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Global Stocks on Brink of Bear Market as Oil Slides; Ruble Sinks

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London Stock Exchange Group Plc

Turmoil returned to global markets as oil plunged and European stocks sank to the lowest levels in 13 months, fueling a rush into haven assets.

Earnings exacerbated the rout, sending MSCI Inc.’s gauge of global equities to the brink of a bear market. Russia’s ruble and Mexico’s peso fell to records, while bets mounted on an end to Hong Kong’s dollar peg. Yields on 10-year Treasuries dropped below 2 percent and the yen jumped to a one-year high.

“There are a lot of things behind” the selloff, said Steven Schwarzman, the chief executive officer of Blackstone Group LP, in an interview Wednesday with Bloomberg Television’s Erik Schatzker from Davos, Switzerland. “You have economic things such as the slowing of the U.S. economy which has been pretty gradual. You’ve got energy going down so quickly that you can almost get windburn. You’ve got China as an issue which is is probably overdone. So when you put those factors together you have an unattractive brew along with the concern the Federal Reserve will raise rates and slow the economy further.”

Oil’s slump to a 12-year low is ripping through markets. Just on Wednesday, Royal Dutch Shell Plc said profit may drop at least 42 percent in the fourth quarter and Saudi Arabia was said to order a halt in selling options used to bet against its currency peg. U.S. bonds now predict the slowest inflation since May 2009. A report on Thursday will probably show U.S. crude stockpiles expanded, exacerbating the global glut.

“It’s back to oil and that’s what is driving everything,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “We can easily run more because it’s pure fear. I don’t know what we need to change this sentiment.”

Stocks

The Stoxx Europe 600 Index tumbled 2.5 percent at 8:35 a.m. in New York, with all industry groups declining. The MSCI All-Country World Index retreated 1.2 percent, extending its drop from a May high to 18.6 percent, nearing the 20 percent threshold for a bear market. More than $15 trillion has been erased from the value of global equities in the period, according to data compiled by Bloomberg.

Shell slid 5.5 percent and BHP Billiton Ltd. dragged commodity producers lower, falling 6.9 percent after trimming its full-year iron ore output forecast. Zurich Insurance Group AG declined 8.7 percent after forecasting a second straight quarterly loss for its biggest unit.

Standard & Poor’s 500 Index futures slid 1.6 percent. Goldman Sachs Group Inc. slipped 1.9 percent after reporting a 65 percent drop in fourth-quarter profit as an agreement to settle a U.S. probe into its handling of mortgage-backed securities reduced earnings.
The cost of living in the U.S. dropped in December, led by a slump in commodities, and New-home construction in the U.S. unexpectedly fell, government reports showed to day.

Emerging Markets

The MSCI Emerging Markets Index dropped the most in two weeks, sinking 2.8 percent to the lowest on a closing basis since May 2009. The gauge is down more than 12.6 percent this year, the worst start since records began in 1988.

Hong Kong’s Hang Seng China Enterprises Index tumbled 4.3 percent as oil producers plummeted and a drop in the city’s dollar spurred concern over capital outflows. The Shanghai Composite Index slipped 1 percent.

Russia’s Micex Index declined 1 percent and the Bloomberg GCC 200 Index of equities in Gulf markets lost 3.6 percent. Saudi Arabia’s Tadawul All Share Index sank 5 percent and Dubai shares slid 4.6 percent. Egypt’s benchmark tumbled 5.3 percent.
Russia’s ruble weakened as much as 3.1 percent to a record 81.0490 against the dollar. The Mexican peso fell to a record 18.4775 per dollar and is down 6.4 percent this year, making it Latin America’s worst performing major currency.

Saudi Arabian banks are under orders to stop selling currency products that allow investors to make cheap bets on a devaluation of the riyal, according to five people with knowledge of the matter. The Saudi Arabian Monetary Agency told banks not to sell options contracts on riyal forwards at a meeting in Riyadh on Jan 18., the people said, asking not to be identified as the information is private.

Hong Kong’s dollar traded near its weakest level since 2007 and forwards contracts sank as China’s market turmoil fueled speculation the city’s 32-year-old currency peg will end. Contracts to buy the currency in 12 months fell as much as 0.3 percent to HK$7.8904 per dollar, beyond the HK$7.75-HK$7.85 range that it can trade within under the existing exchange-rate system. The spot rate dropped to as low as HK$7.8272, within 0.35 percent of the weak end of its band.

