Connect with us

Markets

Wall Street Set for a Steady Open, COVID Treatments Purchases Boost Sentiment

Published

on

COVID-19 Vaccine - Investors King

By Edward Moya

US stocks were headed for a flat open, following efforts from the US and UK to secure COVID treatments. Trading volumes will continue to fall heading into the holiday weekend, but risk appetite will struggle to deliver a significant stock market rally as the Omicron variant still poses a major risk for many healthcare systems. 

US Treasury yields inched higher with the yield curve most likely waiting until the New Year before steepening.

COVID

The next battle in the war against COVID has both the US and UK rushing to secure supplies in COVID treatments.  The Biden administration is expected to acquire 4 million courses of COVID-19 treatments by the end of January, while the UK secured 1.75 million courses of Merck’s COVID pill and 2.5 million courses of Pfizer’s COVID treatment.  Omicron has shown that unvaccinated individuals are still a significant portion of the population amongst heavily vaccinated countries and that hospital capacity is rapidly disappearing.  Germany is concerned over the current surge could eventually test their healthcare capacity.

In the US, a return to lockdowns seen earlier in the pandemic are unlikely, but the US consumer will be weaker as many Americans won’t have the same benefits if their jobs have tentative closures.

Madrid is battling a record number of daily COVID infections and could face similar restrictions announced earlier in the week in Catalonia.  China’s Xi’an reported 52 Covid cases and that will likely lead to further restrictive measures.

The annual Consumer Electronic Show (CES) in Las Vegas is still going to happen, but many key players are pulling out.  The heavily anticipated event that unveils the latest innovation in tech will not see Amazon, Facebook, Twitter, and Pinterest. Earlier in the week, the World Economic Forum postponed the Davos meeting.

The world wants to return to normal, but a return to convention centers and annual showcases will have to wait until after the Christmas surge is over in late January.

US Data

The final reading of third quarter GDP saw upside revisions across the board, with the headline revised higher from 2.1% to 2.3%.  Personal consumption improved from the preliminary 1.7% reading to 2.0%, while pricing readings edged higher.  This data was old but did confirm the narrative of growth remaining strong and pricing pressures still are approaching their peak.

The Chicago Fed National Activity index declined more than expected as production and employment indicators decelerated.

Czech

The Czech Central Bank (CNB) is aggressively tackling inflation after surprising FX traders with another larger-than-expected rate hike.  The benchmark rate rose 100 basis points to 3.75%, 25 basis points more than the consensus estimate.  The Czech koruna rallied against the dollar and little changed against the euro.

Oil

Crude prices are little changed as traders refuse to put on any major positions as too much uncertainty persists with the short-term crude demand outlook and while trading volumes continue to fall leading up to the holidays.  A force majeure from a key Nigerian export terminal and a weaker dollar have provided some support for oil prices.

The omicron variant could still lead to more restrictive measures across Europe and Asia, but prices won’t break since OPEC+ can easily adjust their production levels.  Oil prices seem like they could go much higher in the New Year once the demand outlook is beyond the current omicron wave.

Gold

Gold prices edged higher as Wall Street remains fixated over the growing list of short-term risks.  Omicron remains the focus for most traders and that should support gold prices to remain close to the $1800 level.  The dollar should start to trade relatively flat into year end as quantitative tightening by the Fed has mostly been priced in.

Gold dipped after a better-than-expected final reading of third quarter GDP, that showed slightly more inflation and economic growth.

Cryptos

Bitcoin and Ethereum have both entered holiday mode and continue to consolidate around key technical levels.  The headlines have not been inspiring to suggest a breakout could be imminent.  Ethereum’s micro futures contracts on the CME are off to a lackluster start.  Despite Ether being all the buzz for the next wave of crypto investors, the uptick with micro ether futures is disappointing as only 115,000 contracts traded in the two weeks to December 17th.

Bitcoin continues to face a wall at the $50,000 level and until that level is breached, speculators may remain on the sidelines.

Continue Reading
Comments

Markets

Lacking Direction

Equity markets are lacking any real direction in Asia and that appears to be carrying into the European session as well.

Published

on

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

Equity markets are lacking any real direction in Asia and that appears to be carrying into the European session as well.

Europe is seeing minor losses on the open, offsetting some of the small gains in choppy trade at the start of the week. This follows a similarly choppy session in the US on Monday as the Dow flirted with exiting correction territory and the Nasdaq bear market territory.

We may have reached a point in which investors need to decide whether they truly buy into the recovery/no recession narrative or not. That is what appears to have fueled the recovery we’ve seen in equity markets despite the fact that inflation hasn’t even started falling, central banks are still hiking aggressively and recession is on the horizon for many.

It’s time to decide whether this is just a substantial bear market rally or a genuine view that the economic outlook is far less downbeat than many fear. If equity markets are going to push on from here, it must be based on the latter which I’m sure many would welcome but perhaps more through hope than expectation.

Don’t get me wrong, the US in particular still has plenty of reason to be encouraged. The data on Friday highlighted once more just how hot the labour market still is and the consumer is still in a very healthy position. But there are pockets of weakness as well and unless inflation starts to subside, those areas of strength will start to crack.

The inflation data on Wednesday could effectively set the mood for the rest of the summer. That seems quite dramatic but if we fail to see a drop in the headline rate, considering the acceleration we’re expected to see in the core, it could really take the wind out of the sails of stock markets as it would be very difficult for the Fed to then hike by anything less than 75 basis points in September.

Of course, there will be one further labour market and inflation report before the next meeting which will also have a big role to play. But the July data will be very difficult to ignore. If the rally is going to continue, we may need to see a deceleration in the headline rate at a minimum, perhaps even a surprise decline at the core level as well. It’s no wonder we’re seeing so much caution this week.

