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Market Outlook Jan 28 – Feb 1

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Emerging Markets
  • Market Outlook Jan 28 – Feb 1

This week will set the tone for the rest of the year as investors await Federal Reserve position on rate increase, Italy’s GDP to validate slowdown in Europe’s third-largest  economy, Chinese Purchasing Managers Index to assess the level of global slow down, Australia’s inflation report to see if the improved unemployment rate and 21,600 jobs created pressured prices in December, BOJ monetary policy after lowering inflation projection for 2019 and the number of jobs created in the U.S in January following government shutdown.

The International Monetary Fund lowered its global growth projection for 2019 from 3.7 per cent to 3.5 percent last week, citing trade disputes and slowing growth in China after data showed the economy grew at a 28-year low in 2018. Signalling the effect of trade war on the world’s second-largest economy despite the People’s Bank of China’s stimulus to enhance productivity and sustain growth.

The weaker than expected growth stalled commodity prices – halted crude oil bullish move- as market confidence drop on possible slow down in oil demand. China is the world’s largest importer of crude oil.

Still, despite the increase in global risk, haven assets (currencies) failed to attract enough buyers to sustain 2018 growth momentum as investors fear risks could spread across the financial markets with the slowing growth in Euro-area, Brexit uncertainty, U.S shutdown and Fed wait and see approach.

In Euro-Area, the Bank of Italy cuts its 2019 growth projection for Italy from 1 percent to 0.6 percent, while the European Central Bank maintained current interest rates and warned on rising risks to growth.

“The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility,” Draghi said at a press conference.

The Euro currency dropped to a month-low against the U.S dollar after Mario Draghi, the ECB president, acknowledged that near-term data are likely to be weaker than expected. Further validating global perspective after a series of purchasing managers index showed growth in the region is slowing down. This week investors will look for more clues in the Italian economic report and ECB monetary policy to better assess the level of slowdown in the region.

Crude oil remained in a range ahead of U.S-China meeting this week, a positive outcome should boost oil outlook and support emerging assets. Still, the U.S. Fed’s monetary stance will determine capital inflow into the emerging markets.

 

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

Crude Oil Dips Slightly on Friday Amid Demand Concerns

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Crude oil gains

On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.

Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.

Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.

The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.

This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.

Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.

Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.

While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.

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Commodities

Nigeria’s Petrol Imports Decrease by 1 Billion Litres Following Subsidy Removal

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Ship Aveon Offshore

Nigeria’s monthly petrol imports declined by approximately 1 billion litres following the fuel subsidy removal by President Bola Ahmed Tinubu, the National Bureau of Statistics (NBS) reported.

The NBS findings illuminate the tangible effects of this policy shift on the country’s petroleum importation dynamics.

Prior to the subsidy removal, the NBS report delineated a consistent pattern of petrol imports with quantities ranging between 1.91 billion and 2.29 billion litres from March to May 2023.

However, in the aftermath of Tinubu’s decision, the nation witnessed a notable downturn in petrol imports, with figures plummeting to 1.64 billion litres in June, the first post-subsidy month.

This downward trend persisted in subsequent months, with July recording a further reduction to 1.45 billion litres and August witnessing a significant decline to 1.09 billion litres.

August’s import figures represented a decrease of over 1 billion litres compared to the corresponding period in 2022.

The NBS report underscores the pivotal role of the subsidy removal in reshaping Nigeria’s petrol import landscape with the Nigerian National Petroleum Company emerging as the sole importer of fuel in the current scenario.

Despite higher petrol imports in the first half of 2023 compared to the previous year, the decline in June, July, and August underscores the profound impact of subsidy removal on import dynamics, affirming the NBS’s latest findings.

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Crude Oil

Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO

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Nigeria oil rig

The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.

Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.

Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.

He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.

Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.

The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.

Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.

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