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Asian Stocks Climb as Yen Steadies Amid U.S. Fed Rate Comments

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Asian stocks

Asian stocks rose as the yen steadied after breaking through 100 against the dollar and investors weighed the prospects for higher rates this year.

The MSCI Asia Pacific Index rose 0.1 percent to 139.69 as of 9:10 a.m. in Tokyo. Japan’s Topix index climbed 0.3 percent as the yen retreated against the dollar after briefly touching 99.54 on Tuesday. New York Fed President William Dudley said the central bank could potentially raise interest rates as soon as next month, warning investors that they are underestimating the likelihood of increases in borrowing costs.

“Considering how much the yen has strengthened, Japanese shares are showing resilience,” said Chihiro Ohta, a senior strategist with SMBC Nikko Securities Inc. “However, there aren’t any reasons to actively buy Japanese stocks right now.”

Asian equities have climbed 23 percent from their February low through Tuesday as lackluster data from the world’s biggest economies fueled speculation central banks will continue to support them with stimulus and loose monetary policy. While the odds the Fed will raise rates in December climbed to 51 percent on Tuesday, from 45 percent the previous day, traders are betting there’s only a 22 percent chance of tightening next month, data compiled by Bloomberg showed.

Yen Strength

Investors also weighed the policy response from the Bank of Japan as the yen surpassed 100 per dollar for the second time this year. Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley see the yen extending this year’s 20 percent gain versus the dollar, further confounding policy makers who are seeking to spur growth and inflation in the world’s third-largest economy. As the currency surged Tuesday, Japanese Vice Finance Minister Masatsugu Asakawa said he’s watching with concern to see if there are speculative moves in the foreign-exchange market.

The “Japanese economy is extremely weak,” Perpetual’s Sherwood said. “Helicopter money could be in play as Japanese policy makers run out of ammunition.”

South Korea’s Kospi index was little changed. Australia’s S&P/ASX 200 Index fell 0.2 percent. New Zealand’s S&P/NZX 50 Index climbed 0.6 percent. Markets in China and Hong Kong have yet to start trading.

China Retreat

Futures on the FTSE China A50 Index added 0.3 percent in most recent trading, while those on the Hang Seng Index rose 0.1 percent. The Shanghai Composite Index slipped 0.5 percent on Tuesday, after advancing above its 200-day moving average for the first time in a year as volume rebounded. While the gauge has climbed 17 percent from its January low, it’s still down 40 percent from last year’s peak.

China’s regulators took another step toward opening their financial markets on Tuesday, unveiling a second channel for foreign investors to buy the country’s stocks while also lifting restrictions on asset flows. The trading link between Hong Kong and Shenzhen is expected to start in about four months.

The long-delayed second link, which had been expected for more than a year, is part of China’s efforts to internationalize its capital markets and increase its global influence to something more in line with the heft of the nation’s economy. Barriers to foreigners wanting to trade the $6.5 trillion of mainland equities were one of the reasons that MSCI Inc. decided not to include the shares in its global benchmark indexes in June. Authorities in Beijing have also kept tight control over how much money leaves the country.

Futures on the S&P 500 Index rose 0.1 percent. The U.S. equity benchmark index slipped 0.6 percent on Tuesday.

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.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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