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U.S. Stocks, Oil Rise as Dollar Slips Before Fed

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  • U.S. Stocks, Oil Rise as Dollar Slips Before Fed

U.S. stocks edged higher as crude rebounded from a November low, while Treasuries advanced and the dollar slipped before the Federal Reserve’s anticipated rate increase.

Energy shares led gains in the S&P 500 Index as West Texas Intermediate oil jumped above $48 a barrel after an industry report pointed to falling crude stockpiles. A broader recovery of commodities spurred the Stoxx Europe 600 Index higher, with miners driving many of the gains. The dollar slipped versus most major peers and 10-year Treasury rates slipped to 2.58 percent.

The swings in oil added some drama to financial markets that have entered a two-day period brimming with central bank decisions, European political drama and a raft of economic data. With the Fed seen as all but certain to raise rates, investors have been weighing how precarious energy prices will feed into the central bank’s path for future moves.

“If you’re excited about whether Fed Chair Janet Yellen will say anything about the number of hikes this year, I think you will be disappointed,” Henrik Drusebjerg, chief strategist at Carnegie Investment Bank AB said in an interview with Bloomberg Radio’s Nejra Cehic and Markus Karlsson. “The Fed has come to use a new term that they will use the window when they have it. If the economy is strong, they will continue hiking.”

What investors will be watching:

  • The Fed’s decision will be announced at 2 p.m. in Washington, followed by Yellen’s news conference a half hour later. Investors are focused on any hints of a change in the number of increases the central bank foresees this year.
  • Wednesday’s vote in the Netherlands will deliver a reading on the state of populism in Europe as races in France and Germany heat up.
  • The Bank of Japan is set to keep its rates and yield-curve policy unchanged in its policy decision on Thursday. The Bank of England, Swiss National Bank and Bank Indonesia are also expected to stand pat with policy decisions.
  • U.S. Secretary of State Rex Tillerson travels to Japan, South Korea and China in his first visit to the region since taking office.
  • U.S. President Donald Trump’s first budget outline for fiscal 2018 is expected on Thursday. He’s said he’ll seek a $54 billion boost in defense spending, paid for by an equal amount of cuts to non-defense agencies.

Here are the main market moves:

Stocks

  • The S&P 500 added 0.2 percent to 2,370.80 at 9:31 a.m. in New York.
  • Energy producers climbed 0.4 percent after sinking more than 2 percent Tuesday.
  • The Stoxx Europe 600 Index added 0.3 percent as mining companies rallied 1.5 percent as a group.

Commodities

  • WTI gained 1.6 percent to $48.48. U.S. inventories fell by 531,000 barrels last week, the industry-funded American Petroleum Institute was said to report.
  • Gold futures slipped 0.2 percent to $1,200 an ounce in New York.

Currencies

  • The Bloomberg Dollar Spot Index slipped by 0.2 percent and dropped against all but two of its major peers.
  • The British pound led G10 currencies with a gain of 0.4 percent, but pared an earlier advance after wage growth slowed. A YouGov poll for The Times showed that 57 percent of Scottish voters want to remain inside the U.K. compared to 43 percent who seek independence.
  • The euro rose by 0.2 percent to $1.0627, following its 0.5 percent drop a day earlier.

Bonds

  • The yield on 10-year Treasury notes fell three basis points to 2.577, after slipping three basis points in Tuesday trading.
  • Dutch bond yields fell as voters head to the polls in the Netherlands, with five and 10-year benchmarks outperforming bunds by one-to-two basis points.

Asia

  • Stocks in Asia were mixed. Hong Kong shares pared declines as Chinese Premier Li Keqiang played down the risk of a trade conflict. Speaking at a press conference after the close of the annual National People’s Congress, Li said it’s important for both China and the U.S. to keep talking to build trust.

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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Gold

Gold Steadies After Initial Gains on Reports of Israel’s Strikes in Iran

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Gold, often viewed as a haven during times of geopolitical uncertainty, exhibited a characteristic surge in response to reports of Israel’s alleged strikes in Iran, only to stabilize later as tensions simmered.

The yellow metal’s initial rally came on the heels of escalating tensions in the Middle East, with concerns mounting over a potential wider conflict.

Spot gold soared as much as 1.6% in early trading as news circulated regarding Israel’s purported strikes on targets in Iran.

This surge, reaching a high of $2,400 a ton, reflected the nervousness pervading global markets amidst the saber-rattling between the two nations.

However, as the day progressed, media reports from both countries appeared to downplay the impact and severity of the alleged strikes, contributing to a moderation in gold’s gains.

