Connect with us

Markets

Omicron Turns From Bad Santa To Good Santa

Published

on

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

A cocktail containing better US Q3 GDP data, along with positive omicron headlines further inoculated financial markets against a year-end sell-off overnight. Mostly, it was Scottish and Imperial College London’s studies that back up preliminary South African data, suggesting that omicron is far more contagious than delta, but much less likely to put you in hospital. Of course, with case numbers exploding across the world, the sheer volume of omicron cases means that for health systems, omicron could mathematically and statistically be a zero-sum game versus omicron.

Markets don’t concern themselves with these sorts of “slapping you in the face” details if the headlines agree with the narrative that they want to hear. Unsurprisingly in New York, therefore, equities powered higher along with oil, and the US Dollar staged a sharp retreat as defensive positioning was unwound, although the bond market was sharply unchanged. So, markets and investors will get their “Santa/Christmas rally” by the looks of it. On a personal level, it is the only question I have been asked all week. It has become so annoying that I have contemplated breaking wrapped Christmas presents and taking scissors to soft toys.

From here, we are probably going to need some more omicron headlines along the lines of hospitalisations and deaths soar with total cases to turn the markets from their perpetual, central bank QE-induced perpetual buy-the-dip in everything course. The data calendar in the US sees jobless claims, durable goods and personal spending and income released tonight, the last major dataset to be released globally for this year. It would take a serious negative divergence by the data to upset the applecart of bulls, and likely only temporarily.

Thereafter, we will be left to the tender mercies of omicron headlines until the new year, and even that potency now appears to be fading. Only Vladimir Putin deciding to holiday over the Ukrainian border changes that narrative. Think much lower equities, lower everything in Europe, $150 oil, a much higher Dollar and Swiss Franc with plunging treasury yields. But I don’t want to be the Grinch-ski who stole Christmas.

In Asia, the calendar today is dead with only Singapore Inflation for November to relieve the monotony. Higher than expected prints could put another tightening by the MAS back on the table and see local equity weakness. Otherwise, we are in a hurry-up-and-wait mode in Asia today.

Asian equities drift higher on sympathy trade.

Overnight, the buy-the-dip FOMO gnomes had another day in the sun on Wall Street, thanks to decent US GDP data and indications that omicron is less symptomatically aggressive. Record highs were in sight once again as the S&P 500 jumped 1.02%, the Nasdaq powered 1.18% higher, and the Dow Jones gained a healthy 0.74%. In Asia, futures on all three have maintained their gains, drifting around 0.10% higher today.

The overnight rally on Wall Street has dragged seemingly still reluctant markets in Asia higher today as well, with regional bourses still refusing to fully buy into the hype from the US. The Nikkei 225 is 0.10% higher, despite an upward revision to Japan’s 2022 GDP forecast by the government. South Korea’s Kospi is 0.35% higher.

In China, a lockdown of the city of Xian to combat a virus outbreak has had no noticeable impact on local equity markets, which are recording modest gains. The Shanghai Composite and CSI 300 have gained 0.20%. Hong Kong, meanwhile, has posted a somewhat healthier gain of 0.45%.

Singapore has shrugged of VTL restrictions to gain 0.25%, with Kuala Lumpur rising by 0.40%, and Taipei gaining 0.60%. Jakarta is 0.35% higher with Bangkok rising by 0.65% and Manila jumping 1.10% higher. Australian markets have also risen in sympathy, the ASX 200 and All Ordinaries gaining 0.35%.

That all set the scene for a modest rally in European markets this afternoon, although the UK’s CBI Monthly Growth Indicator, and UK Car Production released this morning, both disappointed and may cap sentiment in London this afternoon. It would take some huge downside misses from the US data dump this evening to unsettle what appears to be an inevitable Santa rally on Wall Street into the end of the week.

US Dollar falls hard on surging virus sentiment.

The US Dollar was in full retreat overnight, mostly due to reports that omicron presents fewer hospitalisation risks. That saw sentiment swing even more strongly back to the global recovery trade and saw the dollar index collapse by 0.37% to 96.12, easing still more in Asia to 96.03. I am adjusting my downside support level to 95.85 on the dollar index, where it has traced out a triple bottom. A daily close under 95.85 sets up a deeper US Dollar correction, potentially into January, assuming omicron remains a storm in a teacup in the minds of the investors globally.

EUR/USD rallied 0.40% to 1.1340 overnight, but still faces resistance above 1.1360. Only a move above 1.1400 suggests a medium-term low could be in place. GBP/USD shrugged on weaker Q3 GDP to leap 0.66% to 1.3350 after the US Prime Minster appeared to rule out more virus restrictions, despite cases hitting 100,000 per day yesterday. GBP/USD needs to recapture 1.3400 to signal a medium-term low. USD/JPY remains at 114.15 today, with no movement in US bond yields overnight meaning no movement in the currency pair.