Oil edges lower as Vienna talks conclude

Oil prices are marginally lower on Tuesday after recovering slightly at the start of the week. All of the talk of recession has caught up with crude prices over the summer, forcing a substantial correction that will be welcomed by those looking on in horror as they fill their cars.

The question is how sustainable $90 oil is when the market remains very tight and OPEC+ is only willing to make small moves in order to address it. It’s comforting to know that Saudi Arabia and the UAE have spare capacity in case of emergency but I’m sure most would rather they actually use some of it considering many countries are facing a cost-of-living recession. ​

Nuclear deal talks in Vienna have concluded, with the EU suggesting a final text will now be put forward for the US and Iran to either agree on or reject. I’m not sure traders are particularly hopeful considering how long it’s taken to get to this point and with there still reportedly being points of contention. An agreement could ease further pressure on oil prices, the extent of which will depend on how quickly the country could then flood the market with additional crude.

Gold eyeing CPI data for breakout catalyst

Gold continues to trade around its recent highs ahead of Wednesday’s inflation report, with a softer dollar on the back of lower yields on Monday supporting the rally once more. The yellow metal continues to see significant resistance around $1,780-1,800 and we may continue to see that in the run-up to the CPI release. A softer inflation number tomorrow, particularly on the core side, could be the catalyst for a breakout to the upside while a stronger number could put $1,800 out of reach for the foreseeable future.

Bitcoin rallies losing momentum

Bitcoin is not generating the same momentum in its rallies in recent weeks, as it continues to run into strong resistance on approach to $25,000. In much the same way that US stock markets are lingering around potentially important levels ahead of the inflation data, we could see bitcoin behaving in a similar manner. A weaker inflation reading could be the catalyst it needs to break $25,000 and set its sights on the $28,000-32,000 region once more, where it hasn’t traded since the early part of the summer.

Continue Reading

Energy

Nigeria Loses N184 Billion to Gas Flaring in H1 2022

Nigeria lost N184 billion to gas flaring in the first half (H1) of 2022, the Nigerian Oil Spill Monitor.

Published

on

Oil and Gas

Nigeria, Africa’s largest economy, lost N184 billion to gas flaring in the first half (H1) of 2022, the Nigerian Oil Spill Monitor, a unit under the Nigerian Oil Spill Detection and Response Agency (NOSDRA), reported on Sunday.

Despite Nigeria’s huge gas deposits, Africa’s largest economy continues to struggle with the necessary infrastructure needed to convert gas flaring to useful natural liquified gas. In the last 18 months, Nigeria has lost almost a trillion Naira in gas value.

The report showed that Nigeria lost a total sum of N707 billion in 2021 alone while another N184 billion was lost in the first half of 2022.

NOSDRA report noted that gas companies operating in the country flared 126 billion standard cubic feet (SCF) of gas in the first six months of 2022, resulting in $441.2 million or N188.887 billion (using the I&E exchange rate) lost.

Further analysis of the report showed that oil firms operating in the offshore oilfields flared 62.2 billion SCF of gas valued at $217.6 million in the first half of 2022. However, companies operating onshore flared a total of 63.9 billion SCF, estimated at $223.6 million.

Speaking on the situation, Prof. Olalekan Olafuyi, the Chairman of the Society of Petroleum Engineers (SPE), Nigeria Council, in an interview on Sunday, said the Federal Government is working on raising gas flaring penalties to further compel oil companies operating in the country to comply with the existing gas policy.

He said “We are working closely with the Nigerian Upstream Petroleum Regulatory Commission, and I can categorically say that companies who flare gas will now pay more than those utilising it. So, it will be to their advantage to start thinking of ways to utilise their gas instead of flaring them.”

Presently, the federal government imposed a penalty of $2 on 1000 SCF of gas flared by oil companies producing above 10,000 barrels per day (bpd). While companies producing less than 10,000 bpd are fined $0.5 per 1000 scf of gas flared.

Even though Olafuyi did not state how much increase the new rate would attract, he said the Federal Government is working with the Nigerian Upstream Petroleum Regulatory Commission (BUPRC) to devise a suitable penalty increase.

Continue Reading

Crude Oil

Oil Drops to $93.32 a Barrel on Monday

Oil prices declined on Monday amid concerns over the recession and the drop in crude oil imports in China, the world’s largest importer of the commodity.

Published

on

Oil - Investors King

Oil prices declined on Monday amid concerns over the recession and the drop in crude oil imports in China, the world’s largest importer of the commodity.

Brent crude oil, the international benchmark for Nigerian oil, dropped to $93.32 per barrel at 12:47 pm Nigerian time, down from $96.06 a barrel it attained during the Asian trading session.

U.S. West Texas Intermediate oil also depreciated from $89.47 a barrel to $87.45.

China, the world’s top crude importer, imported 8.79 million barrels per day (bpd) of crude in July, up from a four-year low in June, but still 9.5% lower than a year ago, customs data showed.

Chinese refiners drew down stockpiles amid high crude prices and weak domestic margins even as the country’s overall exports gained momentum.

Reflecting lower U.S. gasoline demand, and as China’s zero-Covid strategy pushes recovery further out, ANZ revised down its oil demand forecasts for 2022 and 2023 by 300,000 bpd and 500,000 bpd, respectively.

Oil demand for 2022 is now estimated to rise by 1.8 million bpd year-on-year and settle at 99.7 million bpd, just short of pre-pandemic highs, the bank said.

Russian crude and oil products exports continued to flow despite an impending embargo from the European Union that will take effect on Dec. 5.

In the United States, energy firms cut the number of oil rigs by the most last week since September, the first drop in 10 weeks.

The U.S. clean energy sector received a boost after the Senate on Sunday passed a sweeping $430 billion bill intended to fight climate change, among other issues.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending