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China Exports Snap Losing Streak on Weaker Yuan

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NEPC
  • China Exports Snap Losing Streak on Weaker Yuan

Chinese exports beat expectations in November, a positive sign for the global economy, but analysts warned Thursday of an uncertain outlook as US President-elect Donald Trump prepares to take office, with Beijing’s trade policy in his sights.

The advance broke a seven-month losing streak and marks a sharp turnaround from the previous month helped by a plunging yuan, which made the country’s goods cheaper for overseas buyers.

Imports also beat forecasts, suggesting the world’s number two economy continues to stabilise after years of slowing growth and providing some welcome news for the country’s leaders.

Exports increased 0.1 percent year-on-year to $196.8 billion, beating a Bloomberg News survey of economists predicting a median five percent drop.

Rising commodity prices also lifted imports 6.7 percent to $152.2 billion, compared with expectations of a 1.9 percent fall. The trade surplus slipped to $44.6 billion in the month.

China is the world’s biggest trader in goods, and its performance affects partners from Australia to Zambia, which have been battered as its expansion has slowed to levels not seen in a quarter of a century.

However, it has suffered years of slowing growth and last year expanded at its weakest rate in a quarter of a century.

The readings were a massive improvement on the previous month, when exports dived 7.3 percent and imports fell 1.4 percent.

Stable overseas demand and a weaker Chinese currency helped, with the yuan sliding against the dollar to eight-year lows in recent weeks.

But analysts with ANZ warned that the “upside surprise” in exports reflected a delay in shipments from the previous two months.

“Despite today’s positive surprise, the medium-term outlook for Chinese trade remains challenging,” said Julian Evans-Pritchard of Capital Economics in a note.

– Trump fear –

A broadly sluggish outlook for global growth will weigh on exports, he said, while the cooling of China’s red-hot property market will suppress demand for imported commodities.

China also faces possible roadbumps as Trump — who has blasted Beijing as a protectionist and has threatened to tear up global trade deals — takes office on January 20.

The billionaire-businessman-turned-politician has promised to declare China a currency manipulator and threatened to slap 45 percent punitive tariffs on imports from the country to protect jobs.

As a warm up, he fired off two tweets Sunday blasting the country’s policies.

“Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the US doesn’t tax them),” he demanded.

“I don’t think so!”

China, which tightly controls the yuan’s movement, has in recent months steadily weakened the rate around which the currency is allowed to trade.

Last month it put it beyond 6.9 to the dollar for the first time in more than eight years as the greenback soars on expectations Trump’s plans for big spending and tax cuts could force the Federal Reserve to hike interest rates.

Beijing is struggling to prop up the yuan as capital flows out of China’s flagging economy in search of better investments in the United States.

To combat the outflows, authorities indicated this week they are looking at relaxing restrictions on foreign investment in sectors including automotive electronics, mining, agricultural and chemical production and some service industries.

China’s foreign exchange reserves plunged $69 billion to a five-year low in November, according to data Wednesday, as the central People’s Bank of China tried to support the yuan.

Earlier Customs released figures in yuan terms that showed exports expanding 5.9 percent on-year, and imports rising 13.0 percent.

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.

Crude Oil

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude oil

Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

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.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

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.

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