Analysts noted that while the initial spike was fueled by fears of heightened conflict, subsequent assessments suggesting a less severe outcome helped calm investor nerves, leading to a stabilization in gold prices.

Traders had been bracing for a potential Israeli response following Iran’s missile and drone attack over the weekend, raising concerns about a retaliatory spiral between the two adversaries.

Reports of an explosion in Iran’s central city of Isfahan further added to the atmosphere of uncertainty, prompting flight suspensions and exacerbating market jitters.

In addition to geopolitical tensions, gold’s rally in recent months has been underpinned by other factors, including expectations of US interest rate cuts, sustained central bank buying, and robust consumer demand, particularly in China.

Despite the initial surge followed by stabilization, gold remains sensitive to developments in the Middle East and broader geopolitical dynamics.

Investors continue to monitor the situation closely for any signs of escalation or de-escalation, recognizing gold’s role as a traditional safe haven in times of uncertainty.

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Commodities

Global Cocoa Prices Surge to Record Levels, Processing Remains Steady

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Cocoa futures in New York have reached a historic pinnacle with the most-active contract hitting an all-time high of $11,578 a metric ton in early trading on Friday.

This surge comes amidst a backdrop of challenges in the cocoa industry, including supply chain disruptions, adverse weather conditions, and rising production costs.

Despite these hurdles, the pace of processing in chocolate factories has remained constant, providing a glimmer of hope for chocolate lovers worldwide.

Data released after market close on Thursday revealed that cocoa processing, known as “grinds,” was up in North America during the first quarter, appreciating by 4% compared to the same period last year.

Meanwhile, processing in Europe only saw a modest decline of about 2%, and Asia experienced a slight decrease.

These processing figures are particularly noteworthy given the current landscape of cocoa prices. Since the beginning of 2024, cocoa futures have more than doubled, reflecting the immense pressure on the cocoa market.

Yet, despite these soaring prices, chocolate manufacturers have managed to maintain their production levels, indicating resilience in the face of adversity.

The surge in cocoa prices can be attributed to a variety of factors, including supply shortages caused by adverse weather conditions in key cocoa-producing regions such as West Africa.

Also, rising demand for chocolate products, particularly premium and artisanal varieties, has contributed to the upward pressure on prices.

While the spike in cocoa prices presents challenges for chocolate manufacturers and consumers alike, industry experts remain cautiously optimistic about the resilience of the cocoa market.

Despite the record-breaking prices, the steady pace of cocoa processing suggests that chocolate lovers can still expect to indulge in their favorite treats, albeit at a higher cost.

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Crude Oil

Dangote Refinery Leverages Cheaper US Oil Imports to Boost Production

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Crude Oil

The Dangote Petroleum Refinery is capitalizing on the availability of cheaper oil imports from the United States.

Recent reports indicate that the refinery with a capacity of 650,000 barrels per day has begun leveraging US-grade oil to power its operations in Nigeria.

According to insights from industry analysts, the refinery has commenced shipping various products, including jet fuel, gasoil, and naphtha, as it gradually ramps up its production capacity.

The utilization of US oil imports, particularly the WTI Midland grade, has provided Dangote Refinery with a cost-effective solution for its feedstock requirements.

Experts anticipate that the refinery’s gasoline-focused units, expected to come online in the summer months will further bolster its influence in the Atlantic Basin gasoline markets.

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, noted that Dangote’s entry into the gasoline market is poised to reshape the West African gasoline supply dynamics.

Despite operating at approximately half its nameplate capacity, Dangote Refinery’s impact on regional fuel markets is already being felt. The refinery’s recent announcement of a reduction in diesel prices from N1,200/litre to N1,000/litre has generated excitement within Nigeria’s downstream oil sector.

This move is expected to positively affect various sectors of the economy and contribute to reducing the country’s high inflation rate.

Furthermore, the refinery’s utilization of US oil imports shows its commitment to exploring cost-effective solutions while striving to meet Nigeria’s domestic fuel demand. As the refinery continues to optimize its production processes, it is poised to play a pivotal role in Nigeria’s energy landscape and contribute to the country’s quest for self-sufficiency in refined petroleum products.

Moreover, the Nigerian government’s recent directive to compel oil producers to prioritize domestic refineries for crude supply aligns with Dangote Refinery’s objectives of reducing reliance on imported refined products.

With the flexibility to purchase crude using either the local currency or the US dollar, the refinery is well-positioned to capitalize on these policy reforms and further enhance its operational efficiency.

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