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U.K. Manufacturing Growth Surges to Fastest in Three Years

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  • U.K. Manufacturing Growth Surges to Fastest in Three Years

U.K. manufacturing unexpectedly grew at the fastest pace in three years in April as the domestic market strengthened and the pound’s depreciation boosted exports.

A measure of factory conditions rose to 57.3 from 54.2 in March, according to IHS Markit’s Purchasing Managers’ Index. That’s far better than the 54 forecast by economists in a survey and above the 50 level dividing expansion from contraction. Growth in new orders and exports also gathered pace.

The pound rose immediately after the survey was released, before paring its advance, and was little changed at $1.2894 as of 10:40 a.m. London time.

Markit’s report reinforces the view that exporters are in what Bank of England Deputy Governor Ben Broadbent has called a “sweet spot,” since the currency’s decline has increased competitiveness, while the U.K. still enjoys free trade with the EU’s single market. But while the better factory numbers are a good start to the second quarter, sterling is also fueling inflation, and the consumer side of the economy is weakening.

The drop in the pound “helped manufacturers take full advantage of the recent signs of revival in the global economy, and especially the eurozone,” said Rob Dobson, senior economist at IHS Markit. “The big question is whether this growth spurt can be maintained.”

Much of the economy’s performance will depend on the services sector. It posted its weakest performance in two years in the first quarter, when the pace of overall economic growth slowed by more than half. A gauge of services from Markit due Thursday is forecast to decline to 54.5 in April from 55 in March.

The factory survey also highlighted the mixed effects of the pound’s decline since the vote to leave the EU. Factory price pressures remained elevated last month, with input costs above their long-run average. As that feeds through to inflation, that means workers are facing a drop in real incomes this year, undermining their spending power.

Consumers are also facing double uncertainty from Brexit negotiations and a general election after U.K. Prime Minister Theresa May called an early election for June to try to strengthen her hand in the talks with the EU.

George Buckley, an economist at Nomura in London, said the improvement in the latest factory PMI was a “remarkable achievement in the face of Brexit uncertainty,” though he noted that sharp moves in the measure have typically reversed the following month.

“Clearly the U.K. manufacturing sector is deriving some benefit from the export side,” he said. “While we continue to think that weaker consumption and investment spending will take its toll on economic growth as the year develops, this morning’s PMI points to ‘stronger for longer’ than we thought.”

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.

Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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