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The Silence Of The Turkeys

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By Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA

Even Hannibal Lecter would be “cutting back” at Thanksgiving this year, with the American Farm Bureau Federation calculating that the average components of Thanksgiving dinner are 15% higher this year than 2020. As Americans head of to a price inflated helping of turkey, cranberry sauce and something called a green bean casserole, inflation was very much in the minds of markets from last nights pre-holiday US data dump.

Although Durable Goods disappointed, when automobiles and Boeing aeroplanes are stripped out, the number looked pretty good. Elsewhere, the inflationary signals were more Hannibal, and less Clarice. Personal Income and Personal Spending both rose by more than forecast and the PCE Price Index, a Fed favourite, also exceeded expectations, rising to multi-decade highs on a YoY basis. The FOMC Minutes suggested the doves are in retreat as well. The committee noted that inflationary expectations in the near term could exceed forecasts and that a faster tapering is not out of the question.

It is probably the last item that weighed on markets the most. Once again, currency markets were the pressure relief valve, with the US Dollar spiking once again, helped along by a soggy German IFO, fears of virus lockdowns and ECB officials pouring cold water on rate hikes. Front end yields squeezed higher in response as the FOMC maintained a 2.0% inflation target for the end of 2022. Stock markets ignored the data as investors dipped their toes back into the S&P 500 and Nasdaq waters ahead of the US holiday, unable to resist a cranberry sauce covered buy-the-dip moment.

Another Turkey that benefited from a Silence of the Turkey was Turkey. President Erdogan managed to talk the Turkish Lira 12% lower on Monday, but some silence yesterday saw the Lira close 7.0% higher versus the greenback. I rather suspect the stay is temporary though, and that financial markets intend to keep eating the Lira with some fava beans and a nice chianti once the Thanksgiving leftovers are consumed.

Another emerging market, perhaps more pertinent to Asia, Mexico, also saw plenty of action. The Fed taper-trade has not been kind to the Mexican Peso this week. The Peso finished 1.0% lower at 21.4200 after the Mexican President appointed the Deputy Finance Minister, who has zero experience in central banks or monetary policy, as the next central bank Governor. Nothing beats learning on the job, I guess. As a developing market and a major oil producer with a high beta to the US economy, Mexico could well be a template for many parts of ASEAN and the Mexican Peso is now 3.0% lower for the week. China, once again, set a weaker Yuan fixing today, and with that shield eroding, a taper-trade could be coming to a country near you if you are sitting in Asia.

Two countries that will probably buck that trend in regional Asia are Singapore and South Korea. Singapore is rapidly reopening its economy internationally and recovering domestic demand should outperform the export sector in Q1 2022. The Singapore/Malaysia partial reopening of the land border on November 29th being but one example. Notably, both the Monetary Authority of Singapore and the Bank of Korea have both started tightening monetary policy. The MAS tightened via the NEER recently (look this one up readers, like communicating with Mrs Halley, it’s complicated), and the BOK hiked by another 0.25% to 1.0% this morning. The BOK Governor was hawkish in his outlook, and you can be sure the MAS will be at its next biannual policy decision in Q2 2022. For the rest of Asia though, policy settings look set to remain dovish, and if the Fed taper is accelerated at the December meeting, Asian FX could be in for a torrid finish to the year.

Elsewhere, New Zealand’s Balance of Trade and Australia’s Capex have passed without incident. Rising exports flattered the New Zealand Balance of Trade, while Australian Capex was a Q3 print and thus, was eroded by the New South Wales and Victoria lockdowns. Better times will come as Australia reopens. Both the Australian and New Zealand Dollars continue to look vulnerable though, in no small part due to their hawkishly dovish fence-sitting central banks. Mostly though, their roles as global risk sentiment barometers leave them at the coal-face of the reality of the Fed taper.

Turning to China, the China Securities Journal is running a story that more fiscal stimulus could be on the way. With the PBOC adding liquidity via the repo today and setting a weaker Yuan fix, China markets should have plenty of reasons to be happy. Instead, investors seemed more focused on three other developments. Firstly, indebted property developer Kaisa Group is offering to swap $400 million of Singapore Exchange-listed notes for longer maturities. The wording of the offer feels more like playing Russian roulette with 5 bullets in the 6 chambers. Take the offer or we won’t be able to pay the note when it expires on the 7th of December.

