Global Portfolio Risk Report, Wednesday, June 5

Oil producers could face a price slump unless OPEC+Russia cut production again, advised ING, the Dutch-based financial house. But Russia may not go along with more production cuts, setting up a surplus-supply situation. “There seems to be growing resistance from Russian oil producers to extend the current production cut deal through until the end of the year,” said ING. The CEO of Russian oil-producer Rosneft “said that continuing cuts would only mean that Russia would give up market share, with the US filling the void.” OPEC+Russia may strike an output-cut deal at their meeting June 25 in Vienna, but if not, prices could slide.

Corporates

Bioplan USA, a provider of beauty-industry packaging and sampling services, was downgraded to “CCC+” from “B-” with a negative outlook by S&P Global, which cited sustained cash-flow weakness. Bioplan depends on the retail and print industries to distribute products, but both sectors are weak, noted S&P. Bioplan’s $65-million revolving facility will mature in September and “unless it extends the maturity or obtains a new revolving facility, we expect the replacement of the revolver with the factoring of accounts receivable for working capital purposes to constrain liquidity,” said S&P.

Bank Regulators Backsliding?

Globally, government bank overseers are becoming lax in their resolve to improve bank regulation after the 2008 financial crisis, and that could undermine bank solvency in a future economic downtown, said Bank of International Settlements General Manager Agustin Carstens. Memories “of the (Global Financial Crisis) gradually fade. It is characterised by a weakening in the will to persevere with the ambition and implementation of the reforms,” said Carstens at a conference in Madrid this week. “Vested interests gain momentum, promoting the fallacy that ‘this time is different.’ and that delaying, diluting or rolling back post-crisis reforms is the convenient path to promote jobs and growth,” he said.

VIX/Gold/Bitcoin

The Cboe VIX, a metric of expected volatility for US markets in the next 30 days, posted at 16.83 in pre-market trading Wednesday, off 0.82%. Readings below 20 generally indicate the market expects below-average volatility. The VIX has been inching higher towards 20 in recent weeks, but Tuesday’s remarks by US Federal Reserve Chair Jerome Powell — that the central bank was open to easing — seems to have calmed down the index.

Gold is moving up 0.84% pre-market, to $1,335 an ounce. The yellow metal hit more than $1,340 an ounce in February and has been largely confined to a trading range near $1,300 since 2013.

Bitcoin, which hit $8,732 on May 26, more the doubling year-to-date at that time, has since declined to $7,779 in pre-market action.

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