By Geoffrey Smith
Investing.com -- Silver hits $30 an ounce as the retail investor army moves on from GameStop. The short squeeze in other stocks still has some juice left in it. Stocks are set to bounce at opening, helped by reports of Exxon and Chevron having held merger talks. And China’s manufacturing PMI hits its lowest since July as lockdowns return. Here’s what you need to know in financial markets on Monday, February 1st.
1 Move over, GameStop - here comes the #silversqueeze
The frenzy in a handful of heavily-shorted stocks appears to be easing, as the army of retail traders congregated around social media chat boards focuses on a new target – silver.
Silver futures were up 11% at $29.89 an ounce by 6:30 AM ET (1130 GMT), having earlier traded briefly above $30. Bulls have a multi-faceted investment thesis: all industrial metals are enjoying healthy rallies as the world’s manufacturing sector profits from a change of spending patterns under the pandemic, while the photovoltaic and electronics industries that drive silver demand are also buoyant.
However, the financial system is not short silver – one important difference between this market and the stocks that rocketed last week. And one of the Wall Street players longer than most is none other than Ken Griffin’s Citadel, the object of much retail trader ire last week.
2. Exxon, Chevron held merger talks
Executives at Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) held preliminary talks about merging their companies during the dark days of 2020, The Wall Street Journal reported at the weekend.
The two companies said the talks were tentative and that there are no discussions ongoing at present. However, the mere fact that they took place is a stark indication of the pressure that Big Oil came under last year as the pandemic accelerated trends away from oil and gas consumption and toward greener energy sources.
Exxon Mobil stock was up 2.1% in premarket trade on the news, while Chevron stock was up 1.7%. Both stocks had fallen to three-week lows in the wake of disappointing quarterly results last week.
3. Stocks set to bounce at open; squeeze continues amid earnings lull
U.S. stocks are set to open higher after suffering their worst weekly loss in three months last week.
By 6:30 AM ET, Dow Jones futures were up 216 points, or 0.7%, while S&P 500 futures were up 1.0%. Nasdaq futures were up 1;1%.
Earnings season is in its usual early-week lull, with Thermo Fisher, Vertex and NXP Semiconductors (NASDAQ:NXPI) the only releases of note – and all due after the closing bell.
Last week’s short squeeze still appears to have some juice left in it: GameStop (NYSE:GME) stock was indicated up 5.4% in premarket, while AMC Entertainment (NYSE:AMC) stock was up 22%. Koss (NASDAQ:KOSS) stock was up 7.8% and Bed Bath & Beyond Inc (NASDAQ:BBBY) stock up 6.7%.
4. China's PMI hits lowest since July; GBP rises on vaccine victory
The boom in silver comes just as China’s economy, which buys more of the stuff than anyone else’s, is showing signs of cooling off. The Caixin Manufacturing PMI fell to 51.7, its lowest since July, this month, as localized outbreaks of Covid-19 led to tens of millions of people being locked down and restrictions of varying degrees on business.
In Europe, IHS Markit’s manufacturing PMIs were a mixed bag, with Germany’s weakening and Spain’s falling back into contraction, while France and Italy were both stronger than expected, as was the U.K. The Eurozone PMI edged up slightly, defying expectations for a fall.
The pound tested a five-month high against the euro after the news, also supported by the resolution of a dispute over vaccine distribution after the EU Commission backed off a threat to impose customs inspections on the Irish border.
5. Oil supported by signs of OPEC compliance
Oil prices rose overnight after fresh newswire reports indicated that members of the Organization of Petroleum Exporting Countries are sticking to their agreed output targets, and not yielding to the temptation of pumping more in an effort to cash in on the current favorable prices.
By 6:30 AM ET, U.S. crude futures were up 1.1% at $52.75 a barrel, while Brent futures were up 1.4% a barrel.
The discipline is all the more striking given the intense budget pressure that many OPEC members are under. Iraq, the bloc’s second-largest producer, opened talks last week with the International Monetary Fund over a bailout. Its government has drafted a $20 billion cut to spending this year, newswires reported over the weekend.