China’s property sector woes haven’t gone away, which leads me to the next point. A group of US Federal Reserve researchers have found substantial downside risks to China’s growth outlook. That won’t bother Beijing, but the banning of 12 more China companies by the US overnight might well do. Finally, spare a thought for JP Morgan overlord, Jamie Dimon, who may be feeling like more Jamie Ma than Jamie Dimon this morning, after joking that a 100-year old JP Morgan would outlast the 100-year old Chinese Communist Party. There’s nothing like being a Dimon in the rough.

Asia equity markets are having a mixed day.

The buy-the-dippers couldn’t help themselves on Wall Street overnight as both the Nasdaq and S&P 500 shrugged of inflationary data retraced some of their losses overnight, helped by a retracement low in 30-year yields, flattening the yield curve. The S&P 500 rose 0.23% while the Nasdaq finished 0.44% higher. The Dow Jones was weighed down by retail names but finished only 0.03 lower. In Asia, futures have climbed once again, the Dow And S&P futures rising 0.30%, with Nasdaq futures 0.15% higher.

With the US on holiday, Asian markets have been left to their own devices leading to a very mixed day across the region. The Nikkei 225 has climbed 0.75% following Wall Street, while the Kospi is 0.40% lower following a BoK rate hike and hawkish comments afterwards. In China, the Shanghai Composite is flat while further US tech company bans see the CSI 300 fall by 0.30%. Hong Kong is remarkably quiet, the Hang Seng up just 0.10% today.

ASEAN markets are equally mixed with Singapore and Kuala Lumpur down 0.15% and Taipei up just 0.10%. Jakarta has climbed 0.55% higher while Bangkok is flat and Manila is 0.65% lower. Australian markets are content to mark time as the side-ways price action this week continues. Both the ASX 200 and All Ordinaries creeping 0.10% higher.

With a US holiday dampening activity today, European markets are likely to struggle once again, as potentially wider virus restrictions across the continent continue to dampen sentiment.

US Dollar rallies once again.

The US Dollar rallied once again overnight after a more hawkish tone to the FOMC Minutes and higher than expected PCE data. Some pre-holiday risk-hedging buying may also have flowed through currency markets with the US Dollar being the market’s favourite way to play the inflation/Fed-taper trade at the moment, especially with the Euro languishing under a virus cloud. The dollar index rose by 0.35% t0 96.86 but has eased back to 96.75 in Asia as US stock index futures continue to rally. With volumes sure to be muted for the rest of the week, the US Dollar remains vulnerable to a downside correction, with the dollar index’s relative strength index (RSI) remaining in very overbought territory. Nevertheless, the index remains a buy-on-dips and could well move through 97.00 into next week.

Interestingly, despite a flattening of the US yield curve overnight, USD/JPY continued to move higher, rising 0.25% to 115.40, which, in my mind, reinforces the upside bias to the cross. Resistance is nearby at 115.50 and a rise through that opens the door to 118.00 in the coming weeks, assuming US yields remain firm. Support remains at 115.00 and 113.50.

EUR/USD retreated in the face of US dollar strength once again overnight, weighed down by dovish ECB officials and virus restriction concerns. The single currency fell 0.43% to 1.1200 overnight before climbing to 1.1415 in Asia today. It remains on track to test 1.1160 this week. That in turn sets up a potential retest of 1.1000. Only a reversal of US yields lower alleviates the negative outlook, although the Covid-19 situation will cap any gains. GBP/USD fell in sympathy, easing 0.37% to 1.3330 before rising to 1.3345 in Asia. Short-covering, like the Euro, is likely to be temporary and Sterling remains vulnerable to a test of 1.3300, being guilty by geographic association with the Euro.

