By IRINA OVCHINNIKOVAThe first week of August has infected global markets with uncertainty and bewilderment. The infection permeated through the combination of ambiguous Q2 reports, oil glut and melancholic Chinese economy. And the infection triggered horrors in traders’ souls and minds.1. Q2 reports are still on the agenda. 78% of companies belonging to the American index S&P 500 have already published their Q2 revenues, and more than a half failed to match forecasts. Even Warren Buffett’s Berkshire Hathaway earned 37% less. To be honest, some companies received very impressive profits, however bad news has long legs, therefore they are very fast to affect the market.2. The oil glut swamps the economy. Today industry buys a WTI barrel for less than $44! The commodity sold off because of the evidence of increase activity in the U.S. Baker Hughes proclaimed oil rigs rising by 6 to a total of 670 over the week. The total the U.S. rig count, which includes gas rigs, reached 884. Daily output rose to 9.465 million barrels in the U.S.! Add 10.57 million barrels from Saudi Arabia. The kingdom intends to offer 11 million barrels daily for the second half of the year anticipating a flow of Iranian oil.3. China was considered as an ideal giant consumer and the best hard-working manufacturer, greedy for oil. Not now. Chinese trade balance glides to 43.03 billion from 46.54 billion in the preceding month. In year-over-year comparison, exports slumped 8.3%, while import fell to 8.1%. Forget the “Chinese-demanded-market” strategy. Not to mention the disappointment in Beijing gold reserves, which equal 1658 tons only. Analysts all over the globe have been expecting at least 3000 tons. A myth behind China’s miracle is gone, even the communist party is working hard to regulate the market and support the myth.To get a positive view, I would like to concentrate on the great news for Israel. On the 7th of August S&P reaffirmed the A+ status in the Credit Rating for the state of Israel. Why the A+ is so significant? The rank in the Credit Rating reassures investors in stable economy and potential profitability of the state. Three financial specialists from Frankfurt, Dubai and Mumbai have evaluated economic reports and financial risks before giving A+ mark. The factors of risks reflect the obvious – geopolitical situation in the Middle East. The state of Israel functions as an oasis for business in the region, despite of the fact, that one of the neighbors has got AA-. However, the AA-honored neighbor owns giant territory and sea of oil, which brings him might and power all over the markets. Naturally, at the moment two A-rank economies are looking for partnership in order to escape the damage of Iranian sanctions soon to be released. Iran possesses$56 frozen billion. After easing of the sanctions, the Muslim state will get the access to the money. No doubt the government will be anxious to spend a couple of billion dollars to fight faithless countries in the region. Therefore, the partnership is the way to resist for those, who are faithless from the Iranian viewpoint.To summarize, the positive view is the glance from the stable economic position and understanding of the oil market mechanics. Just to feel comfortable and protected from the infection.
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