- Asian Shares Rise as Upbeat U.S. Jobs Data Offsets Trade Worries
Asian shares rose to their highest in two-and-a-half-weeks on Monday as strong U.S. jobs data offset worries that tariff wars between the United States and the rest of the world could retard global economic growth.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.0 percent to a high last seen on May 17, while Japan’s Nikkei rose 1.3 percent.
Tech names such as Tencent and Taiwan Semiconductor Manufacturing were among the biggest gainers.
European stocks are seen rising, with spread-betters expecting Britain’s FTSE and Germany’s Dax to gain 0.3 percent and France’s Cac 0.4 percent.
On Wall Street on Friday, U.S. tech shares soared, pushing up the Nasdaq Composite 1.51 percent to 7,554 points, near its record closing high of 7,588 struck in March.
In contrast, the S&P 500, which rose 1.08 percent on Friday, was still about 140 points off a record peak of 2,872 set in January due to concerns over trade frictions.
Finance leaders of the closest U.S. allies vented anger over the Trump administration’s metal import tariffs on Saturday, setting the tone for a heated G7 summit next week in Quebec.
In a rare show of division among the normally harmonious club of wealthy nations, six G7 member countries issued a statement asking U.S. Treasury Secretary Steven Mnuchin to convey their “unanimous concern and disappointment” to President Donald Trump.
“The G7 is showing more divisions than unity, to the point where one has to wonder whether it is worth holding meetings,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“The G7 summit this weekend could be equally terrible. There’s even talk that Trump may not go. Concerns on trade frictions are likely to continue to weigh on markets,” he added.
There appears to have been no major break-through on trade disputes after U.S. Commerce Secretary Wilbur Ross met Chinese Vice Premier Liu He, either.
China warned the United States on Sunday that any agreements reached on trade and business between the two countries will be void if Washington implements tariffs and other trade measures, as the two ended their latest round of talks in Beijing.
Still, the U.S. economy’s current strength kept bears at bay for the moment.
Data released on Friday showed U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, indicating a rapidly tightening labour market, which could eventually fuel inflation.
“We had strong headline figures on employment but rise in wages was still well-contained and did not point to a sharp acceleration in inflation,” Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April. That pushed the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.
The strong employment report added to a string of upbeat economic data, including consumer spending, industrial production and construction spending.
They have suggested economic growth was regaining speed early in the second quarter after expanding at a moderate 2.2 percent annualised rate in the January-March period.
Given the strength, the Federal Reserve is all but certain to raise interest rates at its policy meeting next week.
That supported the dollar against other currencies.
The U.S. currency traded at 109.50 yen, having gained 0.6 percent on Friday, extending its rebound from Tuesday’s low of 108.115, its lowest level in over five weeks.
The euro traded at $1.1665, off Thursday’s high of $1.1725. Still, it kept some distance from Tuesday’s 10-month low of $1.1510 as concerns over Italy’s political crisis have eased.
U.S. crude futures fell as low as $65.51 per barrel on Friday, touching their lowest level in almost two months. Rising U.S. crude production and a glut trapped inland due to a lack of pipeline capacity have pressured prices.
U.S. crude futures last traded at $65.71, down 0.15 percent. Global benchmark Brent was down 0.44 percent, at $76.45.
Crude Oil Drops on Wednesday as U.S. Oil Inventories Jump Unexpectedly
Global oil prices fell by 1 percent on Wednesday after data from the U.S. Energy Department showed that the United States oil inventories unexpectedly rose by 4.3 million barrels last week. More than the 1.9 million barrels predicted by experts.
The unexpected increase in United States inventories weighed on crude oil prices on Wednesday, erasing $1.31 or 1.5 percent from Brent crude oil after it rose to a seven-year high on Tuesday. While the U.S West Texas Intermediate (WTI) dipped by $1.09 or 1.3 percent to $83.56 a barrel.
Still, gasoline stocks declined by 2 million barrels across the United States, a situation likely to push pump prices even higher.
“The market continues to deplete Cushing crude oil inventories and that is impacting the Brent-WTI spread and ultimately we’re going to see crude oil diverted from the Permian up to Cushing rather than going to the Gulf Coast,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
However, the shaky COVID-19 recovery in most economies has led to doubts over the sustainability of rising oil prices.
“(Some) countries are falling into an autumn Covid-19 case spike,” said Louise Dickson, senior oil markets analyst at Rystad Energy, “which poses downside risk for oil demand growth in the very near-term and could provide a soft pressure on oil prices.”
Brent Crude Oil Extends Gain to $86.66 a Barrel Amid Tight Supply
Tight global oil supply pushed Brent crude oil, against which Nigeria oil is priced, to a multi-year high of $86.66 per barrel on Monday at 3:30 pm Nigerian time.
Oil price was lifted by rising fuel demand in the United States and tight global supply as economies recover from pandemic-induced slumps.
“The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.
Goldman Sachs on the other hand is predicting a further increase in Brent crude oil to $90 a barrel, citing a strong rebound in global oil demand due to switching from gas to oil. This the bank estimated may contribute about 1 million barrels per day to global oil demand.
The investment bank said it expects oil demand to reach around 100 million barrels per day as consumption in Asia increases after the devastating effect of COVID-19.
“While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast,” Goldman said in a research note dated Oct. 24.
Earlier this month, the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ agreed to continue increasing oil supply by 400,000 bpd a month until April 2022 despite calls for an increase in global oil supplies.
The decision bolstered the price of Brent crude oil above $84 per barrel and expected to push the price even further to $90 a barrel. Low global oil supply amid rising demand for crude oil will continue to support oil prices in the near term.
“Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production,” Goldman Sachs stated.
U.S. and Ghana Inaugurate New $64.7 Million Energy Infrastructure Investment at Pokuase
U.S. Ambassador to Ghana Stephanie Sullivan joined the President of Ghana H.E. Nana Akufo-Addo and other Ghana government officials to formally inaugurate the Pokuase Bulk Supply Point (BSP) in Accra today. The U.S. Millennium Challenge Corporation (MCC) funded the $64.7 million (GH₵ 391.9 million) electrical infrastructure project under the Ghana Power Compact.
“The Pokuase Bulk Supply Point represents sustainable infrastructure investment by the United States with Ghana that will benefit hundreds of thousands of Ghanaians now and into the future,” remarked Ambassador Sullivan at the inaugural event. “It will help deliver more reliable power to the people, places, and businesses of Accra that drive increased economic activity benefitting families, businesses, and communities.”
This represents a flagship investment under the Millennium Challenge Corporation’s Ghana Power Compact. The Pokuase BSP will reduce outages in the power system, help stabilize voltages, and improve the quality and reliability of power supplied to the northern parts of the capital city of Accra. It will also reduce technical losses in the power transmission and distribution system, contributing to the financial viability of the Electricity Company of Ghana (ECG) and the Ghana Grid Company (GRIDCo) in the long term. The Pokuase BSP is now the largest-capacity BSP in Ghana at 580 megavolt amperes (MVA) and will directly benefit 350,000 utility customers.
The Government of Ghana implemented the project through the Millennium Development Authority (MiDA). MiDA formally handed over the new power substation to ECG and GRIDCo in today’s ceremony.
The Pokuase BSP is the first major construction project to be completed under the Ghana Power Compact. The $316 million compact is helping the Government of Ghana improve the power sector through investments that will provide more reliable and affordable electricity to Ghana’s businesses and households. The compact is also funding a BSP at Kasoa and two primary substations at Kanda and Legon, in addition to other power sector investments, energy efficiency programs, and women’s empowerment programs within the power sector. The compact program will officially close on June 6, 2022.
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