Japanese stocks swung between gains and losses as investors weighed a strengthening yen with prospects for lower U.S. interest rates. Economic data released Friday did little to change the view that the Federal Reserve will take a gradual approach to raising rates.
The Topix index rose 0.6 percent to 1,309.57 at the lunch break in Tokyo, erasing a loss of 0.7 percent. The index dropped 4.7 percent last week, its worst weekly performance in two months. The Nikkei 225 Stock Average added 0.2 percent to 16,197.79. The yen traded at 111.50 per dollar after strengthening 0.8 percent on Friday. Even with signs of life in American manufacturing and jobs data that topped estimates adding to optimism in the U.S. economy, traders still don’t expect higher interest rates until the fourth quarter.
“American ISM figures were encouraging. The dollar-yen is falling for now because the Fed’s stance is taken as being a bit dovish, but that won’t continue into infinity,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “At some point the dollar will stop falling because investors will realize the U.S. economy is, after all, quite strong. And at that time we’ll could see a sudden rebound in the value of Japanese firms that do business globally.”
Odds of a Fed hike this month remained at zero even as data for last month showed that U.S. manufacturing expanded for the first time in seven months and more workers than expected were added to nonfarm payrolls, while the jobless rate crept higher as more people sought work. Expectations for a hike in June are at 24 percent, slightly higher from 20 percent prior to the economic data.
Futures on the Standard & Poor’s 500 Index were little changed after the underlying gauge added 0.6 percent on Friday to close at the highest level this year. Optimism in the U.S. economy and expectations for only gradual Fed tightening overshadowed a selloff in oil.
Exporters led losses on Monday in Tokyo as the stronger yen and weaker-than-expected U.S. sales figures weighed on the sentiment of automakers. Toyota Motor Corp. and Nissan Motor Co. each fell at least 2.6 percent, while Mazda Motor Corp. tumbled 5.8 percent.
Sun Corp., which surged 97 percent last month, was little changed at the lunch break after tumbling as much as 5.8 percent. Shares of the Japanese firm have risen on speculation the company’s Israeli unit is helping the FBI crack iPhones.
Kaneka Corp. surged 11 percent, the most in five years, after the Nikkei reported the chemical manufacturer has developed lithium-ion batteries that are 100 times faster than conventional technology and that can be used to charge mobile phone in 10 minutes.
Sharp Corp. jumped 5.6 percent after the Apple Inc. supplier on Saturday formally signed a rescue deal to sell a majority stake to Foxconn Technology Group. The company also said late Friday that it reached an agreement with its banks on loan terms.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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