The Australian and New Zealand Dollars eased overnight, AUD/USD falling 0.45% to 0.7200, and NZD/USD tumbling by 1.10% to 0.6870 as markets voiced their disappointment over the 0.25% hike yesterday by the RBNZ. A cautious risk sentiment atmosphere, with the US on holiday, is likely to cap any gains in either currency. Both are in danger of retesting 2021 lows at 0.7100 and 0.6800 respectively with the Kiwi the more vulnerable of the two with no RBNZ meeting until February.

The PBOC set a weaker Yuan fixing at 6.3980 today, adding another CNY 100 billion in liquidity via the repos. However, USD/CNY refuses to take the bait with USD/CNY trading OTC at 6.3880 and remaining anchored below 6.3900. That continues to provide some support to regional Asian currencies, which mostly traded sideways overnight and today. One exception is the Malaysian Ringgit which has fallen 0.40% to 4.2260 today. The Korean Won is holding steady at 1189.90 the Bank of Korea policy hiked rates by 0.25% with a hawkish outlook. USD/Asia dips should find plenty of support if the USD/MXN price action overnight is anything to go by. We could see a couple of days of consolidation though before the US Dollar uptrend resumes next week.

Oil consolidates post-Biden rally.

Oil prices were almost unchanged overnight and remain so in muted Asian trading. Brent crude is trading at $82.35 today, with WTI trading at $78.35 a barrel. US official Crude Inventories rose unexpectedly by 1 million barrels overnight, temporarily capping gains. Prices were supported though, as markets turn their attention to the OPEC+ meeting next week and any possible response to the Biden-led SPR release from across the globe.

The OPEC+ JMMC meets on November 30th, with the full meeting occurring on December 2nd. Chatter is increasing that OPEC+ may less-than-subtly retaliate by slowing the pace of monthly production increases, particularly as their own data indictors a daily surplus in the world by early next year. But the fact that US production has now risen back to 11.5 million barrels a day, and yet oil prices remain near highs, suggests its underlying fundamentals remain strong, especially with OPEC+ compliance above 100%. Notably, the oil futures backwardation curve has flattened as hedgers pile into far-dated contracts, implying that expectations of future oil prices remain well anchored to the higher side.

I do not expect OPEC+ to dial back on production hikes next week in retaliation. The grouping is nothing if not pragmatic. From a geopolitical perspective, rubbing salt in the wounds of their largest customers would be counterproductive although we can expect some peripheral noise from bay boys, Russia and Iran. The high compliance level by OPEC+ implies that the grouping is pumping as fast as it can and will probably struggle to meet increased target allocations anyway with only Saudi Arabia, the UAE and Iraq having swing production capacity. Taken in totality, prices will remain solidly supported on material dips, as we have seen over the past week.

Brent crude is testing resistance at $83.25 a barrel. Support is at $81.80 followed by $78.60 and $5.00 a barrel with the 100-DMA lurking at $76.90. WTI has traced out a triple top around $79.30 a barrel. That is followed by $80.00 and $82.00 a barrel. Support is at $78.00 and $74.85 a barrel, followed by the 100-DMA at $74.35.

Gold consolidates near its weekly lows.

Gold traded sideways overnight, with a slight flattening of the US yield curve allowing it to finish unchanged at $1788.60 an ounce. In Asia, some risk-hedging and a slightly lower US Dollar has seen it climb a modest 0.20% higher to $1792.20 an ounce. In all likelihood, with the US on holiday today and many in the US making a long weekend of it, gold is likely to range between $1780.00 and $1810.00 for the rest of the week.

If US yields remain firm gold will be vulnerable to further losses, and it faces a challenging technical outlook in the short term. The 50-day, 100-day, and 200-day moving averages are clumped together at the present level between $1789.50 and $1793,50 an ounce. That is followed by $1800.00 and $1810.00 an ounce. Support is nearby at $1780.00 an ounce and failure will signal a retest of $1760.00 and $1740.00 an ounce.

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Energy

Sunna Design Wins A €40 Million Contract to Deploy Solar Street Lighting in Rural Togo

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Renewable Energy - Investors King

 Sunna Design, leader in connected solar lighting solutions, has signed a 40 million euro contract with the Government of Togo for the supply and installation over 24 months, and then maintenance over 12 years, of 50,000 intelligent street lamps. This contract, funded by the General Directorate of the French Treasury, is part of the larger project CIZO (“switch on the light” in mina language), which aims at electrifying 500,000 rural households, about 1.5 million inhabitants in 1,000 villages.

