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Is The U.S. Army About To Save The World?

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

An interesting story is making the rounds this morning, suggesting that researchers at the Walter Reed Army Institute of Research have made substantive progress in developing a compound that protects against multiple coronaviruses, including Covid-19. The link to the story is here.

https://www.defenseone.com/technology/2021/12/us-army-creates-single-vaccine-effective-against-all-covid-sars-variants/360089/

and here

https://www.army.mil/article/252890/series_of_preclinical_studies_supports_the_armys_pan_coronavirus_vaccine_development_strategy

with more detail on the preliminary results here

https://eidresearch.org/news/press-release/series-preclinical-studies-supports-armys-pan-coronavirus-vaccine-development

I have deliberately avoided being an armchair virologist or epidemiologist but having been asked non-stop this week from the world’s media as to whether we will have a “Santa Claus” equity rally this year, this seems to be as good a reason to e less Grinch, and more Santa, as any. Bloomberg ran a story into this line of research recently, including the work of Walter Reed, but this seems to be an evolution of that. Nor have I heard of www.defenseone.com who have released the story. I would be remiss in not letting readers know about this potential, in my mind, major development in the quest for a one ring to rule them all vaccine. You should, of course, do your own research as to the veracity of the story and the news organisation running it.

If the above story does have legs, the positive momentum seen in US markets overnight could pick up steam substantially. Overnight, the fast-money headline-chasing FOMO gnomes of Wall Street were hard at work as the omicron headline ticker went quiet (relatively), and President Biden made soothing noises about boosters and a potential rerun at the build back better in January. US bond yields rose as hot money moved out of defensive foxholes, US equities powered higher along with oil, but the US Dollar continued holding steady.

The buy-the-dip strategy remains irresistible to most and I fully acknowledge that it has had a higher efficacy than any vaccine over the last 18 months. However, with pre-holiday liquidity tumbling, and market direction entirely dominated by headline derived volatility, it is probably not wise to get too wedded to “the worst is over just yet. I’ll say is again, volatility is the winner in December, not thematic direction. Catching that dip could easily be a falling knife instead.

Asian markets are taking a much more cautious approach to the schizophrenic fast-money histrionics in New York overnight. It appears that the holiday season and book closing has well and truly arrived here judging by the vol I am seeing this morning. In the same vein, the data calendar is equally as empty in the region today, with only Malaysian Inflation of note. Final reads on UK and US Q3 GDP come out this evening, but the words “Q3” and “final” make them old news.

More interesting will be official US weekly Crude Inventories, with a low print potentially extending oil’s comeback. Notably and ominously, natural gas prices hit record highs in Europe overnight as Russian gas stopped flowing through a major pipeline. Ironically, the US has natural gas coming out of its ears, with prices languishing. Europe may yet pay the price for its strategic ineptitude in Q1 if the winter turns brutal, and that’s without omicron.

With that, I am back to watching the news ticker for clues on market direction, along with a continuing search to secure Brussel sprouts here in Jakarta, as strategic a challenge as any facing the international community.

Asian equities don’t buy the US hype.

US markets were on fire overnight as a slowdown in omicron headlines irresistibly led the fast-money herd into a buy-the-dip frenzy. With pre-holiday season liquidity heightening ranges, US markets soared with the S&P 500 jumping by 1.78%. That was overshadowed by the Nasdaq, which soared 2.40% higher, as the Dow Jones gained an impressive 1.59%. The first sign that this rally is built on eggshells is coming from US futures today though. The S&P 500 and Dow Jones futures have eased by 0.10%, while Nasdaq futures have already given back 0.35%.

With no follow-through on US index futures, Asian markets have rightly adopted a wait-and-see cautious approach today, perhaps tired of the relentless whip-saw price action emanating from New York. Asian markets are mostly higher, but only very moderately so. Even the Nasdaq directional slaves of Tokyo are taking a break today, the Nikkei 225 rising just 0.10%. The South Korean Kospi climbing just 0.15%.

In Mainland China, activity is similarly quiet, the Shanghai Composite is unchanged, while the CSI 300 is just 0.10% higher. Hong Kong has put on a better show, rising by 0.60% thus far.