Commodities

West Texas Intermediate crude lost as much as 4 percent to $27.32 a barrel before trading 3 percent lower. Inventories probably increased by 2.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration Thursday.

Industrial metals dropped on prospects for slower economic growth in China and sustained low oil prices. Copper fell as much as 1.1 percent.

Gold rose as renewed losses in equities spurred demand for less risky assets, with Citigroup Inc. saying bullion’s rationale as a haven was now back in vogue and prices may be supported over the first quarter.

Soybeans in Chicago dropped from the highest in almost four weeks on bets that ample supply in South America will damp prices.

Currencies

The yen strengthened 0.8 percent to 116.68 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.9 percent to 127.19 per euro. The euro was little changed at $1.0908.

The Australian dollar slid 0.8 percent to 68.52 U.S. cents, extending this year’s decline to 6. percent. The kiwi touched the weakest level since Sept. 30.

The Canadian dollar, which has fallen every day this year, slipped to the lowest since 2003 amid speculation the central bank will cut its benchmark interest rate to a level last seen during the 2009 financial crisis.

The Bank of Canada decides on interest rates Wednesday, and private-sector economists are almost evenly divided on whether it will cut the policy rate to 0.25 percent.

Bonds

Treasuries climbed, pushing 10-year yields to the lowest since October, as investors sought the safety of sovereign debt. The benchmark 10-year note yield fell nine basis points to 1.97 percent, according to Bloomberg Bond Trader data. That’s the biggest drop since Dec. 11.

The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, shrank as much as three basis points to 1.37 percentage points, the narrowest since May 2009.

The yield on similar-maturity German bunds sank five basis points to 0.50 percent, while that on U.K. gilts fell seven basis points to 1.63 percent.

The cost of insuring corporate debt resumed increases. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies rose for the 10th time in 11 days, climbing three basis points to 99 basis points. An index of default swaps on junk-rated companies jumped 19 basis points to 397 basis points, the highest in more than a year.

Bloomberg

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.

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Crude Oil

Oil Slips With Energy Prices in Europe Halts Record Rally

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Crude Oil - Investors King

Oil dipped toward $72 a barrel in New York after prices of energy commodities in Europe halted a record-breaking run.

West Texas Intermediate futures fell 0.6%, having reached the highest intraday level since early August on Wednesday. A rally in European gas and power prices to unprecedented levels was set to end as industries were starting to curb consumption. The surge in energy rates could temporarily boost diesel demand by as much as 2 million barrels a day as consumers switch fuels, according to Citigroup Inc.

Still, the bullish signals for oil are continuing to increase. U.S. crude inventories dropped by more than 6 million barrels last week to a two-year low, according to government figures, as coronavirus vaccination programs permit economies to reopen. Chevron Corp. Chief Executive Officer Mike Wirth warned that the world is facing high energy prices for the foreseeable future.

The investor optimism is showing up in key oil time spreads widening. Trading of bullish Brent options also surged to a two-month high on Wednesday.

Prices have been pushed higher in recent days “by supply outages combined with expectations of switching from gas to oil in the power sector,” said Helge Andre Martinsen, a senior oil market analyst at DNB Bank ASA. “We still believe in softer prices toward year-end and early next year as curtailed production returns and OPEC+ continues to increase production.”

Strong prices for gas, liquefied natural gas and oil are expected to last “for a while” as producers resist the urge to drill again, Chevron’s Wirth told Bloomberg News. Norway’s Equinor ASA said Thursday it also expects European gas prices to remain high over winter.

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Energy

Fuel Scarcity: Petrol Sells N220 Per Litre in Nsukka

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petrol scarcity Nigeria

Premium Motor Spirit, otherwise called petrol, now sells for between N200 and N220 per liter at the independent marketers’ service stations in Nsukka, Enugu State.

The News Agency of Nigeria is reporting the hike in the price against the official pump price of N162 per liter.

It said it started about a fortnight ago due to the scarcity of the commodity in the town and its environs.

Some residents of the town expressed deep worry over the development in separate interviews with NAN on Wednesday.