A pillar of Togo’s NDP (National Development Plan) deployed by the Togolese presidency, CIZO aims to speed up the modernization of the country, including ensuring universal access to electricity by 2030.

Connected lighting, a key step for rural development

Public lighting grids have an impact on rural communities’ life conditions and strengthening of the economy, by facilitating passenger and goods transport, pedestrian traffic, night work, as well as drastically reducing road accident rates and insecurity.

Solar street lights are autonomous and resilient energy sources, and the only relevant technical-economic solution to bring appropriate public lighting and connection services to off-grid areas. In Togo – where only 8% of the 8.3 million residents are connected to the grid – access to energy is a key factor for economical development. The challenge is also to promote geographical balance, in response to an unbridled urbanization phenomenon in Sub-Saharan Africa, through a planned deployment of sustainable, decentralized and smart infrastructures.

Mila Aziable, Minister Delegate to the President for Energy and Mines, says: “This partnership is the result of a shared ambition and is right in line with the Head of State’s will to achieve accessibility for all in terms of energy. We want to give a new dynamic to rural areas, make them more attractive through our contribution in all priority sectors and those of the local economy, while betting on innovative technologies adapted to our context, our time and our environment. This partnership clearly projects our country in a new dynamic, in the direction of a universal access to energy.”

Franck Riester, Minister Delegate attached to the Minister for Europe and Foreign Affairs, in charge of Foreign Trade and Economic Attractiveness: “We are proud to support Sunna Design’s sustainable public lighting project in Togo, for the benefit of more than 1.5 million inhabitants in rural areas. Under the initiative of the President of the Republic, we made Africa a priority of our international action. Central to our strategy is the will to accompany the development of infrastructures and technologies in a sustainable city. In these fields, our SMEs such as Sunna Design have an internationally recognized expertise. It is together, with our African partners, with the support of the private sector, that we must accompany the continent’s economic development.”

“The trust granted by the Togo Government – a visionary, pioneer and highly demanding partner in the fields of electrification and digitization in rural environment – acknowledges the solidity of Sunna Design’s know-how, as well as our capacity to innovate and accompany our clients over time” says Ignace de Prest, Sunna Design CEO. “That also represents a new step in our company’s transformation, now an essential partner for both urban and rural applications. The impact of the project on populations strengthens the teams’ commitment and our company’s project.” 

A sustainable technological solution with a 12-year guarantee

Consisting of 50,000 connected street lights, Sunna Design’s project notably plans for:

  • Solar lighting roll out in priority areas, identified and investigated beforehand via an unprecedented census study of rural infrastructures, ensuring a measurable economic and social impact of each lighting point on people
  • The use of iSSL+ solutions, all-in-one connected street lights with batteries designed to resist high temperatures, produced by Sunna Design at its “Factory of the Future” labeled industrial site, in the Bordeaux region
  • Operation and maintenance services during 12 years, including participation and strengthening of an ecosystem of local operators, promoting local employment
  • Provision of a transparent platform for monitoring implementation and detailed performance of the solar solutions, accessible to public authorities, private and financial partners

The Togolese Agency for Rural Electrification and Renewable Energies (AT2ER), promoter of the project, was able to validate Sunna Design’s technical lead, robust equipment and track record in Sub-Saharan Africa rural areas, and finalize a unique project including performance and guarantee commitments over time.

Solar lighting related (connected) services

Sunna Design’s know-how extends beyond lighting: its solutions can integrate an ecosystem of IoT applications (connected objects), powered by the clean energy provided by Sunna Design’s intelligent solar batteries.

Autonomous and connected, these applications answer several needs in terms of connectivity, telecommunications and safety. They represent a development focus of the digital economy, another pillar of Togo’s NDP.

This innovative application has already been successfully implemented and tested by Sunna Design in Togo, in the frame of a pilot project operational since 2020, financed by the FASEP fund of the General Directorate of the Treasury. This project will allow the continuation of these experiments in some targeted areas, as well as skill improvement on the “WiFi Grid”, to offer Internet access to villages through the solar street lamps.

