European stocks rebounded as oil trimmed losses after the the International Energy Agency said pent-up demand would absorb record crude output.
The Stoxx Europe 600 Index rose 0.4 percent, with miners and energy producers trimming losses, as crude pared a drop of as much as 1.5 percent after the IEA forecast. Asian equities fell. New Zealand’s dollar surged to a one-year high after the country’s central bank cut interest rates and signaled a more gradual easing path than some investors had anticipated. Nickel snapped a four-day advance. Ukraine’s 2019 Eurobond fell the most since June amid signs tension is increasing with Russia.
Crude entered a bear market last week and the outlook remains clouded as Saudi Arabia and Iran refuse to give ground in their war for market share, with both boosting output just days after OPEC announced an informal meeting to discuss ways to stabilize falling prices. Exacerbating the problem is global demand, which remains weak even as policy makers from Frankfurt to Tokyo engage in unprecedented stimulus to boost their economies. A strengthening jobs market in the U.S. has yet to convince traders that the world’s biggest economy is strong enough for the Federal Reserve to raise interest rates this year.
A gauge of U.K. home sales pointed to the fastest decline in transactions since the global financial crisis in 2008, Royal Institution of Chartered Surveyors data showed on Thursday. Singapore cut the top end of its 2016 growth forecast after the economy expanded less than previously estimated in the second quarter. Financial markets in Japan were shut for a holiday.
West Texas Intermediate crude fell 0.2 percent to $41.63 a barrel at 11:15 a.m. in London, after sinking 2.5 percent on Wednesday when official data showed U.S. supplies increased by 1.06 million barrels last week.
The IEA said in its monthly report that an increase in the volume of crude processed this quarter will shrink brimming stockpiles even as Saudi Arabia, Kuwait and the United Arab Emirates pump at all-time highs. The updated outlook comes a day after the Organization of Petroleum Exporting Countries said weakness in global crude markets may persist as demand slows seasonally and fuel inventories remain abundant.
Saudi Arabia, the world’s largest crude exporter, boosted oil output to a record 10.67 million barrels a day in July, according to OPEC data published Wednesday. In Iran, production has risen to 3.85 million barrels a day — the highest since 2008 — according to comments from Oil Minister Bijan Namdar Zanganeh reported by the Fars news agency.
Weak oil hurt sentiment on demand for commodities, ending a four-day rally in nickel. The metal dropped 0.9 percent to $10,765 a metric ton after Monday touching a one-year high. Zinc fell 0.2 percent and tin lost 0.8 percent.
“Crude oil’s damping market sentiment for metals,” Zhao Qiannan, an analyst with Beijing Newnie E-commerce Co., said by phone from Shanghai.
TThe Stoxx 600 rebounded from a decline of as much as 0.2 percent, as gauges of miners and oil companies came off session lows. The number of shares changing hands was about a third less than the 30-day average.
Zurich Insurance Group AG added 4.2 percent after saying earnings fell less than projected. KBC Group NV advanced 5.5 percent after posting better-than-expected profit and revenue and cutting its forecast for 2016 loan-loss provisions in Ireland.
K+S AG, Europe’s biggest potash producer, slipped 9.2 percent after saying it expects lower earnings in 2016. Thyssenkrupp AG lost 0.7 percent after Germany’s biggest steelmaker reported a decline in quarterly profit.
S&P 500 futures rose 0.2 percent after the underlying equity benchmark declined 0.3 percent on Wednesday, retreating from a near-record high. Investors will look Thursday to earnings from retailers including Macy’s Inc. for indications of the health of the American consumer.
Stocks have benefited from better-than-forecast earnings this season, particularly among technology companies. With about 90 percent of S&P 500 members having posted results, 78 percent have beaten profit predictions and 56 percent have topped sales projections.
The MSCI Asia Pacific excluding Japan Index fell 0.2 percent, slipping from a one-year high. Australia’s S&P/ASX 200 Index dropped 0.6 percent as benchmarks lost ground in Shanghai and Taiwan.
