 losing 1.48% on the day. In Dow terms that’s a loss of 293 points. The decline in European stocks rippled across the pond and at one point in the morning pulled the Dow down 100 points but the Blue Chip index managed to recover some of loss closing down 59 points, 0.30%, at 19,827. The S&P 500 gave back 7 points, also 0.30%, ending at 2,268. After posting 6 consecutive days of higher closes the Nasdaq fell 35 points, 0.63%, finishing at 5,539. Let’s keep in mind the stock market has soared since the election on hopes of a Trump led corporate tax reform, less regulation of certain sectors, including oil & gas, and fiscal spending. Investors have placed their bets on what “could” happen. Now it’s time to see it actually happen.

There were no economic reports of significance released yesterday so let’s move on to today where the Dow is up 23 points. Chatter. Asian stocks closed higher and European stocks are waffling around unchanged.

Oil

• Prices little changed.
• Dollar markedly weaker.

WTI and Brent prices closed little changed yesterday with WTI closing up 11¢ at $52.48 and Brent settling down 39¢ at $55.47. Oil prices ended little changed yet the value of the U.S. dollar fell materially relative to other currencies. The dollar fell on comments by President-elect Trump who told the Wall Street Journal in an interview the dollar was “too strong” and the Chinese were keeping the yuan weak. “Our companies can’t compete with them [China] now because our currency is too strong, and it’s killing us.” Usually commodities priced in the U.S. dollar rally on a weaker dollar, and indeed oil prices were way up in the morning, over a buck, but in the afternoon our EIA released a report forecasting a rise in U.S. shale production of 41,000 bpd next month to 4.748 million bpd from the major shale plays. Output from the Permian basin, where half the rigs in America are currently working, is expected to rise of 53,000 bpd. The agency also revised January’s production upward 17,000 bpd. Shale plays are very closely watched because that is where the marginal barrel of oil in the U.S. is produced. Each shale play has its own economics but generally speaking the Permian Basin has the best economics and the Bakken the worst.

This morning WTI is getting hit pretty hard trading down 95¢ with yesterday’s EIA report sinking in and investors getting jittery that the increase in production will pull prices lower. OPEC’s and other producers’ decision to reduce output by nearly 1.8 million bpd drove prices higher and if U.S. production markedly ramps up it doesn’t take a rocket scientist to conclude it will weigh on prices.

Courtesy of MDA Information Systems LLC

Natural Gas

• No change in prices.
• Today’s weather forecast trending colder in the 11-15 day time frame.

Yesterday natural gas prices closed virtually unchanged with the February contract closing down 0.7¢/MMBtu at $3.412. The definition of chatter. That being said, it was indeed a volatile day. With the morning weather forecast trending cooler natty opened up 10¢ higher but the noon update came in warmer bring in the sellers. When I was a trader we called yesterday a “chop fest.”

This morning the weather forecast in the 11-15 day time frame trended cooler but natty is down 6.0¢ on a very weak cash market. The current anomalously warm weather is creating a very weak cash market. Temperatures in Chicago and Cincinnati will be 16 to 25 degrees above average over the next 5 days. That’ll kill load.

Elsewhere

Most everyone’s done it. Celebrities, politicians and everyday people. I’m talking about flashing the peace sign knowingly or unknowingly when someone is taking a picture. Well if you’ve ever done that you may want to reconsider doing it again. Researchers at Japan’s National Institute of Informatics (NII) have found fingerprints can easily be recreated from photos taken up to three meters away without the need for advanced technology as long as the picture is clear and well-lit. This isn’t the first time hackers have used biometrics. In 2015 hacker Jan “Starbug” Krissler recreated Angela Merkel’s iris from a photo and managed to unlock a test. Once biometric data is stolen it can be sold on the Dark Web where the risk of inappropriate access to a user’s accounts and identity will persist for that person’s lifetime. Before you panic though technology is being developed to counter the theft. China-based Goodix is developing a “live” fingerprint scanner that uses prints and infrared analysis of underlying tissue and heart pulse.