Singapore has just announced a dialling back of its vaccinated travel lane policies due to omicron, and I have a feeling we will see more in the days ahead. That is likely to weigh on sentiment with the STI now up just 0.10%. By contrast, Kuala Lumpur has risen by 0.40%, thanks to oil’s rally overnight, while Taipei is 0.20% higher. Jakarta has gained 0.25% with Bangkok rising 0.45% and Manila unchanged. Australian markets are in Christmas mode, the All Ordinaries edging 0.20% higher, with the ASX 200 up just 0.10%.

The price action in Asia suggests that European and UK markets are unlikely to follow New York’s lead with the UK Prime Minister apparently due to announce a decision on a post-Christmas circuit breaker decision in the next 48 hours. Surging energy prices in Europe, as well as the evolution of omicron across the Eurozone, will weigh limit gains on the continent.

US Dollar holds steady.

The US Dollar held steady via the dollar index overnight, although the surge in positive sentiment in equity markets saw gains in the Canadian, Australian and New Zealand Dollar risk barometers. The dollar index held steady at 96.48 and I continue waiting for a break or either 96.00 or 97.00 to signal the US Dollars next directional move.

EUR/USD remains steady at 1.1270 today with risks still skewed lower thanks to omicron and energy prices. Failure of 1.1200 signalling a test of 1.1000. Sterling has risen by 0.45% to 1.3250 as the UK PM ruled out pre-Christmas restrictions overnight. USD/JPY has edged higher to 114.10 as US bond yields rose overnight.

The three risk-sentiment amigos, the CAD, AUD, and NZD all staged modest rallies overnight, but still remain near 2021 lows. The omicron flavour of the day will continue to dictate directional moves through the holiday period.

Asian currencies are steady as USD/CNY remains near-unchanged at 6.3725. The firm Chinese Yuan and diminishing holiday season liquidity are dampening activity in the regional Asia FX space, and I expect range trading to dominate over the rest of the week.

Another wild day for oil.

The headless chickens populating oil markets had another day in the sun overnight, sending oil prices rocketing higher after a lower US API Crude Inventory figure, and riding the wave of diminishing virus caution as the news tickers stayed relatively quiet. Tonight’s official US Crude Inventories are expected to fall by 2.5 million barrels. Assuming omicron stays away from its Bad Santa role, a lower number could be the excuse needed in the chicken run to propel prices higher once again.

OPEC+, of course, continues to lurk in the background, and their free option on quickly reigning in production to support prices from the last meeting open should continue to be a warning to overenthusiastic bears. If Brent crude heads towards $65.00 a barrel, I wouldn’t discount OPEC+ stepping in. Given that compliance is over 100%, this would process would be easy to achieve.

Brent crude rose by 2.70% to $74.00 a barrel overnight, climbing slightly to $74.1o in Asia. Brent crude has resistance at $74.40 and then $76.00 a barrel, with support is at $73.25, the 200-DMA. WTI rocketed 3.0% higher to $71.25 a barrel overnight, adding 10 cents to $71.35 in Asia. It has resistance at $73.00 a barrel, with support at $70.55, its 200-DMA. Trading in Asia is reflecting the same cautious approach seen in Asian equity markets today. Headless chickens can run in any direction randomly.

Gold is sleepless in Singapore.

Gold probed $1800.00 an ounce overnight but quickly retreated as US yields rose, finishing almost unchanged at $1789.00 an ounce. Asian trading is moribund, gold edging slightly lower to $1788.50 an ounce as regional markets move into holiday mode.

Gold’s attempts to stage a meaningful recovery continue to disappoint, with traders cutting long positions at the very first sign of trouble intra-day. Gold lacks the momentum, one way or another, to sustain a directional move up or down. Likely, gold will remain a forgotten asset class and face another week of choppy range trading.

Gold has formed a rough double top around the $1815.00 region which will present a formidable barrier t$1840.00. Support lies at $1790.00, followed by $1780.00 an ounce. $1790.00 to $1815.00 could well be the range for the week.

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Markets

A Wild 24 Hours

Stock markets aren’t faring too badly on Thursday, which is arguably surprising considering how eventful the last 24 hours have been.

