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Election Angst Spreads as Stocks Drop, Bonds Rise With Gold, Yen

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Donald Trump and Hillary Clinton
  • Election Angst Spreads as Stocks Drop, Bonds Rise With Gold, Yen

Global stocks fell toward a three-month low and bonds jumped as investors crowded into haven assets after polls showed Donald Trump gaining ground in next week’s U.S. presidential election.

Shares in Europe slumped for the eighth consecutive day and futures foreshadowed a seventh day of losses for U.S. equities. Currency markets also reflected the growing unease in financial markets, with the yen and Swiss franc strengthening, and Mexico’s peso, seen as a barometer of the election, extending its biggest decline since July. Gold climbed to a one-month high and Treasuries rose as the looming election pushed a Federal Reserve policy decision into the background. Crude oil fell after a report showed American stockpiles expanded.

In a sign of fraying nerves, a Bank of America Corp. index tracking volatility has jumped 64 percent since it touched its lowest level in two years last week. That’s as Democratic presidential contender Hillary Clinton has seen her odds of winning the Nov. 8 U.S. presidential election falter after an FBI examination into her e-mails was restarted Friday. In an open letter on Tuesday, 370 economists, including some Nobel laureates, warned that Trump is “a dangerous, destructive choice,” because he “promotes magical thinking and conspiracy theories,” a statement that was quickly denounced by a top adviser as out of touch with reality.

“This is a year of surprises and backlash against convention,” said Paul Wildman, an analyst at Avalon Capital based in London. Trump “leans toward more protectionism,” he said.

Stocks

The MSCI All Country World Index of shares slipped 0.2 percent as of 7:54 a.m. in New York, set for the lowest close since July 12. The Stoxx Europe 600 Index fell 0.4 percent, with almost all industry groups down. Automakers slid the most as the euro strengthened versus the dollar, potentially harming exports, while financial firms also tumbled. The MSCI Asia Pacific Index fell by the most since September, with Japanese shares retreating from a six-month high before the nation’s financial markets shut Thursday for a holiday.

Europe’s VStoxx Index added 1.6 percent, taking its advance into an eighth day, the longest streak in more than five years. Still, the measure of volatility expectations is in line with its average over the last year, and other measures of risk are below the highs seen when Britain voted to leave the European Union in June.

An ABC News/Washington Post tracking poll on Tuesday showed Trump, a Republican, with 46 percent support to Clinton’s 45 percent, putting him ahead for the first time since May. Futures on the S&P 500 Index fell 0.3 percent.

“The Trump risk is in revival,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities Inc. “With Trump, there always follows an uneasiness over whether policies will be managed properly in the U.S.”

Danske Bank A/S helped position a gauge of lenders as among the worst performers on the Stoxx 600, dropping 2.5 percent after A.P. Moller-Maersk A/S sold its remaining stake in Denmark’s biggest bank. Maersk lost 9.4 percent after reporting a slump in earnings as the shipping industry suffers from overcapacity. Hugo Boss AG rose 6.5 percent after reporting better-than-estimated profit due to cost cuts and growth in China.

Sony Corp. sank to a two-month low after the Japanese electronics maker’s quarterly profit missed estimates and Sumitomo Electric Industries Ltd. tumbled 12 percent after the company lowered its full-year earnings target.
Companies including Alibaba Group Holding Ltd. and Facebook Inc. report earnings Wednesday.

Currencies

The yen climbed 0.7 percent against the dollar, after surging 0.6 percent in the last session. The franc also added 0.4 percent following a 1.4 percent jump that marked its biggest gain in about five months.

Mexico’s peso slid 0.8 percent versus the greenback and touched its weakest level since Sept. 30. The currency tends to lose ground when support builds for Trump, who has said he would revisit the North American Free Trade Agreement that governs commerce between the U.S. and Mexico.

The won dropped as much as 1.1 percent to its weakest level since July as South Korean President Park Geun-hye replaced her prime minister and finance chief on Wednesday to help stem the fallout from a political scandal that threatens her grip on power.

South Africa’s rand rallied as much as 1.7 percent to a five-week high after President Jacob Zuma withdrew a court application to halt the release of a graft ombudsman’s report into allegations the Gupta family, who are his friends, had too much influence over the government.

The kiwi gained 1.3 percent after New Zealand’s jobless rate unexpectedly fell to the lowest level since 2008. A tightening labor market could help Reserve Bank of New Zealand Governor Graeme Wheeler lift inflation back to the middle of his 1-3 percent target band, negating the need for further policy easing.

Commodities

Gold added 0.6 percent, after a 0.9 percent gain on Tuesday. Before the FBI letter to Congress came out, futures had been stuck in a narrow trading range, with price swings measured by the 60-day historical volatility near the lowest in almost two years.

The Bloomberg Industrial Metals Subindex fell for the first time in eight days, as zinc retreated from a five-year high in London and aluminum slid from its highest close since June 2015.

Crude oil fell 1.4 percent to a one-month low in New York after industry data showed American inventories increased by 9.3 million barrels last week. Organization of Petroleum Exporting Countries members Libya and Nigeria are boosting output, providing a challenge to the group’s effort to finalize an agreement to curb production and stabilize prices.

Bonds

Haven demand boosted sovereign bonds, with 10-year yields falling across most of the developed world.

The yield on Treasuries due in a decade fell three basis points to 1.80 percent, after touching a five-month high of 1.88 percent in the last session. It’s unlikely the rate will climb too far past 2 percent anytime soon given how the American economy is performing, according to Jim Caron at Morgan Stanley Investment Management, which oversees $406 billion.

While the Fed is expected to leave interest rates unchanged when a two-day meeting concludes Wednesday, futures indicate a 68 percent chance of a rate hike by year-end and investors will be on the lookout for any hints the authority may give regarding the policy outlook.

Yields on German 10-year bunds, the euro region’s benchmark securities, headed for their biggest drop in almost six weeks, slipping six basis points to 0.12 percent. Yields on similar-maturity U.K. gilts dropped eleven basis points to 1.17 percent, and those on Spanish 10-year debt fell eight basis points to 1.21 percent.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Crude oil

Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil

Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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Energy

NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade

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Mele Kyari - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.

Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.

Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.

In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.

Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.

He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.

Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.

In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.

Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.

The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.

As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.

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