The global equity bear market deepened in Asia, with Japanese stocks suffering their worst week since 2008 amid anxiety over central banks’ ability to revive the world economy. European stock-index futures signaled gains as oil rose from a 12-year low.
The Topix index slumped 5.4 percent in Tokyo as traders returned from holiday, pushing the regional Asian benchmark toward its steepest weekly drop since gyrations in Chinese assets at the start of the year. The yen was set for its strongest two-week advance since 1998. U.S. index futures also flagged a rebound after losses there helped the MSCI All-Country Index cap a 20 percent slide from its May record.
“We’re in a moment where Peter Pan thinks he can’t fly any more,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “When everyone thinks they can’t fly, we’re doomed. There’s nothing we can do but to try and overturn that sentiment.”
Japanese Finance Minister Taro Aso said regulators will respond to market volatility if necessary after a move to negative rates failed to assuage anxieties last month. A stronger yen threatens to imperil the world’s third-largest economy through disinflation and lower profits for exporters. Investors ignored a second day of testimony from Janet Yellen, whose indication that the Federal Reserve won’t rush to raise interest rates failed to stem a selloff in riskier assets.
The MSCI’s Asia Pacific Index was down 2.8 percent as of 7:08 a.m. London time, on track for a weekly decline of 5.9 percent. The Topix has lost 12.6 percent this week, the most since October 2008. Nomura Holdings Inc. plunged 9.2 percent to the lowest level since December 2012. While Japan resumed trading after a Thursday break, markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays.
Hong Kong’s Hang Seng Index lost 1 percent, the Kospi index in Seoul slipped 1.4 percent, while Australia’s S&P/ASX 200 Index sank 1.2 percent.
Futures on the Euro Stoxx 50 index were up 0.7 percent, while those on the Standard & Poor’s 500 Index rallied 0.3 percent. The S&P 500 reduced a slump of as much as 2.3 percent to close down 1.2 percent in afternoon trade.
Trading in South Korea’s Kosdaq exchange for smaller stocks was halted for 20 minutes after the benchmark gauge plunged more than 8 percent on concern valuations were excessive relative to earnings prospects. Celltrion Inc. slid 12 percent, paring its gain this year to 18 percent. The stock was among the 10 biggest gainers in Asia in 2015. Kakao Corp. tumbled 7.9 percent.
The yen gained 0.3 percent to 112.14 per dollar. Japan’s currency has strengthened at least 2 percent against all its 31 major peers since Jan. 29 amid demand for haven assets. Government officials expressed concern at the moves, fueling speculation Japan may intervene.
“The verbal intervention has already started, with Ministry of Finance officials talking about moves being rough, which looks like the new code word for undesired strength,” said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney. “110 might be some line in the sand when the MOF will lean on the BOJ to shore things up.”
Higher-yielding and developing nation currencies weakened. The New Zealand dollar fell 0.6 percent to 66.76 U.S. cents, while the Malaysian ringgit dropped 0.5 percent, the Thai baht slid 0.8 percent and the South Korean won lost 0.7 percent.
Japan’s 10-year government bond yield rose 7 basis points to 7.5 basis points after falling below zero earlier this week. The similar U.S. Treasury yield rose three basis points to 1.69 percent. The Markit iTraxx Asia index of credit-default swaps rose two basis points to 183, the highest since 2012. That for Japan climbed five basis points to 107.
Oil rebounded amid the most volatile prices since 2009 as speculation swirls over whether producers will act to bolster the market. Futures climbed as much as 5.9 percent and were recently up 4.1 percent.
Gold retreated 0.4 percent after a 4.1 percent surge on Thursday. Bullion is set to climb 5.9 percent this week, the most since 2011, as investors flee a bear market in global stocks, a weakening dollar and the fallout from negative interest rates. Nickel rose 0.9 percent after slumping 3.6 percent on Thursday to the lowest close since 2003.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
Unlocking Investments into Africa’s Renewable Energy Market
The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT.
The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.
Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.
In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.
Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustainable energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.
The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.
Shell Signs Agreement To Sell Permian Interest For $9.5B to ConocoPhillips
Shell Enterprises LLC, a subsidiary of Royal Dutch Shell plc, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.
“After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition,” said Wael Sawan, Upstream Director. “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions.”
Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.
The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.
Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.
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