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Traders Wall Street

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

Stock markets aren’t faring too badly on Thursday, which is arguably surprising considering how eventful the last 24 hours have been.

It’s hard to know where to start on a day like today. While the Fed’s hawkish rate hike is probably the dominant driver in the broader markets, the dangerous nuclear threats from the Kremlin are causing quite a stir and then there’s the small matter of Japan’s first FX intervention in 24 years which has triggered some huge moves in the yen.

Fed resists the urge

The Fed’s decision to hike by 75 basis points, despite the obvious temptation to opt for a full percentage point, was probably sensible given the scale of tightening we’ve already seen this year. It now expects to go further with rates, with markets pricing in another 125 basis points this year and 25 next, although as we’ve seen throughout the year, that will probably change as we get more data. In much the same way that investors got too excited by the July inflation data, it may prove to be the case that the August setback isn’t as bad as feared. In such uncertain times, overreaction is becoming the norm.

Japan finally intervenes as BoJ stands firm

The Bank of Japan is standing firm on its policy stance, despite the widening differential with the US and others. That has put considerable pressure on the currency this year, so much so that the Ministry of Finance completed its first intervention in 24 years as the yen neared 146 against the dollar. The move on the back of that was quite something and it may not be the last. Interestingly, the level the pair reached was only a little shy of that in 1998 when it last intervened, prompting further speculation about whether this is the unofficial line in the sand. That has been denied but the rate check also occurred around 145 so perhaps there is more to it than just volatility. It will be interesting to see how keen traders are to put that to the test in future.

BoE continues with conservative approach

The Bank of England raised rates by 50 basis points today; a move some may view as a little conservative under the circumstances. Of course, that’s an accusation that’s been levelled against the MPC a lot this year as it proceeded with 25 basis point hikes while others were accelerating them. But without the benefit of new economic projections and details of tomorrow’s mini-budget, the decision is that much harder as was evident from the vote split. Perhaps the BoE will regret passing up another opportunity to ramp up the pace of tightening, with inflation now seen peaking just below 11% in October and remaining in double-digits for a few months after. But with the economy potentially already in recession, the Bank – like many others – finds itself between a rock and a hard place.

CBRT keeps cutting despite soaring inflation

One central bank that isn’t concerned about the consequences of its actions is the CBRT. It cut rates by another 100 basis points today despite inflation sitting above 80% which sent the lira to a new record low against the dollar. You have to wonder what it will take for the central bank to accept that its experiment – at the worst possible time – has failed but clearly, we’re not nearly at that point. More pain to come, it seems.

Franc slides as SNB hikes by 75 basis points

The Swiss National Bank hiked rates by 75 basis points today which was at the lower end of expectations. The franc tumbled in the aftermath of the decision, slipping more than 1.5% against the dollar, euro and pound. That’s despite Chair Thomas Jordan hinting at more to come including potentially at an unscheduled meeting, should conditions warrant such action. He also suggested that FX interventions could take place as necessary – which is obviously a hot topic today – while also stressing that the stronger franc has actually aided the fight against inflation.

Oil rises amid more nuclear threats

Oil prices are rising again on Thursday after giving up initial gains a day earlier. Nuclear threats are increasingly becoming the norm from the Kremlin but energy prices remain very sensitive to them. Still, crude isn’t trading too far from the six-month lows and another round of aggressive tightening around the world today won’t be helping, as economic fears continue to weigh on demand prospects. A move below those lows – around $86-88 in Brent – could signal much gloomier economic forecasts and frustrate OPEC+ which has stated it could announce further output cuts, even before the next scheduled meeting.

Choppy trading in gold as the dollar pares gains

Gold has been quite choppy since breaking below $1,680 last week. It has fluctuated largely between here and $1,650 since then and even briefly moved above in the aftermath of the Fed decision. Even today, it slipped back towards the lower end of that range but has since recovered back to the upper end as the dollar has erased gains. Perhaps that’s a sign of a floor appearing, with the market now having priced in a large amount of tightening. I’m not convinced at this stage as the break of $1,680 appeared very significant but time will tell. A pull back in the dollar could certainly facilitate such a recovery in gold.

