Global stocks held near a one-year high as rising oil prices bolstered investor sentiment following disappointing data in the world’s three largest economies.
U.S. equity index futures advanced, after retreating from a record in the last session as a report showed American retail sales stopped expanding in July. The Topix index fell and the yen strengthened after Japan announced slower economic growth than analysts forecast. The Shanghai Composite Index jumped by the most since May as takeover speculation outweighed Chinese figures showing a slump in new lending. The yuan fell for the first time in a week and U.S. crude climbed for a third day.
Global equities are trading near a one-year high as evidence of uneven growth in the world’s biggest economies both unnerves traders and fuels optimism that central banks will come to the rescue by way of stimulus. The probability that the Federal Reserve will increase interest rates this year eased to 42 percent in the futures market on Friday following the release of the U.S. retail sales figures, from 49 percent a day earlier.
“The U.S. economy may have lost a bit of momentum on its way up,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center. “Still, weak numbers mean concern over tightening recedes.”
The Stoxx Europe 600 Index was up 0.1 percent as of 8:24 a.m. London time. William Hill Plc declined 1.3 percent after the U.K.’s biggest bookmaker rejected an increased offer from 888 Holdings Plc and Rank Group Plc. The bidders were down 2.2 percent and up 2.8 percent, respectively.
The MSCI Asia Pacific Index fell less than 0.1 percent, after rallying 3.1 percent last week. Markets in South Korea and India were shut Monday for holidays.
The Topix index lost 0.5 percent as Japan posted an annualized expansion for the second quarter of 0.2 percent, below the 0.7 percent projected by economists.
Officials in Asia’s second-largest economy are struggling to ignite price growth, with the central bank running negative interest rates and an unprecedented asset-purchase program, and the government also bolstering fiscal stimulus.
Hong Kong’s Hang Seng Index climbed 0.8 percent to a nine-month high after government data showed the economy expanded in the second quarter at the fastest pace since 2001. The Shanghai Composite Index advanced 2.4 percent to its highest since January after stake purchases by China Evergrande Group spurred takeover bets among property developers. The Shenzhen Composite Index climbed by the most since June after the Hong Kong Economic Journal reported that a proposed exchange link with Hong Kong will be announced as soon as this week and start in December.
“The road ahead may be bumpy but Asian equities ex-Japan are relatively undervalued, under-owned and under-appreciated,” said Vasu Menon, vice president for wealth management research at Oversea-Chinese Banking Corp. in Singapore. “It could do better than other regions over the next few years once we see greater stability in China and greater clarity with Fed policy.”
Futures on the S&P 500 Index added 0.2 percent, after the U.S. benchmark slipped 0.1 percent in the last session.
The Bloomberg Dollar Spot Index, a gauge of the greenback’s strength, retreated 0.2 percent to levels last seen in June. The yen advanced 0.2 percent, reversing an earlier loss. Russia’s ruble climbed 1.1 percent, leading gains among the currencies of oil-exporting nations.
The yuan weakened 0.14 percent to 6.6425 per dollar in Shanghai, after gaining 0.4 percent over the last four trading days. China’s broadest measure of new credit increased in July by the least in two years, a report showed late Friday. Data earlier that day showed factory output, retail sales and fixed-asset investment all slowed in Asia’s biggest economy.
Thailand’s baht reversed earlier losses to trade 0.5 percent stronger after the government reported better-than-expected economic growth. Gross domestic product expanded 3.5 percent in the three months through June from a year earlier, more than the 3.3 percent increase forecast in a Bloomberg survey.
West Texas Intermediate crude climbed as much as 1.2 percent to $45.02 a barrel. It jumped 6.4 percent last week, its best performance since April, as Saudi Arabia signaled that it’s prepared to discuss stabilizing markets at informal discussions being held by the Organization of Petroleum Exporting Countries in September. Venezuela’s oil and foreign ministers will visit producer countries to lobby for price increases ahead of the talks, President Nicolas Maduro said.
Gold rose for the first time in three days, gaining 0.4 percent. The reduced likelihood of a Fed rate hike is a positive for precious metals as they don’t pay interest.
