Asian stocks fell with crude futures as investors weighed the prospects for higher rates in the U.S., while shares in Japan climbed on speculation for further stimulus.
The MSCI Asia Pacific Index fell 0.1 percent to 139 as of 9:07 a.m. in Tokyo. Japan’s Topix rose 0.4 percent as the yen dropped after Bank of Japan Governor Haruhiko Kuroda said there is “sufficient chance” for more easing in September. Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, echoing hawkish comments from New York Fed President William Dudley last week, ahead of a speech by Janet Yellen later this week at Jackson Hole, Wyoming.
“The Fed is a bit all over the shop so its going to be Janet Yellen’s job this Friday to try to centralize all of these messages into a coherent message that markets can react to,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, said on Bloomberg Radio. “There’s very little reason the Fed needs to raise rates. I don’t think inflation is getting out of control. It’s going to be interesting to see what the Fed chair has to say.”
Asian stocks have rallied 23 percent from a February low through Friday as lackluster data from the world’s biggest economies fueled speculation central banks will continue to support them with stimulus and loose monetary policy. Investors are looking for clues from the Fed on the timing of potential interest-rate increases. While the odds the Fed will raise borrowing costs in December climbed to 51 percent, traders are betting there’s only a 22 percent chance of tightening next month, data compiled by Bloomberg showed.
Japan’s Topix index added to Friday’s 0.4 percent gain as the yen traded at 100.57 against the dollar. The BOJ won’t hesitate to act based on discussions on the results of a comprehensive review at its September 20-21 board meeting, Kuroda said in an interview published Saturday in the Sankei newspaper.
South Korea’s Kospi index slipped 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.1 percent. New Zealand’s S&P/NZX 50 Index climbed 0.3 percent. Markets in China and Hong Kong have yet to start trading.
Futures on the China A50 Index added 0.1 percent in their most recent trading, as did contracts on the Hang Seng Index. Hong Kong stocks fell Friday, paring their third weekly advance. The Shanghai Composite Index gained 0.1 percent on Friday.
Futures on the S&P 500 Index were little changed. The U.S. equity benchmark index lost 0.1 percent on Friday as a two-month rally ran out of steam amid signs investors are again growing skeptical of the long-awaited rebound in corporate profits.
West Texas Intermediate crude slipped 0.6 percent in early Asian trading after surging 9.1 percent last week. Oil declined after Iraq, OPEC’s second-biggest producer, said it will boost oil exports in the next few days amid a glut of supply.
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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