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Asia Extends Global Equity Rally as Bonds Slide

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Europe stocks
  • Asia Extends Global Equity Rally as Bonds Slide

Asian equities took another leg higher after the S&P 500 Index rose to a record high and Treasuries tumbled, with less damage than originally feared from Hurricane Irma supporting the case for a gradually improving U.S. economy.

Japan’s Topix index added to Monday’s rally, the biggest in three months, while South Korean and Australia equities climbed. European stock-index futures also pointed higher. The S&P 500 jumped the most since April to close at its first record in a month. Bloomberg’s dollar index steadied after recouping some of last week’s slump on Monday, though was pulling back in early European trading. Oil also held gains triggered by signs that predictions about Irma’s wrath were overdone.

Moves in favor of risk assets that began Monday were built on throughout the day and into Asian trading on Tuesday morning, supported also by a lack of further provocative developments from North Korea. The UN Security Council on Monday approved a watered-down proposal to punish the nation for its latest missile and nuclear tests, omitting an oil embargo and a freeze of Kim Jong Un’s assets.

“What road seems to be traveled now is one of negotiation rather than provocation. There has been a reversal of the tactics over the last week and I think that’s what the markets are seeing,” Jefferies Chief Global Strategist Sean Darby told Bloomberg Television, referring to the UN vote. “The irony at the moment is that for risk-takers the environment is very good. The inflation data is nowhere near as strong to force the hand of the central banks and economic data is actually getting better.”

Markets in the Philippines are shut as heavy rain and flooding from tropical depression Maring descends on the country.

Here are the main moves in markets:

Stocks

  • Japan’s Topix index advanced 0.9 percent at the close in Tokyo.
  • Australia’s S&P/ASX 200 Index added 0.6 percent.
  • South Korea’s Kospi index rose 0.3 percent.
  • The Hang Seng Index in Hong Kong and gauges in China fluctuated.
  • Futures on the S&P 500 Index were flat in early European trading after the underlying gauge added 1.1 percent on Monday.
  • The Euro Stoxx 50 futures contract rose 0.4 percent as of 7:31 a.m. in London.
  • The MSCI Asia Pacific Index climbed 0.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1 percent after being mostly flat in Asia and gaining 0.6 percent for the first advance in more than a week on Monday. U.S. consumer inflation data on Thursday may add to concerns inflation remains benign.
  • The yen was at 109.38 per dollar after sinking 1.4 percent on Monday, its steepest decline since January.
  • The Aussie bought 80.24 U.S. cents.
  • The euro was up 0.1 percent at $1.1968.

Bonds

  • The yield on 10-year Treasuries held at 2.13 percent after rising eight basis points on Monday.
  • The yield on Australian government notes with a similar maturity added more than three basis points to 2.64 percent.
  • 10-year German bund yields climbed about one basis point at 0.35 percent.

Commodities

  • Gold was little changed at $1,326.57 an ounce after sinking 1.4 percent on Monday.
  • West Texas Intermediate crude was steady at $48.07 following a 1.2 percent gain on Monday.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Posts 2% Gain for the Week Despite India Virus Surge

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Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.

Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.

Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.

In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.

However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.

In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.

The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.

“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.

The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.

“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.

“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”

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Commodities

Lagos Commodities and Futures Exchange to Commence Gold Trading

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gold bars

With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.

According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.

Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.

“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”

“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.

Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.

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Crude Oil

Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook

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Crude oil

Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.

Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.

Both contracts hit the highest level since mid-March in intra-day trade.

“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.

“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.

Crude prices were also supported by a large fall in U.S. inventories.

The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.

Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.

“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.

Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.

“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.

“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.

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