“This project will combine decentralized energy and broadband connectivity to provide both public lighting and Internet access to the populations. Thus, it complements our vision towards accelerating the convergence between energy and digital technology, which we will initiate by deploying optical fiber on the electric network” says Cina Lawson, Togolese Minister of Digital Economy and Technological Innovation.

A turnkey project with financing at the heart of Sunna Design’s strategy

This exemplary contract is at the core of Sunna Design’s strategy, aiming at bringing answers to its customers’ long-term issues, in the form of services. Three years after being the first company to offer Solar Lighting as a Service (SLaaS) in the United States, Sunna Design replicates the offer in Africa, and works to replicate it again. This project, carried out in Togo and financed by a direct loan from the General Directorate of the Treasury, proves that the company now has the most advanced range of technical solutions on the market, as well as the most comprehensive portfolio of services (installation, maintenance, operations, financing). This contract also marks the achievement, on a large-scale project, of the vision of solar lighting as a lever of economic and social development in rural environments, inspired by Thomas Samuel, Sunna Design’s founder, who also developed the project.

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Markets

Asian Markets In Wait-And-See Mode

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By Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA

US stock markets roared higher overnight as omicron nerves settled on initial indications that the new variant is very contagious, but less severe symptom-wise. Whether that is the case or not remains to be seen and omicron sentiment will continue driving swings in market direction into next week. It was enough to flush the FOMO gnomes of Wall Street into action though, with stock markets rallying impressively on Wall Street.

Believe it or not, there are other things going on in the world, however. Most immediately, the US releases Non-Farm Payrolls this evening and assuming the omicron news remains less end of the world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself. That may nip the equity rally in the bud, while the US Dollar and US yields could resume rising.

Asian markets are subdued today across asset classes and even US equity futures have edged lower this morning. There is a fair bit of negative news floating around this morning, and Asia as a whole, after a tumultuous week, looks ready to sit out today’s session on the sidelines. The US Non-Farm Payrolls is as good a reason to be cautious as any. Additionally, the US Congress has passed a bill to temporarily fund the US Government into mid-February, but no progress has yet been made on lifting the overall debt limit, which could be hit as early as next December 15th.

Staying with the US, the US SEC has announced a tightening of listing requirements surrounding ownership and the certifying of auditors in overseas territories who audit foreign companies listed on US exchanges. That is directly aimed at China of course, which have no intention of allowing any such thing. Markets are speculating today that the requirements will see an exodus of Chinese companies from the US exchanges. China ride-hailing giant, Didi Global, has announced it will delist from the US after a troubled IPO that also angered the Chinese Government, never a smart business move. It comes after the Grab SPAC IPO flopped yesterday, with a classic stagging of the IPO occurring. Buying the IPO and dumping into the initial rally. That saw Grab finish 20% lower on the first day of trading. Time will tell if Grab’s “patriotic” listing in the US will remotely justify its $40 billion valuation. I suspect not, and that the only winners will be the pre-IPO shareholders.

Nerves continue to swirl in the China property space as well today, with troubled developer Kaisa failing to gain the 95% approval to swap out its maturing $400 million, note due next week, for longer maturities. Default risks have now reached deafening levels for Kaisa who have until December 7th to pay. Additionally, a 30-day grace period on an $82.50 million coupon for Evergrande falls on 6th December next week.

China’s Caixin Services PMI for November fell unexpectedly to 52.1 this morning from 53.8 in October, raising fears that domestic consumption is fading on the Mainland on rising labour and energy costs, as well as selective virus restriction. That has overshadowed improved services PMI data from Japan, Australia, Singapore and Hong Kong. South Korean markets are struggling as well, with virus cases surging, capping gains on the Kospi and also the Won.

Add in the danger of being whip-sawed on random omicron headlines, it’s hardly surprising Asia wants to sit the rest of today out. I expect a similar response from Europe as well. Next week, we see a lot of CPI releases from the region, including China, as well as the Reserve Bank of Australia and Reserve Bank of India policy decisions, plus China trade data. The week after will see a central bank policy meeting frenzy, including the US FOMC, and depending on where the world is with omicron, a number of central banks will struggle to hit the W for Wimp button, regarding their inflation outlook. Volatility has been the winner this week, and I fully expect it to continue to do so through the rest of December.