Hong Kong’s Hang Seng Index climbed 0.4 percent, led by financial companies, after the head of the city’s bourse operator told CNBC an exchange trading link with the Chinese city of Shenzhen will soon be announced. Hong Kong Exchanges & Clearing Ltd. jumped 2.9 percent, its biggest increase since May.
The MSCI Emerging Markets Index slipped 0.1 percent after advancing five days to the highest close since July 2015. Gulf stocks declined on Thursday, with the Bloomberg GCC 200 Index losing 0.4 percent, trimming this week’s gain to 1.3 percent.
The kiwi rose as high as 73.41 U.S. cents, its strongest level since May 2015, before trading 0.5 percent stronger on the day at 72.40. The Reserve Bank of New Zealand reduced its key rate by 25 basis points to 2 percent. While the cut was expected by all 16 economists surveyed by Bloomberg, the swaps market had priced in a 20 percent chance of a half-point reduction.
“Even though the 25 basis-point rate cut was fully priced in, there was uncertainty that the RBNZ could even have opted for a 50 basis-point rate cut,” said Angus Nicholson, a market analyst in Melbourne at IG Ltd. “Once the 50 basis-point fears turned out to be unfounded the kiwi dollar promptly rallied.”
Bloomberg’s dollar index, a gauge of the greenback versus 10 major peers, rose 0.1 percent. It ended the last session at a seven-week low as the probability of a U.S. interest-rate increase this year slipped by four percentage points to 41 percent in the futures market.
The Swedish krona was little changed, erasing gains after touching the strongest level against the dollar in more than a month, following better-than-expected July inflation data Thursday.
The MSCI Emerging Markets Currency Index dropped 0.1 percent. South Korea’s won snapped a five-day advance, weakening 0.5 percent after reaching its strongest level in more than a year on Wednesday. Bank of Korea Governor Lee Ju Yeol kept the benchmark interest rate at 1.25 percent and said the authority has scope for more policy adjustments. The ringgit slid 0.4 percent as lower crude prices dimmed prospects for Malaysia, the region’s only major net oil exporter.
The MSCI currency gauge has climbed 3.6 percent since China’s surprise yuan devaluation a year ago roiled global markets. Brazil’s real led gains in the past 12 months, up 11 percent, followed by South Korea’s won with a 7.2 percent jump. The biggest loser was Argentina’s peso, declining 37 percent after the country scrapped currency controls. The yuan has dropped 4.8 percent in the period.
The yield on U.S. Treasuries due in a decade rose two basis points to 1.51 percent. It fell on Wednesday as 10-year notes were auctioned at the lowest yield in four years amid near-record demand from a group of buyers that includes foreign central banks and mutual funds. The U.S. is scheduled to sell $15 billion of 30-year bonds Thursday.
U.K. 10-year bonds were little changed, after a three-day rally in the securities pushed yields to a record low on Wednesday. Gilts have been boosted this week on signs the Bank of England may need to pay higher prices to purchase enough to meet the target for its expanded quantitative-easing program.
Ukraine’s 2019 Eurobond fell the most since June 27, sending the yield up 39 basis points to 7.85 percent. Officials in Kiev warned that Russia’s accusation that its agents engaged in “terror” tactics in Crimea may be a ploy to justify the Kremlin escalating the military conflict as fighting between Ukrainian forces and Russian-backed separatists intensified in the country’s east. Russia’s ruble slipped 0.2 percent.
Yields on Australian bonds due in a decade fell for a third day, declining by two basis points to 1.86 percent. New Zealand’s two-year bonds fell and its 10-year notes advanced, flattening the so-called yield curve, following the central bank’s policy meeting.
Brent Crude Oil Crosses $75 Per Barrel as Global Demand Recovers
Crude oil prices sustained bullish runs amid rising demand for global oil and likely delay in Iranian crude supply to global oil market.
Brent crude oil, global benchmark for Nigerian oil, rose above $75 a barrel for the first time since 2019 on Tuesday as global investors remained bullish across the board.
Brent crude rose 26 cents or 0.4 percent to $75.16 a barrel as of 7 am Nigerian time on Tuesday.
