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Equity Rout Deepens, Bonds Rise on Korea Tension

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Global Sell off - Investors King
  • Equity Rout Deepens, Bonds Rise on Korea Tension

Stocks tumbled in Asia, following a U.S. slump overnight, as investors headed for havens from what hedge-fund manager Ray Dalio termed a game of chicken between U.S. and North Korean leaders.

Asian stocks were poised to end their worst week since March. Equity benchmarks from Hong Kong to Sydney extended losses after the S&P 500 Index halted an unprecedented stretch of calm on American equity markets and the CBOE Volatility Index soared 44 percent. South Korea’s stocks and currency dropped and volatility spiked. U.S. President Donald Trump dialed up his warning to North Korea on threats to American allies, lifting gold to a nine-week high and pushing the yen through 109 per dollar, while Treasuries strengthened. Japanese markets are closed for the Mountain Day public holiday.

Escalating tension between the U.S. and North Korea has dominated sentiment in financial markets this week as the spat threatens to boil over into military confrontation. Trump stepped up his campaign of pressure, warning the regime not to follow through with a missile test near Guam and promising massive response to any strike against America or its allies.

Global equities began the week at an all-time high and some notable investment companies have been warning now would be a good time to reduce levels of risk in portfolios. Dalio, who leads the world’s largest hedge fund at Bridgewater Associates, recommends investors consider placing 5 percent to 10 percent of their assets in gold as a hedge against current political and economic risks.

Here are the main moves in markets:

Stocks

  • Australia’s S&P/ASX 200 Index fell 1.3 percent as of 2:40 p.m. in Sydney. The Hang Seng Index in Hong Kong tumbled 1.9 percent and China’s Shanghai Composite Index was down 1.6 percent.
  • South Korea’s Kospi index lost 1.6 percent and volatility on the Kospi 200 surged as much as 27 percent.
  • Contracts on the S&P 500 Index lost less than 0.1 percent and Nasdaq 100 futures declined 0.3 percent. The S&P 500 declined 1.5 percent on Thursday for its steepest slide since May 17 and the lowest close since July 11.
  • The VIX rose 44 percent to 16.04, it’s highest closing price of Trump’s presidency.

Currencies

  • The won weakened 0.5 percent against the dollar, set for the worst weekly decline since March.
  • The yen rose 0.2 percent to 108.98, advancing to the strongest in eight weeks.
  • The Bloomberg Dollar Spot Index was little changed after falling 0.1 percent on Thursday.
  • The euro was at $1.1776 after climbing 0.1 percent in the previous session.
  • The Aussie slid 0.4 percent to 78.47 U.S. cents.

Bonds

  • The yield on 10-year Treasuries declined five basis points to 2.20 percent on Thursday, with trading limited until London opens due to the Japan holiday.
  • Australian 10-year government notes saw yields drop eight basis points to 2.58 percent.

Commodities

  • West Texas Intermediate crude declined 0.9 percent to $48.15 a barrel in early Friday trading after falling 2 percent Thursday.
  • Gold traded at $1,285.82 an ounce and is up 2.2 percent this week.

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 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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