Asian equities refuse to follow the US lead.

The perpetual mega-bulls of the US stock market had their day in the sun finally overnight as US indexes moved sharply higher as the armchair epidemiologists of day trading decided that omicron, while contagious, will be mild symptomatically. The S&P 500 jumped 1.42% higher, with the Nasdaq rising by 0.83%, while the Dow Jones leapt by 1.83%. In Asia, some short-term profit-taking is evident as the news wires turn slightly sour in Asia, futures on all three indexes edging around 0.15% lower.

With US equity futures markets unable to maintain upward momentum today, tier-1 US data due this evening, virus nerves and concerns reappearing around China property and China US-delisting worries, Asian markets have mostly rallied, but only modestly so. The Nikkei 225 has climbed by 0.35%, with the Kospi climbing by 0.45%. Mainland China sees the Shanghai Composite 0.55% higher, with the CSI 300 rising by 0.35%. Hong Kong is in the red, though, as China property nerves sap sentiment. The Hang Seng has fallen by 0.65%.

Across the region, Singapore is 0.25% higher, with Kuala Lumpur up 0.30%, while Jakarta has fallen by 0.30%. Manila has jumped by 1.05%, with Bangkok down 0.15% and Taipei unchanged for the session. Australian markets have recorded cautious gains, the All Ordinaries edging 0.10% higher and the ASX 200 gaining 0.20%.

European markets will likely unwind some of yesterday’s losses, but gains will be limited ahead of the US Non-Farm Payrolls. As ever this week, the street is one negative omicron headline away from turning sharply lower en masse. If the virus news ticker stays quiet, a higher US Non-Farm Payrolls print could see equity gains capped, with a slightly lower or on target print of 550K, not enough to entirely remove faster Fed-taper fears.

The US Dollar rallies.

With omicron nerves easing overnight the US Dollar reasserted itself, rallying modestly versus major currencies and holding steady in the EM space. The dollar index finished 0.10% higher at 96.12, edging higher to 96.17 in Asia. Notably, both the Australian and New Zealand Dollars, key risk-sentiment barometers fell once again to 2021 lows, hinting that caution remains the key mantra in currency markets still.

EUR/USD has slid back below 1.1300 to 1.1295 and an upbeat US Non-Farm Payrolls tonight will set up a test of 1.1200 again next week. In a similar vein, GBP/USD has moved back through 1.3300 to 1.3390, with a retest of 1.3200 possible. USD/JPY rose as Yen haven buying subsided overnight, climbing to 113.20 this morning. If indeed we are at “peak-omicron,” then this weeks low of 112.50 is likely to be the low for the pair for the foreseeable future.

The EM space was relatively sedate overnight, but the US Dollar has resumed advances once again versus Asia FX today with USD/KRW, USD/IDR and USD/MYR up around 0.20%. A firm Non-Farm Payrolls number tonight will increase the pressure of the Asian currencies, whose monetary policies, buy and large, are not aligned with a Federal Reserve set to increase the pace of its taper.

I expect currency markets to remain subdued into the US tier-1 data. As usual this week, the caveat is omicron. If another negative headline were to hit the wires today, we will likely see US Dollar selling with the Yen and Swiss Franc as the main beneficiaries.

OPEC+ surprises, with conditions.

Oil markets rallied last night despite OPEC+ surprising the markets and the author by deciding to continue their pre-planned 400,000 bpd production increases this month. OPEC+ has left a huge poison pill in their statement, retaining the right to convene an immediate meeting and to change their mind if omicron continues to send oil prices lower. That has made it dangerous to be short at these levels and the net effect was to lift prices higher, after the market sold immediately on the headline, before reading the small print.

Overnight, Brent crude finished 2.25% higher at %70.50 a barrel, while WTI rallied 2.25% to $67.35. In Asia, both contracts have continued to rally, rising 0.50% to $70.85 and $69.70 a barrel. Unless we get a major omicron escalation, I will stick my neck out and say that this week’s lows for Brent and WTI likely represent the lows for the medium-term. The relative strength indexes (RSIs) are still oversold meaning both contracts remain vulnerable to a further short-squeeze.

