Everywhere you turn natural disasters and threats of more to come make it feel like the end of the world. Not only do we have to deal with three major hurricanes Irma, Jose and Katia in the Atlantic, now a massive earthquake in Mexico overnight has caused death and destruction. There is also rising nuclear tensions with North Korea that is causing the market to seek safety and wait for that proverbial next shoe to drop next.
There are reports of at least five dead after an 8.1 magnitude earthquake and a tsunami that struck the southern coast of Mexico early Friday, prompting tsunami waves in the country and warnings to the Pacific coasts of several Central American countries, including Guatemala, El Salvador, Costa Rica, Nicaragua, Panama and Honduras.
The National Hurricane Center (NHC) is warning that Hurricane Irma remains, "an extremely dangerous" category 4 hurricane with 155 mph winds. The NHC storm track map shows Irma is set to hit Florida on Saturday night before tracking up towards Georgia, Tennessee and South Carolina. That is unwelcome news.
The dollar has gone into deep retreat as the market worries about North Korea tensions and after European Central Bank Chief Mario Draghi made comments that the ECB may move to cut back on quantitative easing in October while U.S. Federal Reserve officials suggest that they may slow their trajectory of interest rate increases. The dollar weakness is also reflecting the potential hit on the U.S. economy as it prepares to take a hit from Hurricane Irma just after the hit from Hurricane Harvey and perhaps another shot from Hurricane Jose (see chart below). The Mexican peso is also taking a hit as Hurricane Katia will hit land and the fallout from this massive earthquake that may impact there economy as well.
That, along with the risk on, end of the world as we know it feelings, is leading to a breakout move higher for gold, silver and platinum. Orange Juice prices rose almost 4% as this may be the final blow for many Florida orange juice growers as they may just give up after this storm. Florida orange juice growers have fought falling demand for their product as well as crop disease.
Energy prices are in an eerie calm. Gas prices fell on fears of demand destruction. Brent crude is surging versus WTI as EU refiners demand crude. Natural gas is flat awaiting to see how bad the destruction is.