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Stocks Rise, Currencies Drift Before Bankers Speak

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  • Stocks Rise, Currencies Drift Before Bankers Speak

European stocks advanced as the euro and dollar traded sideways before Janet Yellen and Mario Draghi speak in Jackson Hole. Commodities showed more conviction, with most raw materials climbing.

Stocks across Europe fluctuated before gradually following Asian equities higher, with the Stoxx Europe 600 Index rising as mining-share gains outweighed retailer declines. The Bloomberg Commodity Index was in the green for a third day. Crude traded near $48 a barrel as Hurricane Harvey headed for Texas. While flat against the greenback, the euro fell against most other major peers as data showed German corporate confidence weakened.

In a week when traders have had little to go on and the Northern Hemisphere summer has suppressed volumes, equity markets have struggled for traction as investors await the forum in Jackson Hole, Wyoming. Though European Central Bank President Draghi isn’t expected to offer a fresh policy message, his speech and that of Federal Reserve Chair Yellen will be parsed for clues on the timing of reductions in stimulus.

Meanwhile, two Fed officials offered opposing views Thursday on the inflation debate. Kansas City’s Esther George said another rate hike is feasible this year if U.S. data holds up. Dallas’s Robert Kaplan called for patience in waiting for prices to go higher.

“Will financial-stability concerns prompt the Fed to hike, even when inflation is so low? This is what the market wants to know,” John Cairns, a strategist at Rand Merchant Bank in Johannesburg, wrote in a client note. “With little else to focus on, the market has morphed the symposium into a colossus. Risks are two way: Yellen could take the hike off the table, or reaffirm it.”

Beyond the gathering of central bankers, market risks may be building in Washington. President Donald Trump took to Twitter to fuel the debate on legislation to keep the U.S. government open next month. Trump blasted Republican leaders for ignoring his advice on raising the debt ceiling and creating a “mess.” Countering, House Speaker Paul Ryan said the borrowing limit will be raised. Rates on short-term Treasury bills spiked amid concern Congress and the White House may not act in time.

Here are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index increased 0.3 percent as of 9:18 a.m. in London.
  • The MSCI World Index of developed countries climbed 0.1 percent.
  • Futures on the S&P 500 Index advanced less than 0.05 percent.

Currencies

  • The euro dipped 0.1 percent to $1.1786.
  • The Bloomberg Dollar Spot Index advanced less than 0.05 percent.
  • The British pound climbed 0.1 percent to $1.2811.

Bonds

  • The yield on 10-year Treasuries fell less than one basis point to 2.19 percent.
  • Britain’s 10-year yield climbed one basis point to 1.065 percent.
  • Germany’s 10-year yield increased two basis points to 0.39 percent, the first advance in more than a week.

Commodities

  • West Texas Intermediate crude gained 0.7 percent to $47.78 a barrel.
  • Gold advanced 0.1 percent to $1,287.25 an ounce.
  • Copper climbed 0.4 percent to $6,716.00 per metric ton, the highest in almost three years.

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 Inch Down Amid Dollar Strength and Interest Rate Concerns

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Crude oil prices declined on Monday as the U.S. dollar strengthened and concerns over potential interest rate hikes resurfaced.

Brent crude oil, against which Nigerian oil is priced, slipped marginally by 3 cents to settle at $85.21 per barrel following a modest 0.6% decline on Friday.

Similarly, U.S. West Texas Intermediate (WTI) crude oil saw a minimal decrease of 2 cents to close at $80.71 per barrel.

Market analysts pointed to the robust performance of the U.S. dollar, which gained ground after the release of positive Purchasing Managers’ Index (PMI) data on Friday.

Tony Sycamore, a markets analyst at IG in Sydney, noted, “The U.S. dollar has opened bid this morning and appears to have broken higher following better U.S. PMI data on Friday night and political concerns ahead of the French election.”

A stronger dollar typically makes dollar-denominated commodities like oil less attractive for holders of other currencies, putting downward pressure on prices.

Last week, however, both Brent and WTI crude contracts managed to gain approximately 3% each.

This was largely driven by increasing signs of demand recovery for oil products in the U.S., the world’s largest consumer of crude oil. Additionally, ongoing supply constraints enforced by OPEC+ further supported market sentiment.

According to ANZ analysts, U.S. crude inventories continued their decline while gasoline demand recorded a seventh consecutive weekly rise.

Moreover, jet fuel consumption has rebounded to levels last seen in 2019, indicating a robust recovery in travel-related fuel demand.

Speculative activity in the oil market has also been notable, with analysts from ING observing an increase in net-long positions in ICE Brent as traders adopt a more positive outlook heading into the summer months.

“We remain supportive towards the oil market with a deficit over the third quarter set to tighten the oil balance,” they stated.

Despite these bullish indicators, geopolitical tensions persisted, providing a floor for oil prices.

Escalating conflicts in the Middle East, including the Gaza crisis and increased drone attacks on Russian refineries by Ukrainian forces, continued to underpin market sentiment.