The overnight lows for Brent at $65.80 and for WTI at $62.50 a barrel form short and medium-term support, and it is unlikely the market will want to test OPEC+’s mettle at this stage. The grouping having shown itself to be relatively immune to pressure from the US President amongst others. That said, virus concerns continue to linger, meaning Brent crude will struggle to recapture $75.00 a barrel, and WTI $70.00 a barrel in the nearer term.

Gold’s standing 8-count continues.

With virus nerves subsiding and the Fed-taper stronger US Dollar story reasserting itself, gold continued to take a standing 8-count, remaining near its weekly lows. Gold fell 0.77% to $1768.25 an ounce overnight, before weekend risk hedging buyers in Asia lifted it back to $1772.50 this morning.

Gold is flirting with its last major support level at $1770.00 an ounce, and failure tonight sets up a possible wave of stop-loss sellers and a retest of $1720.00, possibly as early as next week. Gold’s inability to rally with skyrocketing risk aversion, a weaker US Dollar or weaker US yields remains deeply concerning.

Gold has resistance between $1791.00 and $1792.00 an ounce, where the 50, 100 and 200-day moving averages are clustered. Behind that is $1800.00 and then $1815.00 an ounce.

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Volatility Continues on Omicron Anxiety

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Facebook's "Cool Space" Points to Future of Office Growth

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

European stock markets were back under pressure on Thursday, continuing the seesaw price action we’ve seen all week.

Early signs aren’t promising given the rate of case increases in South Africa and the fact that Omicron is already popping up in numerous other countries. Investors may continue to be attracted to the dips but one thing is clear, rallies so far have been short-lived.

Perhaps they’re hoping for positive news on the vaccine effectiveness against the new strain and taking advantage of these levels before it’s too late. If they don’t get the news they’re hoping for, we could see another sharp move lower.

Oil bounces back as OPEC+ warns of sudden adjustments

It’s been another volatile session in the oil markets as OPEC+ met to decide on output targets for January. As per the previous agreement, the group had intended to increase production by 400,000 barrels per day each month but the coordinated SPR release and Omicron variant news threw a spanner in the works.

It was never likely that the group would retaliate against the SPR release and while many were expecting them to pare back, perhaps postpone, January’s increase in anticipation of an Omicron hit to demand, there’s clearly just not enough information out there at the moment to warrant a knee-jerk response. They bought themselves a couple of extra days but clearly little more is known than earlier this week.

So the decision to stick to planned increases was sensible, as was the caveat that they could make immediate adjustments before the next meeting if warranted. That doesn’t provide much certainty but it’s the flexibility the group needed to remain consistent as they await more data. And they had already planned for surges this winter which also allows them to be patient.

Oil prices fell after the initial decision but rallied again once the clarification was made on adjustments outside of the arranged meetings. With the White House stating that it welcomed the decision and it would still go ahead with the SPR release, crude prices could remain under pressure in the near term until more information on the variant is known.

Gold crumbles after failing to capitalise on rallies

Days of struggling to hold onto gains and generate any momentum above $1,800 is coming back to bite gold as it slips more than 1% on Thursday and tests the lows since mid-October. Higher yields, particularly at the short end, may be responsible for the slump in gold, as central banks prepare to withdraw stimulus and raise rates, despite the threat of Omicron. They don’t really have the flexibility they once did with inflation running so far above target. More lockdowns would be unbearable for central banks, which may be forced to compound the pain in order to contain rising price pressures.

Bitcoin remains under pressure

Bitcoin is under a little pressure again on Thursday as it gets caught up in the wild swings in risk appetite across the broader markets. The price moves in bitcoin have perhaps been a little less volatile than we’re seeing elsewhere, which isn’t something you hear that often, but it has remained under pressure due to it being a high-risk asset. Should the sell-off in risk assets intensify, bitcoin could get hit hard as well. It’s seeing some support around $53,500 for now, with $60,000 capping any rallies.

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