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Asia Stocks Rise, Dollar Rebounds as Irma Weakens

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  • Asia Stocks Rise, Dollar Rebounds as Irma Weakens

Asian stocks rose and the dollar rebounded from its lowest in more than two years as hurricane Irma’s force waned and the United Nations prepared to vote on tougher North Korean sanctions.

Japan’s Topix index was headed for its biggest gain in more than three months as a weaker yen gave a boost to exporters. Equities also advanced in Seoul and Hong Kong, and Treasuries fell after North Korea refrained from an expected missile test at the weekend.

The dollar rose against major peers as Irma, while devastating, didn’t reach the feared Category 5 storm that some had anticipated and looks to have spared Miami. The offshore yuan declined after China’s central bank was said to have removed a reserve requirement on the trading of foreign-exchange forwards.

Risk appetite also returned to the markets as the chances of Federal Reserve interest rate increases this year receded after the U.S. was struck by the first back-to-back major storms since 1964. New York Fed President William Dudley said in an interview with CNBC that hurricanes could affect the timing of rate hikes.

Still, the shadow of North Korea remains. Pyongyang warned of retaliation if the United Nations Security Council approves harsher sanctions in response to the North’s nuclear test. The UN will vote Monday on fresh sanctions, saying that Kim Jong Un’s nuclear program poses the most serious threat since World War II. Pyongyang “is closely following the moves of the U.S. with vigilance,” its state-run Korean Central News Agency said on Monday, citing a statement by the Ministry of Foreign Affairs.

With Fed speakers now in a blackout period before next week’s policy meeting, the focus this week be on assessing the impact of natural disasters on U.S. growth. Investors will also parse data due on retail spending in the American economy and the U.S. consumer price index as inflation remains stubbornly low. U.S. CPI is projected to have risen in August at a faster pace.

Stocks

  • The Topix index advanced 1.4 percent as of 10:55 a.m. Tokyo time, on course for its steepest advance since early June. South Korea’s Kospi index was up 1 percent and the S&P/ASX 200 Index in Sydney rose 0.7 percent.
  • Hong Kong’s Hang Seng Index was up 1 percent, while gauges in China were also higher.
  • Futures on the S&P 500 Index climbed 0.5 percent. The underlying gauge fell 0.2 percent on Friday.
  • The MSCI Asia-Pacific Index jumped 0.6 percent to hit the highest since December 2007.

Currencies

  • The yen fell 0.5 percent to 108.42 per dollar.
  • The euro lost 0.2 percent to $1.2010.
  • The Aussie was at 80.40 U.S. cents, down 0.2 percent.
  • The Korean won was little changed at 1,128.95 per dollar.
  • The Bloomberg Dollar Spot Index rose more than 0.2 percent. It lost 1.5 percent last week, its worst week since May.

Bonds

  • The yield on 10-year Treasury notes climbed almost four basis points to 2.09 percent.
  • Australian 10-year bond yields rose about four basis points to 2.61 percent.

Commodities

  • West Texas Intermediate crude added 0.8 percent to $47.84 a barrel in early trading after losing 3.3 percent on Friday.
  • Gold declined 0.7 percent to $1,336.89.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Global Oil Prices Appreciate to $77.85 After Saudi Announces Plan to Cut Production

Global oil prices appreciated on Monday morning following Saudi Arabia’s announcement that it will cut crude oil production by 1 million barrels per day (bpd) from the month of July to curb global economic headwinds weighing on the market.

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Global oil prices appreciated on Monday morning following Saudi Arabia’s announcement that it will cut crude oil production by 1 million barrels per day (bpd) from the month of July to curb global economic headwinds weighing on the market.

Brent crude oil, against which Nigerian oil is priced, rose by $1.72, or 2.3%, to $77.85 a barrel by 10:48 am Nigerian time while the U.S. West Texas Intermediate crude also climbed by $1.72, or 2.4%, to $73.46.

Both crude oils gained more than 2% on Friday after the Saudi energy ministry announced that the top exporter would reduce output from 10 million bpd in July to 9 million bpd in May 2024. The biggest of such reduction in years.

The voluntary cut is on top of a broader deal by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to limit supply into 2024 as the OPEC+ producer group seeks to boost flagging oil prices.

OPEC+ pumps about 40% of the world’s crude and has cut its output target by a total of 3.66 million bpd, amounting to 3.6% of global demand.