Bitcoin seeing strong support

Bitcoin is managing small gains after slipping earlier in the day. Once more, it slipped back towards $18,000 where it ran into some support. With the summer lows around $17,500 just a little below again, this is a huge test for bitcoin and cryptos overall. If risk appetite doesn’t improve, that support is at risk of breaking, with further support then potentially appearing around $16,000.

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Energy

D.Light Launches Solar Products in Nigeria to Transform Lives of Low-Income Individuals

D.Light has officially launched into the Nigerian market to transform the lives of low-income individuals

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Renewable Energy - Investors King

D.Light, a pioneering manufacturer and provider of Solar products has officially launched into the Nigerian market to transform the lives of low-income individuals.

This expansion into Nigeria is coming after the company secured a $50 million investment some months ago to better focus on the renewable energy space and support its expansion in Africa.

Speaking at the launch, Co-founder and President Sam Goldman said “The reality is that we are still so far from where we need to be in terms of our population and their needs.

“Hence our target market is the low-income individuals; not just the rural communities which is why the company adopts the ‘pay-as-you-go” model. Access to sustainable energy will not be possible unless we solve the funding problem.

Also speaking about D.light’s mission in Nigeria and across the globe, the chairman of the board, Mrs. Ibukun Awosika stated that the company seeks to transform the lives of a lot of people on earth, as well as bridge the gap to ensure inclusiveness for everyone.

Her words, “Our vision is to change the lives of billions of people on the face of the earth who are crying for equity to have a chance to live a better life.

“We are in Nigeria to transform Africa one community at a time, and this is our driving force she said”.

The co-founder and CEO, Ned Tozun explained that d.light has employed over 6,000 people across Africa.,

He said, “Our target is lower-income individuals. There is a sun in the village and the cities, so when we just say a rural market, it is not.

“The guy who lives in Lagos, but doesn’t have a generator shouldn’t even use a generator if he can have a solar solution. Why? Because of environmental sustainability.

“So, when you think about all the ESG matters, you will encourage more people to use alternate sources of energy rather than polluting sources of energy and that helps everywhere; whether you are in the city or the village. It is about lower income.

“What we’ve done is to think of the entire problem chain. Firstly, innovate the product. Two, how do you deliver it? Deliver it to them at the most reasonable price. Thirdly, make sure it’s affordable for them”.

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Crude Oil

Crude Oil Pulls Back to $91 a Barrel on Monday

Despite the strong U.S. dollar and slowing demand for crude oil, the price of the commodity pulled back on Monday during the New York trading session.

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Crude oil - Investors King

Despite the strong U.S. dollar and slowing demand for crude oil, the price of the commodity pulled back on Monday during the New York trading session.

Brent crude oil, against which Nigerian oil is priced, pulled back from $88 a barrel to $91.52 at 5:31 pm Nigerian time. While the U.S. West Texas Intermediate oil pared losses to $84.75 a barrel, up from $81.65 it traded in the early hours of the day.

The price of the commodity traded lower in the early hours of the day on concerns that central banks will raise interest rates to curb inflationary pressures, a move expected to further hurt demand for crude oil and support the U.S. Dollar’s attractiveness to foreign investors.

“Ideas that continued rate increases will slow world crude demand and keep upward pressure on the U.S. Dollar is triggering long liquidation in both crude and natural gas this morning,” said Dennis Kissler, senior vice president of trading at BOK Financial.

While the pullback may not last given a series of factors impacting the outlook of the commodity, supply remained tight and will continue to dictate prices for the remaining part of the year, especially with the Organization of Petroleum Exporting Countries and allies led by Russia, known as OPEC+ still struggling to up production.

The cartel fell short in August, missing its target by 3.583 million barrels per day (mbpd) following a 2.892 mbpd missed in July.

“The market still has the start of European sanctions on Russian oil hanging over it. As supply is disrupted in early December, the market is unlikely to see any quick response from U.S. producers,” ANZ analysts said.

However, the gradual easing of COVID-19 restrictions in China, the largest importer of the commodity, may help bolster prices.

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