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EMERGING MARKETS: Trade Woes Knock Emerging Stocks, Currencies Get Reprieve

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Emerging Markets
  • EMERGING MARKETS: Trade Woes Knock Emerging Stocks, Currencies Get Reprieve

Emerging stocks flirted with fresh 14-month lows on Thursday amid escalating trade tensions, though many battered currencies took a breather after days of hefty losses with South Africa’s rand strengthening nearly 1 percent.

MSCI’s emerging market equity benchmark fell 0.4 percent to a three-week low in its seventh straight day in the red, edging to within a whisker of its lowest level since July 2017 and firmly back in bear territory. The index has lost now nearly 21 percent from its January peak.

Steep losses in Asia dragged the benchmark lower, with Hong Kong and China mainland stocks falling around 1 percent on concerns that U.S. President Donald Trump’s administration could slap tariffs on an additional $200 billion worth of Chinese products following the end of its consultation period later in the day.

“That, then, could lead to new China tariffs being announced shortly – and China in turn stands ready to retaliate,” Bas van Geffen at Rabobank wrote in a note to clients. “This would certainly be bad news for equities globally, as it would elevate the trade conflict to a whole new level. Fears of a U.S. tariffs announcement are adding to the EM selloff.”

Meanwhile emerging market currencies were taking a breather following hefty losses in recent days. Emerging market currencies have been battered after a full blown currency crisis engulfed Turkey and the crisis in Argentina sent tremors through developing economies.

RAND STEADIES

South Africa’s rand strengthened 0.9 percent against the dollar after President Cyril Ramaphosa repeated promises for a stimulus package to reignite growth following data earlier in the week showing the continent’s most industrialised economy unexpectedly dipped into recession in the second quarter – its first since 2009.

Adding to momentum was data showing that South Africa’s current account deficit narrowed to 3.3 percent of gross domestic product in the second quarter.

However, ratings agency Moody’s warned that the slump into recession exacerbated fiscal and monetary challenges for South Africa, and was a “credit negative”. The rand has tumbled 20 percent since the start of the year.

Turkey’s lira, which has dropped more than 40 percent since the start of the year, strengthened 0.5 percent. Ankara also said it had appointed two deputies to the Ministry of Treasury and Finance led by President Tayyip Erdogan’s son-in-law Berat Albayrak.

Mexico’s peso matched those gains, though Russia’s rouble was treading water as the economy ministry cut its economic growth forecast and with the threat of possible new sanctions from the U.S. looming large.

However, it seemed there was little let-up of pressure on the horizon for both local and external debt markets.

The premium of emerging market debt over safe-haven U.S. treasuries as measured by the JP Morgan EMBI Global index closed at its highest in more than two years on Wednesday. Meanwhile the VanEck ETF, which replicates JP Morgan’s local currency emerging bond index GBI EM, touched a fresh record low in its sixth straight day in the red.

“Seeing EM sovereign-U.S. credit spread differentials at their widest suggests that market tension is on the rise,” Morgan Stanley’s Hans Redeker wrote in a note to clients.

“For EM spreads to tighten, liquidity conditions need to improve, but we currently see no indication of this.”

In central Europe, the Serb dinar firmed a touch ahead of a central bank meeting where policy makers are expected to keep the region’s highest benchmark rate unchanged at 3 percent rather than cutting it further.

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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