The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs.
“The market sentiment stays strong with improved outlook for global demand,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, adding that a rally in Asian stock markets is also helping boost risk appetite among investors.
Global shares extended their recovery on Tuesday, with Asian markets bouncing from four-weeks lows as investor focus on economic growth partly offset worries about the U.S. Federal Reserve raising rates sooner than expected.
BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and recovering demand could push oil briefly to $100 per barrel in 2022.
Investors are looking to weekly U.S. inventory data as crude oil stockpiles have fallen for four weeks, said Toshitaka Tazawa, analyst at commodities broker Fujitomi Co.
U.S. crude stocks were expected to drop for the fifth consecutive week, while distillate and gasoline were seen rising last week, a preliminary Reuters poll showed on Monday.
“The oil prices are expected to hold a firm tone amid expectations that fuel demand will pick up quickly along with economic recovery in Europe and the United States,” Tazawa said.
The price gap between the world’s two most actively traded oil contracts narrowed to its lowest in more than seven months, demonstrating that U.S. oil output is still in the COVID-19 doldrums with the market likely to remain undersupplied.
Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country’s presidential election.
Raisi on Monday backed talks between Iran and six world powers to revive a 2015 nuclear deal but flatly rejected meeting U.S. President Joe Biden, even if Washington removed all sanctions.
“The lower probability of Iranian crude oil returning to the market due to the new hardline president is also supporting the market,” Fujitomi’s Tazawa said.
Majority of New Renewables Undercut Cheapest Fossil Fuel on Cost
The share of renewable energy that achieved lower costs than the most competitive fossil fuel option doubled in 2020, a new report by the International Renewable Energy Agency (IRENA) shows. 162 gigawatts (GW) or 62 per cent of total renewable power generation added last year had lower costs than the cheapest new fossil fuel option.
Renewable Power Generation Costs in 2020 shows that costs for renewable technologies continued to fall significantly year-on-year. Concentrating solar power (CSP) fell by 16 per cent, onshore wind by 13 per cent, offshore wind by 9 per cent and solar PV by 7 per cent. With costs at low levels, renewables increasingly undercut existing coal’s operational costs too. Low-cost renewables give developed and developing countries a strong business case to power past coal in pursuit of a net-zero economy. Just 2020’s new renewable project additions will save emerging economies up to USD 156 billion over their lifespan.
“Today, renewables are the cheapest source of power,” said IRENA’s Director-General Francesco La Camera. “Renewables present countries tied to coal with an economically attractive phase-out agenda that ensures they meet growing energy demand, while saving costs, adding jobs, boosting growth and meeting climate ambition. I am encouraged that more and more countries opt to power their economies with renewables and follow IRENA’s pathway to reach net-zero emissions by 2050.”
“We are far beyond the tipping point of coal,” La Camera continued. “Following the latest commitment by G7 to net-zero and stop global coal funding abroad, it is now for G20 and emerging economies to match these measures. We cannot allow having a dual-track for energy transition where some countries rapidly turn green and others remain trapped in the fossil-based system of the past. Global solidarity will be crucial, from technology diffusion to financial strategies and investment support. We must make sure everybody benefits from the energy transition.”
The renewable projects added last year will reduce costs in the electricity sector by at least USD 6 billion per year in emerging countries, relative to adding the same amount of fossil fuel-fired generation. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar PV. Cost savings come in addition to economic benefits and reduced carbon emissions. The 534 GW of renewable capacity added in emerging countries since 2010 at lower costs than the cheapest coal option are reducing electricity costs by around USD 32 billion every year.
2010-2020 saw a dramatic improvement in the competitiveness of solar and wind technologies with CSP, offshore wind and solar PV all joining onshore wind in the range of costs for new fossil fuels capacity, and increasingly outcompeting them. Within ten years, the cost of electricity from utility-scale solar PV fell by 85 per cent, that of CSP by 68 per cent, onshore wind by 56 per cent and 48 per cent for offshore wind. With record low auction prices of USD 1.1 to 3 cents per kWh today, solar PV and onshore wind continuously undercut even the cheapest new coal option without any financial support.