A civil servant, Stephen Ozioko, said the situation had further compounded the economic difficulties in the area.

Ozioko said many private car owners had been compelled to park their vehicles at home and move around in public transport.

He said: “Since the scarcity started, I decided to park my car and take public transport to the office and back home. N220 per liter is exorbitant and I cannot afford it considering my salary as a civil servant. I shall continue to use public transport until the situation returns to normal.”

A building material dealer, Timothy Ngwu, said the development had also led to an increase in transport fare in the area.

Ngwu said: “Some people now trek from Nsukka Old Park to Odenigbo Roundabout because of the 100 percent hike in fares from N50 to N100 by tricycle.

“Before now, transport fare from Nsukka to Enugu was N500, but transporters now charge between N800 and N1000.”

Also, a commuter bus driver, Victor Ogbonna, described the scarcity and hike in the price of petrol as “unfortunate and an ugly development”.

Ogbonna added: “Today, only a few filling stations are selling the commodity in Nsukka town, while others are shut.”

He alleged that some filling stations, which claimed to be out-of-stock, were selling to black marketers at night.

He said: “This is why black marketers have sprung up everywhere in the town, selling the commodity for about N300 per liter.”

NAN reports that virtually all the major marketers in the area have stopped the sale of petrol, claiming to be out-of-stock.

The people called on the government to urgently intervene in order to bring the situation under control and also put an end to its harsh economic effects on the messes.

NAN.

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Energy

DPR Targets N3.2T Revenue by Year-End

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Department of Petroleum Resources (DPR)-Investors king

Nigeria’s Department of Petroleum Resources (DPR) will hit the N3.2 trillion revenue target by December 2021, according to its Director/ Chief Executive Officer, Mr Sarki Auwalu.

Auwalu made the disclosure when he led a delegation of the DPR management team to the Executive Secretary of Petroleum Technology Development Fund (PTDF), Mr Bello Gusau, in Abuja on Wednesday.

He said that 70 percent of the revenue projection had already been met. “Last year, we exceed our revenue budget. We were given N1.5 trillion but we were able to generate N2.7trillion.

“This year, our revenue budget was N3.2 trillion. By the end of August 2021, we have generated up to 70 per cent.

“So, we with September, October, November and December, it is only the 30 per cent that we will work over,’’ he said

He noted that the government took advantage of fiscal terms within the old and new legislation, thereby creating a level of increased signature bonuses.

“We reorganise the work programme that is normally being done in the DPR to key into the new operational structure as we see it in the bill, now an act.

“That programme is being handled by the planning and strategic business unit as against what we use to have because the entire work programme is supposed to show not only technical but also commercial and viability of oil fields and to guarantee the return on investment for investors.

“We have also created an economic value and benchmarking unit to key into the new fiscal provisions of the PIA,’’ he said.

Commenting on capacity, Auwalu said the country stands at the advantage of exporting skills to emerging oil and gas countries across Africa with proper implementation of the newly passed Petroleum Industry Act.

This, he said, the DPR was ready to partner with the Fund to continue to build capacity in the oil and gas sector

He noted that the Federal Government was determined to create leeway that would encourage investors and drastically improve the nation’s petroleum industry.

He further noted that no fewer than 300 legal battles in the oil and gas industry in Nigeria, which had been stalled for the past 20 years in courts, had been resolved through alternative dispute resolution.

According to Auwalu, the DPR is strategising well to ensure effective implementation of the PIA.

Responding, Gusau commended the DPR for enabling the industry and enhancing business activities in the oil and gas sector.

He said that DPR remained the head of the oil and gas industry in Nigeria adding that the Fund was grateful to benefit from the wealth of ideas from DPR.

“The last time we visited, we had a good discussion and issues raised are being implemented like tracking the inflow of funds in signature bonus accounts.

“We extended the meeting and involved ministry of Finance, Accountant General office and even the Central Bank of Nigeria (CBN).

“Sitting at field development plans and attending significant meetings, helped us to know where and what the industry is trying to do and it also helps to inform our decisions in training and capacity plans,’’ he said

He urged the DPR to continue on its effort to ensure an efficient and productive petroleum industry in Nigeria

He assured collaboration with all as the head of the implementation committee of the Petroleum Industry Act. (NAN)

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