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Fed Announces Unlimited Bond Buying Program to Support Americans

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  • Fed Announces Unlimited Bond Buying Program to Support Americans

The US Federal Reserve on Monday announced it will commence a bond-buying program to mitigate the impact of the coronavirus on businesses, investors and families across the country as experts fear the pandemic could plunge the nation into depression along with the rest of the world.

The central bank had lowered interest rates to zero a week ago to support employment and stabilise prices, however, the fast-spreading COVID-19 differ such meagre move as the bearish trend continues across every sector, forcing the fed to announce it would commence an unlimited bond-buying program to encourage financial institutions to loan money to small businesses looking to support activities amid almost zero movements.

Bond buying program is a central bank program of buying debt to encourage investors and financial institutions to loan money to small businesses during a tough economic period. The central bank’s unlimited bond-buying program means it will buy unlimited debt from the financial institutions, hence bearing the entire risk.

This was after President Trump’s almost $2 trillion stimulus package failed to get timely approval at the Senate, leaving both the Central Bank and Presidency to seek an alternative as the nation’s coronavirus cases rose above 35,000 this week.

Fed Chair, Jerome Powell, during a conference, said aggressive efforts must be taken across both the private and public sectors to curb the impact of the pandemic.

“Economic policy experts must do what we can to ease hardship caused by the disruption to the economy,” Powell said in a 42-minute conference call Sunday evening. “We are prepared to use our full range of tools to support the flow of credit to households and businesses.”

It is unclear if the measures will be enough to curb the impact of the pandemic without a viable cure, especially after the number of confirmed cases rose exponentially in the world’s largest economy.

During the last economic recession, the Fed purchased bonds of almost $4 trillion through a program called quantitative easing to stimulate the economy. Experts are saying the present move, unlimited bond-buying program, could dwarf that number given the current situation.

While the stimulus failed to lift the market on Monday, it bolstered outlook on Tuesday as Wall Street and crude oil rose by at least 4 percent during the early hours of trading.

This may be because other central banks across the world have also commenced stimulus to mitigate risk and instituted measures to curb the spread of the coronavirus pandemic.

“Today there is a strong recovery connected to the move that the Fed has introduced this massive weapon,” said Francois Savary, CIO of wealth manager Prime Partners, adding the Fed needed to prioritize fixing the seize-ups in funding markets.

“The key issue at the end of the day is that we need to deal with a credit markets that is completely closed. First they needed to stop this increase in bond yields… second, they needed to make sure that there is a return of liquidity in the credit then it will be equities – in that sequence.”

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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