The three risk-sentiment amigos, the CAD, AUD, and NZD all booked strong gains overnight between 0.65% for the CAD, and 0.85% for AUD. A rise above 0.7250 for AUD/USD and 0.6850 from NZD/USD will signal further rallies into the new year. USD/CAD is at 1.2850 this morning and needs to close below 1.2750 to signal the same.

Asian currencies despite a much weaker fixing once again from the PBOC for the Yuan versus the US Dollar. It highlights the challenges China has to weaken the Yuan, without incurring the ire of Washington DC, as their closed border means recycled Chinese offshore profits provide an underlying bid to the Yuan. Asian currencies rose on improving sentiment and a strong Yuan ignoring the PBOC signals, continues to provide support during Asian trading hours.

Another big rally for oil.

The omicron is not-as-bad-as-we-thought trade continued to push oil markets higher overnight, thanks to more studies seemingly confirming that thesis. A sharp drawdown in official US Crude Inventories, following the API drop the day before, further gave the fast-money gnomes an excuse to pile back into long positions.

Brent crude leapt 2.1% higher to $75.55 a barrel where it remains in Asia. WTI rallied by an impressive 2.45% to $73.00 a barrel, where it remains in Asia. Brent crude has carved through resistance at $74.45 which becomes initial support, with resistance at 76.90 a barrel, the 100-day moving average. (DMA) WTI is eroding resistance between $73.00 and $73.20 as we speak, which opens further gains to $74.10 initially, its 100-DMA. Support lies at $70.60 and then $70.00 a barrel.

The threat of OPEC+ action has receded dramatically now that Brent crude is back above $75.00 a barrel, with $80.00 a barrel being the sweet spot for the grouping, I believe. Oil’s direction is entirely reliant on omicron headlines, and as long as they stay more contagious but less virulent, oil’s rally is likely to continue, with intra-day ranges exacerbated by thin liquidity.

Gold rallies on weaker US Dollar.

Gold rallied overnight in a mechanical response to a much weaker US Dollar on currency markets. Gold finished 0.80% higher at $1803.60, with the range flattered by lower than average trading volumes. In Asia, gold has added another 0.10% to $1805.40 an ounce.

Gold’s attempts to stage a meaningful recovery remain unconvincing, 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. That said, gold could extend its gains into the end of the weak if growth sentiment remains ascendant.

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

Continue Reading
Comments

Crude Oil

Nigerian Army Seizes 700,000 Liters of Stolen Petroleum in Sweeping Raid Across Four States

Published

on

In a series of raids across Rivers, Bayelsa, Akwa Ibom, and Delta states, troops from the 6th Division of the Nigerian Army seized 700,000 liters of stolen petroleum products, sealed 29 illegal refining sites, and arrested 24 suspected oil thieves.

In a statement issued by the Division’s Public Relations Officer, Lt. Col. Danjuma Jonah, it was noted that 14 boats involved in crude oil theft were also destroyed during the operation.

Jonah disclosed that the raids were conducted between October 28 and November 3, 2024.

He revealed that the troops intercepted a large wooden boat carrying over 150,000 liters of stolen crude oil in the Kula area of Akuku-Toru Local Government Area of Rivers State.

Providing a breakdown of the operation, Jonah stated, “Another boat carrying 50,000 liters of crude oil was seized, while three illegal refining sites were dismantled, and cooking pots containing 20,000 liters of stolen diesel were confiscated. Troops also dismantled ten illegal refining sites in Kay and Abesa in Akuku-Toru LGA, seizing 400,000 liters of illegally refined diesel.”

In Bayelsa State, soldiers deactivated two illegal refining sites at Boma Creek in Southern Ijaw LGA, recovering storage tanks holding over 2,500 liters of stolen crude. Similarly, operations in Obughene Creek in Southern Ijaw yielded over 4,500 liters of stolen crude, while another 3,000 liters of illicit product were seized at West Boma Creek.

In Akwa Ibom State, troops intercepted two Toyota Camrys loaded with illegally refined diesel, concealed in nylon bags, totaling 3,000 liters. The vehicles were stopped along the Ikot Abasi-Abak road, and the drivers were detained.

In Delta State, multiple raids were conducted, including the interception of a tricycle in Kwale, Ndokwa West LGA, carrying stolen iron pipes allegedly taken from decommissioned Oando pipelines.

Another raid in Patani town uncovered a storage dump containing 40 jerricans of stolen products, while troops patrolling Uro Community waterways intercepted a wooden boat with 200 sacks of premium motor spirit,” he concluded.

The statement added that suspects arrested during the raids have been handed over to relevant authorities for prosecution.

