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Asian Stocks Stumble on Geopolitical Tensions, Oil Stands Tall

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Currency Exchange Bureaus As China Roils Markets For Second Day As Yuan Tumbles With Stocks

Asian stocks were on edge on Wednesday as geopolitical tensions flared after Turkey downed a Russian fighter jet, while crude oil prices extended gains.

Spreadbetters expected some of the tension to have eased when trading begins in Europe, forecasting a slightly higher open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.

MSCI’s index of Asia-Pacific stocks outside of Japan .MIAPJ0000PUS edged up 0.1 percent but shares in Hong Kong .HSI, Australia and South Korea .KS11 slipped.

Japan’s Nikkei .N225 shed 0.4 percent.

Adding to investor nervousness that followed attacks in Paris earlier this month, Turkey shot down a Russian aircraft near the Syrian border on Tuesday, saying the jet had violated its air space.

It was one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century.

“The individual impact on the market from events like the Paris attacks and heightened security in Brussels may be small, but there is also uncertainty that’s worrying investors,” said Masaru Hamasaki, head of market & investment information department at Amundi Japan.

“The stock market does not like uncertainty,” Hamasaki said.

Still, some of the markets in the region managed to hold their own even as the tense backdrop kept buyers at bay. Shanghai shares edged up 0.3 percent .SSEC while Malaysian and Indonesian stocks also posted modest gains.

“The conclusion would be Russia would not want to take this too much further at a time when its economy is seeing some green shoots after the past two years of sanctions,” said Evan Lucas, market strategist at IG in Melbourne, adding that Turkey is Russia’s second-biggest energy customer.

The incident briefly sparked oil supply fears and sent crude prices surging overnight to 2-week highs.

U.S. crude CLc1 absorbed early profit taking on Wednesday and edged up 0.1 percent to $42.92 a barrel.

The rally in crude favoured commodity currencies such as the Australian dollar AUD=D4, which hovered near a 1-month high of $0.7276.

The Canadian dollar fetched C$1.3294 CAD=D4 to the greenback after pulling away from a 2-month low of C$1.3436 struck earlier this week.

The U.S. dollar was lower, hurt in part as the latest flare-up in geopolitical tensions stoked demand for safe-haven Treasuries and drove their yields lower.

The benchmark 10-year U.S. note yield US10YT=RR stood at 2.239 percent after touching a 3-week low of 2.206 percent overnight.

“I was a bit worried yesterday. So far Russia seems to be taking a ‘grown-up’ attitude, which was good but the market may remain a bit anxious,” said Takako Masai, head of market research at Shinsei Bank in Tokyo.

The dollar index against a basket of major currencies .DXY fell to 99.528, retreating from an 8-month peak of 100.000 set on Monday.

Against the yen, the greenback dipped to a 1-1/2 week low of 122.27 JPY= before crawling back to 122.43.

The euro EUR= gained 0.1 percent to $1.0655.

Prices of metals such as zinc, copper and nickel, which had recently plumbed multi-year lows, bounced on the back of the dollar’s retreat. A stronger dollar makes dollar-denominated metals more expensive for buyers. [MET/L]

However, industrial metals are seen remaining under pressure in the long run with an expected Federal Reserve interest rate hike in December likely to underpin the dollar.

Reuters

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

OPEC Agrees to Increase Oil Supply by 500,000 Barrels Per Day Ahead of Surge in Demand

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Nigeria's economic Productivity

OPEC and allies finally agreed to ease their 7.7 million barrels per day production cut by 500,000 barrels per day starting from January 2021.

This will now bring the oil cartel’s total production cuts to 7.2 million barrels per day starting from next year.

Oil prices rose after the news as the market believed the approval of Pfizer COVID-19 in the United Kingdom will kick start a series of approvals and helped restore confidence, increase business activities and demand for the commodity across the globe.

After the outcome of the meeting was made public on Thursday, Brent Crude Oil against which Nigerian oil is priced gained 1.35 percent on Friday after gaining 1.4 percent on Thursday to $49.37 per barrel at 11.35 am Nigerian time on Friday.

The US West Texas Intermediate gained 1.29 percent to $46.23 barrel on Friday.

500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.

Investors King increased business sentiment in the energy sector to boost investment, increase activity in the sector and most important improve crude oil demand enough to accommodate the 500,000 barrels per day extra that would be hitting the global market starting from January.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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