“Saudi remains keener than most other members in terms of ensuring oil prices above $80 per barrel, which is essential for balancing its own fiscal budget for the year,” said Suvro Sarkar, leader of the energy sector team at DBS Bank.

“Saudi will probably continue doing whatever it takes to keep oil prices elevated … and take calculated pre-emptive steps to ensure the macro concerns potentially affecting demand are negated.”

Consultancy Rystad Energy said the additional Saudi cut is likely to deepen the market deficit to more than 3 million bpd in July, which could push prices higher in the coming weeks.

Goldman Sachs analysts said the meeting was “moderately bullish” for oil markets and could boost December 2023 Brent prices by between $1 and $6 a barrel depending on how long Saudi Arabia maintains output at 9 million bpd over the next six months.

“The immediate market impact of this Saudi cut is likely lower, as drawing inventories takes time, and the market likely already put some meaningful probability on a cut today,” the bank’s analysts added.

Many of the OPEC+ reductions will have little real impact, however, as the lower targets for Russia, Nigeria and Angola bring them into line with their actual production levels.

In contrast, the United Arab Emirates (UAE) was allowed to raise output targets by 200,000 bpd to 3.22 million bpd to reflect its larger production capacity.

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Crude Oil

Global Oil Prices Surge as US Lawmakers Suspend Debt Ceiling

Global oil prices appreciated on Friday after the United States lawmakers voted to have the country’s debt ceiling suspended for the next two years.

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Global oil prices appreciated on Friday after the United States lawmakers voted to have the country’s debt ceiling suspended for the next two years. On the final vote, 149 Republicans and 165 Democrats backed the measure, while 71 Republicans and 46 Democrats opposed it.

Brent crude oil, against which Nigerian oil is priced, rose by 77 cents, or 1% to $75.05 a barrel by 9 am while U.S. West Texas Intermediate crude (WTI) was up 69 cents, or 1%, at $70.79.

Markets were reassured by a bipartisan deal to suspend the limit on the U.S. government’s $31.4 billion debt ceiling, which staved off a sovereign default that would have rocked global financial markets.

Earlier signals of a potential pause in rate hikes by the Federal Reserve also provided support to oil prices, not least by weighing on the U.S. dollar , making oil cheaper for holders of other currencies.

Investor attention is now fixed on the June 4 meeting of the Organization of the Petroleum Exporting Countries and allies including Russia, collectively called OPEC+.

OPEC+ in April announced a surprise cut of 1.16 million barrels per day in April, but the gains from that move have since been retraced and prices are below pre-cut levels.

But signals on any fresh cut have been varied, with Reuters reporting and bank analysts indicating that further output cuts are unlikely.

On the demand side, the U.S. Institute for Supply Management (ISM) said its manufacturing PMI fell to 46.9 last month, the seventh-straight month that the PMI stayed below 50, indicating a contraction in activity.

Manufacturing data out of China painted a mixed picture. Thursday’s better-than-expected Caixin/S&P Global China manufacturing PMI contrasted with the previous day’s official government data that reported factory activity in May had contracted to the lowest level in five months.

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Weak Chinese Data Weighs on Oil Prices Today

Oil prices declined by 2% on Wednesday as weak Chinese data and a stronger United States dollar dragged on commodity prices.

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Oil prices declined by 2% on Wednesday as weak Chinese data and a stronger United States dollar dragged on commodity prices.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.75, or 2.37%, to $71.96 a barrel at 3:46 pm while U.S. West Texas Intermediate crude (WTI) shed $1.90, or 2.74%, to $67.56.

The decline in prices was caused by weak Chinese manufacturing activity. The data released by the Chinese government showed that activity in the sector contracted faster than expected in May with the official manufacturing purchasing managers’ index declining from 49.2 posted in April to 48.8 in May, below the 49.4 predicted by economists.

Also, the strong U.S. dollar is another factor impacting the purchase of crude oil as buyers holding foreign currencies found it too expensive.

The U.S. dollar index, which measures the greenback against six major peers, saw support from cooling European inflation and progress on the U.S. debt ceiling standoff, which will advance to the House of Representatives for debate on Wednesday.

Market players are preparing for the upcoming June 4 meeting of OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia.

Mixed signals by major OPEC+ producers on whether or not the group will decide to further cut oil production have sparked recent volatility in oil prices.

Despite the latest pullback in prices, HSBC and analysts do not expect OPEC+ to announce further cuts in the upcoming meeting.

HSBC said on Wednesday that stronger oil demand from China and the West from the summer onwards will bring about a supply deficit in the second half of the year.

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