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Japan Stocks Fall as Yen Strengthens After Abe Stimulus Package

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Japanese shares fell for a third day as the yen jumped after details of the government’s stimulus package disappointed investors. Glassmakers and banks led declines.

The Topix index retreated 1.8 percent to 1,277.42 as of 10:08 a.m. in Tokyo, with all but one of the 33 industry groups dropping. The Nikkei 225 Stock Average sank 1.4 percent. The yen traded at 101.23 per dollar after gaining 1.5 percent on Tuesday as a 28 trillion yen ($277 billion) spending package failed to ignite optimism Japan can revive its economy.

“A risk-off mood is coming to the forefront,” said Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc. in Tokyo. “In Japan, where many companies, especially in the auto sector, are easily affected by currency moves, the strength in the yen weighs on the overall profits for listed firms.”

Japan’s cabinet announced 4.6 trillion yen in extra spending for the current fiscal year, as Prime Minister Shinzo Abe seeks to bolster the economy without abandoning targets for improving fiscal health. The package will include 13.5 trillion yen of fiscal measures, including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans.

Electric-appliance makers and banks were the biggest drags on the Topix, while telecommunication and trading houses were the only two industry groups that rose.

  • Casio Computer Co. sank 11 percent after lowering its operating profit forecast by 11 percent to 20 billion yen for the half year through June.
  • Mitsubishi UFJ Financial Group Inc. slumped 3.4 percent, the second-biggest drag on the Topix.
  • Honda Motor Co. rose 4.3 percent after posting operating profit that beat analyst estimates.
  • FamilyMart Co. surged 13 percent after the operators of the Nikkei 225 Stock Average said it will add the convenience store operator to its measure.

The stronger yen has increased speculation that the Bank of Japan will cut negative rates further, damping the prospects for banks’ profits, said SMBC Nikko’s Ohta. The Topix Banks Index has tumbled 33 percent in 2016 after the central bank cut rates earlier this year, leaving Japanese shares among the worst performing developed markets. While the central bank’s latest expansion to its stimulus program — almost doubling exchange-traded-fund purchases — boosted shares on Friday, the measure has fallen every day since.

Futures on the S&P 500 Index lost 0.1 percent. The underlying measure fell 0.6 percent on Tuesday, declining the most in four weeks, as sliding crude prices and lackluster consumer spending data revived anxiety that global growth will falter. Oil traded near $40 a barrel in New York following a drop in U.S. stockpiles.

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.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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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.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

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.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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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.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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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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