The yield on U.S. Treasuries due in a decade fell one basis point to 1.50 percent, after dropping by five basis points on Friday. The rate on similar-maturity Chinese debt dropped was steady at 2.66 percent, the lowest in China Bond data going back to 2006.
Oil Prices Hold Steady Ahead of Crucial OPEC+ Meeting Amidst Fed Rate Hike Signals
Oil prices maintained their significant gains as traders anticipate the outcome of a crucial OPEC+ meeting on supply while considering signals from the Federal Reserve regarding interest rate policies.
Global benchmark Brent hovered below $82 a barrel, having surged over 2% on Tuesday, while West Texas Intermediate traded under $77.
The OPEC+ meeting, scheduled for Thursday to set policies for 2024, is currently grappling with a dispute over output quotas for some African members.
The recent rise in crude prices is underpinned by a weakening dollar, with a Bloomberg gauge of the US currency reaching its lowest level since August.
Federal Reserve policymakers, including Governor Christopher Waller, have hinted at an impending pause in the series of rate hikes, contributing to the bullish sentiment in oil markets.
A softer dollar enhances the appeal of commodities for international buyers.
Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore, commented on the interplay of factors, stating, “The US dollar was dragged lower on a build-up in dovish expectations, which was very much cheered on by oil prices.”
However, concerns persist about OPEC+’s ability to address the challenges in the oil market effectively.
Despite the recent gains, oil is on track for a consecutive monthly decline due to increased supply from non-OPEC countries, intensifying pressure on the cartel and its allies to consider more significant output cuts.
The International Energy Agency’s earlier assessment indicated a potential return to a global crude surplus in the coming year.
In the US, the American Petroleum Institute reported a 817,000-barrel decline in nationwide inventories last week, potentially marking the first drop in six weeks, pending confirmation from government data.
This development may add support to oil prices and impact the ongoing dynamics in the energy market.
Oil Prices Stabilize as OPEC+ Weighs Deeper Output Cuts Amid Global Supply Concerns
Market Evaluates OPEC+ Decision Amidst Bearish Sentiment and Global Supply Worries
A Relaxed Start to the Week But Much More to Come, OPEC+ Eyed
By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
It’s been quite a calm start to the week which isn’t entirely surprising given the lack of events on the calendar today. That said, things are expected to pick up with the rest of the week serving up some big economic releases and a hugely important OPEC+ meeting.
All data now, particularly that of the US, is being looked at through the prism of what it will mean for the final central bank meeting of the year and the new projections it’ll be accompanied by.
Since the last meeting, the data has been encouraging and we’ll get another batch before the Fed meets on 13 December. This week we’ll get the October PCE inflation data – the Fed’s preferred measure – as well as third quarter GDP, ISM manufacturing and jobless claims.
Outside of the US, we’ll get flash HICP inflation data for the eurozone, PMIs from China, CPI figures for Australia and a rate decision from the RBNZ. On top of all that, there’s a plethora of central bank speakers making appearances which will keep us on our toes.
BoE Governor Bailey got the week off to a start on that front, pushing back against expectations for rate cuts from Q2, claiming he doesn’t expect any for the “foreseeable future”. A vague commitment as ever but all we can expect from policymakers for now. There’s still a way to go and as Bailey highlighted, getting from peak to now is likely to be much easier than from here to 2%.
Oil choppy ahead of Thursday’s OPEC+ meeting
Arguably, the OPEC+ meeting will be the week’s most impactful event. Not just because any decision could have direct consequences for price and therefore inflation but also due to the meeting already being pushed back by four days, so there’s clearly some disagreement within the alliance.
The group has always found a way to get an agreement over the line before, even if that means the biggest producers taking on more of the additional commitments so it’s probably safe to say something similar will be achieved this week. But the question is how far they’ll push it, given the recent trend in oil prices and increasing concerns around global growth next year.
Gold eyeing record highs?
Gold has got the week off to a strong start, up around half a percent and hitting a six-month high. It just about managed to end last week above the psychologically challenging $2,000 level – where it’s repeatedly been pushed back from over the last month – and it seems that has propelled it on today.
We’re still seeing some push back though but this break has been backed by softer US data in recent weeks and less hawkish commentary from the Fed. That may be the difference this time around and enable it to look up towards record highs, only a few percent above where it currently finds itself.
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