Global markets shuddered as turmoil emanating from China spread around the world and billionaire George Soros warned of a crisis.
Chinese shares fell 7 percent within a half hour of opening, triggering a full-day trading halt, after the central bank cut the yuan’s reference rate by the most since August. Other equity markets tumbled, with European shares falling the most since September and U.S. futures indicating a lower open. Commodities weren’t spared as crude headed for its lowest settlement in 12 years. Haven assets gained, with Treasuries rising for a sixth day, the yen reaching a four-month high and gold surging.
“China has a major adjustment problem,” Soros said Thursday at an economic forum in Colombo, Sri Lanka. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
Contagion from China helped wipe $2.5 trillion off the value of global equities in the first six days of this year as the nation’s tolerance for a weaker currency is viewed as evidence that policy makers are struggling to revive an economy that’s the world’s biggest user of energy, metals and grains. The World Bank cut its global growth forecasts for this year and next as China’s slowdown prolongs a commodity slump and contractions endure in Brazil and Russia. Chancellor of the Exchequer George Osborne plans to highlight a “dangerous cocktail” of global threats faces the British economy this year.
The Hang Seng China Enterprises gauge of mainland shares listed in Hong Kong tumbled 4.2 percent, its lowest close since October 2011. The Hang Seng Index dropped 3.1 percent.
The Shanghai Composite Index tumbled 7.3 percent before trading was suspended. New circuit breakers, which kicked in on Monday, have been criticized by analysts for exacerbating declines as investors scramble to exit positions before getting locked in by the halts.
After the stoppage, the securities regulator announced rules to limit selling by major shareholders when a ban expires this week. The watchdog also held an unscheduled meeting on the tumbling stock market without coming to a decision on policy action, according to a person familiar with the discussions.
“The Chinese yuan is smack bang at the heart of concerns,” Chris Weston, chief market strategist in Melbourne at IG Ltd. “For risk assets to stabilize and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency. It’s clear that the market is becoming increasingly concerned by the global inflation outlook.”
The offshore yuan swung from a 0.3 percent gain to a 0.7 percent loss and back in the space of about 30 minutes in early activity in Hong Kong’s freely-traded market. It was subsequently 0.4 percent higher versus the greenback, while the onshore rate weakened 0.6 percent.
“We saw aggressive intervention in the offshore yuan market,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “We don’t really understand the rationale behind the market movements in the past few days. Obviously, these movements have reminded us of the market rout last year.”
The central bank is considering new measures to prevent high exchange-rate volatility in the short term, according to people familiar with the matter.
China’s foreign-exchange reserves slid more in December than forecast, capping their first-ever annual decline, as authorities sought to prop up a weakening yuan.
The Stoxx Europe 600 Index slid 3.2 percent at 1:07 p.m. in London, as all but 10 stocks fell. Commodity producers and carmakers, among those with the most sales exposure to China, led declines.
Anglo American Plc tumbled 9.6 percent and ArcelorMittal slid 6.1 percent, dragging a gauge of miners to its lowest level since 2009. A measure of energy producers also fell to a near six-year low, with Royal Dutch Shell Plc dropping 6.2 percent, the most since August.
Daimler AG, BMW AG and Volkswagen AG each lost at least 4.5 percent, helping pull Germany’s benchmark DAX Index below 10,000 for the first time since October.
The VStoxx Index measuring volatility expectations in euro-area shares jumped 17 percent, heading for its biggest weekly advance since April.
Futures on the Standard & Poor’s 500 Index lost 2.2 percent, after the U.S. benchmark slipped Wednesday to its lowest level in three months.
The MSCI Asia Pacific Index retreated 2.1 percent. Benchmark stock indexes in Australia, Japan, Singapore and Thailand all lost more than 2 percent.
The yen, which has been the best-performing major currency so far this year amid the demand for safe-haven assets, rose as much as 1 percent to its strongest level since August versus the dollar.
The pound fell to the weakest level since June 2010, touching $1.4555. The U.K. currency slid 1 percent to 74.46 pence per euro. It has fallen every day this week against the dollar. Disappointing manufacturing and services data added to the view that the Bank of England will have to keep its benchmark interest rate lower for longer.
The Aussie tumbled 0.8 percent to 70.13 U.S. cents, and touched 70.09, its lowest since Oct. 2. It fell more than 3 percent through Wednesday, its worst start to any year since currency controls were scrapped in December 1983, according to data compiled by Bloomberg.
The Bloomberg Commodity Index dropped 0.7 percent, headed for its lowest close since 1999.
West Texas Intermediate crude slid 3.3 percent to $32.86 a barrel, poised for the lowest settlement since February 2004. Crude supplies at Cushing, Oklahoma, the delivery point for U.S. crude, climbed to an all-time high, government data showed Wednesday. Brent oil will slump to $30 in the next 10 days, according Nomura Holdings Inc., while UBS Group AG sees an oversupply pushing prices even lower.
Copper retreated 2.6 percent in London to the lowest since Nov. 24 and zinc slumped 3.6 percent. Cocoa for March delivery fell for a fifth day to an eight-month low on ICE Futures U.S. in New York. Gold rose as much as 0.8 percent to a two-month high of $1,102.85 an ounce.
Yields on 10-year Treasury notes fell one basis points to 2.16 percent, after earlier touching the lowest since October. Japanese government bond futures advanced to a record high after 30-year notes were auctioned at a higher price than dealers forecast. South Korea’s 10-year yield fell to a record low as the weakening yuan dimmed the outlook for exports to China and North Korea’s fourth nuclear test, conducted on Wednesday, spurred demand for safer assets.
Germany’s 10-year break-even rate, a gauge of the market’s outlook for inflation, tumbled to the lowest level since February amid concerns that the rout in commodity markets would subdue price-growth.
The cost of insuring investment-grade corporate debt climbed to the highest since Oct. 6. The Markit iTraxx Europe Index of credit-default swaps on highly rated companies rose four basis points to 85 basis points. The Markit iTraxx Europe Crossover Index of default swaps on junk-rated companies jumped 16 basis points to 351 basis points, the highest since Dec. 15.
Energy producers led losses in developing-nation stocks, driving the MSCI Emerging Markets Index down 2.7 percent. Benchmark gauges in South Africa, Thailand, the Philippines and Abu Dhabi slid more than 2.5 percent and those for Saudi Arabia, Dubai and Qatar tumbled at least 3 percent. Russian markets were closed for a holiday.
A gauge tracking 20 emerging-market currencies dropped for a fifth day, headed for its longest losing streak since October. The rand in South Africa, which counts China as its biggest trading partner, tumbled 1.5 percent to a record low. Russia’s ruble slid 1.1 percent in offshore trading while Mexico’s peso and Brazil’s real slid at least 0.6 percent.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
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.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
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.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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