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Stocks Turn Mixed, Dollar Faces Rate Hike Uncertainty

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  • Stocks Turn Mixed, Dollar Faces Rate Hike Uncertainty

Share markets turned mixed in Asia on Monday amid conflicting signals on the prospects for a truce in the Sino-U.S. trade dispute, while the Federal Reserve’s newly-found concerns over the global economy constrained the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan dithered either side of flat through a sluggish session. Chinese blue chips manage to add 0.5 percent, as did Japan’s Nikkei.

But E-Mini futures for the S&P 500 slipped 0.36 percent and spread betters pointed to modest opening losses for the major European bourses.

Wall Street had firmed on Friday after U.S. President Donald Trump said that he may not impose more tariffs on Chinese goods after Beijing sent a list of measures it was willing to take to resolve trade tensions.

The comment stoked speculation of a deal when Trump meets Chinese President Xi Jinping on the sidelines of a G20 summit in Argentina later this month.

However, Sino-U.S. tensions were clearly on display at an APEC meeting in Papua New Guinea over the weekend, where leaders failed to agree on a communique for the first time ever.

U.S. Vice President Mike Pence said in a blunt speech that there would be no end to U.S. tariffs on $250 billion of Chinese goods until China changed its ways.

“The comments from Trump were seen as offering a glimmer of hope that further tariff action could be held in abeyance,” said NAB’s head of FX strategy, Ray Attrill.

“The exchange of barbs between Pence and Chinese President Xi Jinping in PNG on the weekend continues to suggest this is unlikely.”

SENSING A FED SHIFT
Also uncertain was the outlook for U.S. interest rates.

Federal Reserve policymakers are still signaling rate increases ahead but also sounded more concerned about a potential global slowdown, leading markets to suspect the tightening cycle may not have much further to run.

“Fed officials are having an easier time showing a slightly less hawkish leaning by noting the emerging global slowdown,” said Deutsche Bank’s macro strategist Alan Ruskin.

“It’s undercutting expectations of rate hikes moving above ‘neutral’,” which the Fed has nominated as between 2.5 and 3 percent. “This shift in tone is subtle, but fits with the more bullish bond market tone of late, and is starting to have a material impact on the dollar.”

That will focus attention on an appearance by New York Fed President John Williams later on Monday to see if he echoes the same theme.

Investors have already lengthened the odds on further hikes, with a December move now priced at 73 percent, down from over 90 percent. Futures imply rates around 2.74 percent for the end of next year, compared to 2.93 percent early this month.

Yields on U.S. 10-year paper have duly declined to 3.06 percent, from a recent top of 3.25 percent.

The dollar followed to hover at 96.509 against a basket of currencies, down from a peak of 97.693. The euro was parked at $1.1400, while the dollar backed off to 112.72 yen.

Sterling remained vulnerable at $1.2826 after political turmoil over Brexit caused steep losses last week.

British Prime Minister Theresa May said on Sunday that toppling her would risk delaying Brexit as she faces the possibility of a leadership challenge from within her own party.

With both pro-EU and pro-Brexit lawmakers unhappy with the draft agreement, it is not clear she will be able to win the backing of parliament, raising the risk Britain leaves the EU without a deal.

In commodity markets, gold found support from the drop in the dollar and held at $1,1220.19.

Oil prices suffered their sixth straight week of losses last week, but have found some aid from expectations the Organization of the Petroleum Exporting Countries would cut output.

Brent crude was up 54 cents at $67.30 a barrel, while U.S. crude gained 70 cents to $57.16.

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

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand

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Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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