IRENA’s report also shows that new renewables beat existing coal plants on operating costs too, stranding coal power as increasingly uneconomic. In the United States for example, 149 GW or 61 per cent of the total coal capacity costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by USD 5.6 billion per year and save 332 million tonnes of CO2, reducing emissions from coal in the United States by one-third. In India, 141 GW of installed coal is more expensive than new renewable capacity. In Germany, no existing coal plant has lower operating costs than new solar PV or onshore wind capacity.
Globally, over 800 GW of existing coal power costs more than new solar PV or onshore wind projects commissioned in 2021. Retiring these plants would reduce power generation costs by up to USD 32.3 billion annually and avoid around 3 giga tonnes of CO2 per year, corresponding to 9 per cent of global energy-related CO2 emissions in 2020 or 20 per cent of the emissions reduction needed by 2030 for a 1.5°C climate pathway outlined in IRENA’s World Energy Transitions Outlook.
The outlook till 2022 sees global renewable power costs falling further, with onshore wind becoming 20-27 per cent lower than the cheapest new coal-fired generation option. 74 per cent of all new solar PV projects commissioned over the next two years that have been competitively procured through auctions and tenders will have an award price lower than new coal power. The trend confirms that low-cost renewables are not only the backbone of the electricity system, but that they will also enable electrification in end-uses like transport, buildings and industry and unlock competitive indirect electrification with renewable hydrogen.
Increased Demand Paves The Way for Expansion of Africa’s Sugar Industry
Africa, June 2021: A new focus report produced by the Oxford Business Group (OBG), in partnership with the International Sugar Organization (ISO), explores the potential that Africa’s sugar industry holds for growth on the back of an anticipated rise in regional demand. The report was presented to ISO members during the MECAS meeting at the Organization’s 58th Council Session, on June 17th 2021.
Titled “Sugar in Africa”, the report highlights the opportunities for investors to contribute to the industry’s development by helping to bridge infrastructure gaps in segments such as farming and refining and port facilities.
The report considers the benefits that the African Continental Free Trade Area (AfCFTA) could deliver by supporting fair intra-African sugar trade efforts and bringing regulatory frameworks under a common umbrella, which will be key to improving competitiveness.
The increased international focus on ESG standards is another topical issue examined. Here, the report charts the initiatives already under way in Africa supported by green-focused investment with sustainability at their core, which will help to instil confidence in new investors keen to adhere to ESG principles in their decision-making.
In addition, subscribers will find coverage of the impact that Covid-19 had on the industry, with detailed analysis provided of the decrease in both worldwide sugar production and prices, as movement restrictions and social-distancing measures took their toll on operations.
The report shines a spotlight on sugar production in key markets across the continent, noting regional differences in terms of output and assessing individual countries’ roles as net exporters and importers.
It also includes an interview with José Orive, Executive Director, International Sugar Organisation, in which he maps out the particularities of the African sugar industry, while sharing his thoughts on what needs to be done to promote continental trade and sustainable development.
“The region is well advanced in terms of sugar production overall, but several challenges still hinder its full potential,” he said. “It is not enough to just produce sugar; producers must be able to move it to buyers efficiently. When all negotiations related to the AfCFTA have concluded, we expect greater investment across the continent and a clearer regulatory framework.”
Karine Loehman, OBG’s Managing Director for Africa, said that while the challenges faced by Africa’s sugar producers shouldn’t be underestimated, the new report produced with the ISO pointed to an industry primed for growth on the back of anticipated increased consumption across the continent and higher levels of output in sub-Saharan Africa.
“Regional demand for sugar is expected to rise in the coming years, driven up by Africa’s population growth and drawing a line under declines triggered by the Covid-19 pandemic,” she said. “With sub-Saharan Africa’s per capita sugar consumption currently standing at around half of the global average, the opportunities to help meet increasing domestic need by boosting production are considerable.”
The study on Africa’s sugar industry forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.
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