In South America, Ecuador’s state oil company Petroecuador declared force majeure on deliveries of Napo heavy crude for exports due to severe weather conditions.

Heavy rains led to the shutdown of a critical pipeline and oil wells, impacting production and exports.

Meanwhile, in the U.S., the number of operating oil rigs fell by three to 485 last week, marking the lowest count since January 2022, according to Baker Hughes’ weekly report.

Looking ahead, the interplay between the U.S. dollar’s strength, geopolitical developments, and economic indicators such as PMI data will likely dictate short-term oil price movements.

Investors and analysts remain vigilant for any shifts in these factors that could influence global oil market dynamics in the coming weeks.

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Gold

First Commercial Gold Transaction Nets Nigeria $5 Million in Foreign Reserves

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The Ministry of Solid Minerals Development has concluded its first commercial transaction under the National Gold Purchase Program (NGPP), bolstering the nation’s foreign reserves by $5 million.

Minister of Solid Minerals Development, Dele Alake, announced the successful sale of over 70 kilograms of gold, refined to meet the stringent London Bullion Market Association Good Delivery Standard.

Speaking at the presentation ceremony, Alake emphasized the economic significance of the transaction, stating that it injects approximately NGN 6 billion into the rural economy.

He lauded President Tinubu for his unwavering support for reforms in the solid minerals sector, highlighting the pivotal role of the NGPP in enhancing Nigeria’s foreign reserves and bolstering the value of the Naira.

“This transaction represents a strategic move to use the Nigerian Naira to acquire a liquid asset denominated in United States Dollars, demonstrating a viable strategy for fiscal and monetary stability,” Alake stated.

He further expressed confidence in the NGPP’s ability to contribute to Nigeria’s economic diversification agenda, fostering greater economic confidence and attracting foreign investment.

Executive Secretary of the Solid Minerals Development Fund, Fatima Shinkafi, explained that adherence to the London Bullion Market Good Delivery Standard ensures that Nigeria’s gold exports meet global trading requirements.

She emphasized that only gold bars meeting these standards are acceptable in the settlement of Loco London contracts, reinforcing Nigeria’s credibility in the global gold market.

President Tinubu, upon receiving a symbolic gold bar, commended the Ministry for achieving a crucial milestone in the nation’s economic diversification efforts.

He described the transaction as a concrete step towards realizing the objectives of the Renewed Hope Agenda, aimed at reducing economic dependence on oil and gas revenues.

Through initiatives like the NGPP, Nigeria aims to further enhance its gold reserves, promote economic stability, and create an environment conducive to sustainable economic growth.

The successful completion of the first commercial gold transaction marks a pivotal moment in Nigeria’s journey towards becoming a key player in the global gold market, driving economic prosperity and resilience.

The Ministry of Solid Minerals Development continues to advocate for supportive policies and regulatory frameworks that promote transparency, efficiency, and sustainability in the mining sector, laying the groundwork for future economic growth and development.

As Nigeria moves forward with its gold refining and export initiatives, stakeholders anticipate continued progress in diversifying revenue streams and strengthening the nation’s economic resilience on the global stage.

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Crude Oil

Oil Prices Slip as Japan’s Rising Inflation Signals Rate Hikes

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Crude oil fell in early trading on Friday as concerns over sustained high interest rates in both Asia and the United States weighed on the outlook.

This trend is attributed to Japan’s increasing inflation, which is prompting expectations of imminent rate hikes by its central bank.

Brent crude edged declined by 11 cents to settle at $85.60 per barrel while the U.S. crude oil declined by 9 cents to $81.20 per barrel.

Recent data revealed that Japan’s core consumer prices rose by 2.5% in May compared to the same month last year. This increase marks a growth from the previous month, suggesting that the Bank of Japan is likely to raise interest rates in the upcoming months to curb inflation.

In the United States, data released on Thursday showed a decrease in the number of new unemployment claims for the week ending June 14, indicating continued strength in the job market.

This persistent robustness in employment raises the likelihood that the U.S. Federal Reserve will maintain higher interest rates for a longer period.

Higher interest rates typically have a dampening effect on economic activity, which can subsequently reduce oil demand.

The prospect of prolonged elevated interest rates in two major economies has therefore put downward pressure on crude oil prices.

Despite the downward trend, oil prices received some support from the latest figures from the Energy Information Administration (EIA).

The data showed a drawdown in U.S. crude inventories by 2.5 million barrels in the week ending June 14, bringing the total to 457.1 million barrels. This exceeded analysts’ expectations, who had predicted a 2.2 million-barrel reduction.

Also, gasoline inventories fell by 2.3 million barrels to 231.2 million barrels, contrary to forecasts that anticipated a 600,000-barrel increase.

“Gasoline finally came to life and posted its first strong report of the summer driving season,” remarked Bob Yawger, director of energy futures at Mizuho in New York, highlighting the surprising uptick in gasoline demand.

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