Continue Reading

Crude Oil

OPEC+ Supply, Trump-Harris Election Face Off Lend Support to Oil Prices

Published

on

Crude oil

The decision of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ to delay plans to increase output for another month and the close call of the presidential elections in the United States triggered a 2 percent rise in oil prices.

Brent futures were up $1.98, or 2.7 percent at $75.08 a barrel while the US West Texas Intermediate (WTI) crude rose $1.98, or 2.85 percent to $71.47.

OPEC+ said it would extend its output cut of 2.2 million barrels per day for another month in December at a meeting on Sunday.

Saudi Arabia and Russia, as well as Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates (UAE) agreed to extend the November 2023 voluntary production adjustments of 2.2 million barrels per day for one month until the end of December 2024.

The move is aimed at boosting oil prices amid uncertain demand and accelerating supply, with an eye on the imminent US presidential election, though analysts predict a limited impact.

Also speaking on Monday, OPEC’s Secretary General, Mr Haitham Al Ghais said on Monday that OPEC remains very positive on demand for oil in both the short and long term.

The market has also shifted focus to the American presidential election between Democratic presidential nominee and current Vice President, Kamala Harris and Republican Donald Trump on Tuesday (November 5).

So far, the outcome has shown that the election is tight as it could take days after voting ends to know the eventual winner.

The market will also be looking at the developments in the Middle East, especially with anticipation that Iran was preparing to attack Israel from Iraq within days.

Markets were also watching a new tropical storm that was forecast to form on Monday in the Caribbean and threaten offshore oil production along the Gulf of Mexico.

Oil companies like Shell have moved its non-essential personnel from six platforms, adding it currently expects no other impacts on its production across the Gulf of Mexico.

There will be anticipation of what the US Federal Reserve will do at the next meeting on Thursday with expectations high that the US central bank will cut interest rates by 25 basis points.

Also, investors will be looking to China where the government is expected to approve additional stimulus to boost the slowing economy in the world’s largest oil importer.

Continue Reading

Commodities

Agric Industries Take Interest In Unlocking Nigeria’s $10bn Palm Oil Export Potential

Published

on

palm oil

Some agric-focused industries and firms have indicated interest in enhancing Nigeria’s agricultural productivity and competitiveness through the nation’s $10 billion palm oil export potential.

At the launch of a new report by a research and advisory firm, Vestance, significant untapped opportunities within Nigeria’s oil palm sector were revealed.

Discussing how the nation could regain its lost glory in palm oil production and exportation, stakeholders in the sector emphasised the need for government agencies, private sector investors, smallholder farmers, research institutions, and development partners to work together to help change the narratives in the palm oil sector.

Titled “Reclaiming Lost Glory: Nigeria’s Palm Oil Renaissance,” the report, which was unveiled in Lagos disclosed that Nigeria, despite being a major producer historically, currently exports only $1.34 million in palm oil, ranking 78th globally, while importing $372 million annually

Vestance’s Research Lead, Razaq Fatai, said the report illustrates the immense opportunities lying dormant in the country’s underutilised oil palm plantations, noting that by capitalising and rejuvenating these plantations, Nigeria could generate over $10 billion in export revenue alone.

He explained that Nigeria’s palm oil production began to decline during the country’s civil war between 1967 and 1970, saying, it is now time to begin to reverse the decline and put the sector back on track.

Speaking at a panel session on ways to revitalise the oil palm sector, experts proffered means by which challenges confronting the palm oil sector could be tackled.

In his submission, the Managing Director, SWAgCo (O’dua Investment Group), Dr. Adewale Onadeko, said Nigeria should embrace an agro-industrial cluster strategy, adding that essential infrastructure such as seeds, fertilisers, extension services, processing, and storage facilities should be prioritised if the expected gains could be realised.

Another panellist, Dr. Bayo Ogunniyi, Country Programme Analyst for International Fund for Agricultural Development, highlighted the myriad challenges facing smallholder farmers, particularly the lack of access to finance and the prevalence of old, low-yield seeds.

He underscored the urgent need for Nigeria to distribute high-quality seeds to smallholder farmers to enhance production levels.

Ogunniyi also pointed out that the oil extraction rates of smallholder palm oil processors are alarmingly low, often falling below 15 percent, compared to the 25 percent extraction rates achieved by modern processing mills. Improving these extraction rates is crucial for maximising the output from Nigeria’s palm oil sector.

In his own contribution, CEO of BulkDirect, Ramses Najem, emphasised the importance of situating processing facilities closer to the farms to reduce transportation challenges.

Other speakers at the report launch called for a nationwide adoption of high-yield seeds to boost production, investment in modern processing facilities to increase oil extraction rates, and the development of strategic transportation networks to streamline the supply chain.

 

Continue Reading

Trending