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Wall Street Wrap Up May 30, 2016

Week in Review
June 2, 2016 7:00 PM

stock-exchange-1264703_1920.pngPrices for liquefied natural gas have sunk to a 7 year low in Asia as demand has failed to keep up with rising supply from countries such as the US and Australia. The average spot price in Asia for LNG for delivery in May dropped 42.5% year over year to $4.24 per million British thermal units, the lowest monthly average since July 2009, according to Platts.  In the US, benchmark natural gas has been trading about $2.06 per million BTUs, down 17.2% from a year ago.  LNG is natural gas that is cooled to a liquid form so it can be transported by ship.  Prices have recently come under intense pressure in Asia, which makes up 70% of global demand, thanks to a gusher of new supply.  In February, Cheniere Energy dispatched a shipment of LNG to India, making it the first batch of US shale gas to be delivered in Asia.  Analysts have said they expect the US to become a major exporter of gas into global markets in the next few years. 

The powerful rallies that have lifted stocks on wall street, crude oil and emerging markets for the past three months have one important thing in common—the falling dollar—and investors are growing anxious that it could prove to be the weak link. While the dollar is down 4.5% this year and near a one-year low against a basket of currencies, other investments have surged. U.S. crude prices are up 69% from their February lows. Gold was up 16.5% in the first quarter, its best in three decades. And emerging-market NASDAQ stocks, bonds and currencies have enjoyed double-digit gains in 2016.  Analysts at Morgan Stanley measured the correlation between a weak dollar and their own index of investor appetite for riskier assets. They found it near its highest level in 20 years.  The concern is that it is a relationship that could easily go in the opposite direction. The dollar is heavily dependent on perceptions of what the Federal Reserve will do with interest rates, and those perceptions could change quickly. Meanwhile, analysts warn that the fundamentals for oil, emerging-market assets and even many stocks look too weak to support the recent price gains on their own.

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