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Sitting On A Beach Earning 20%

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Traders Wall Street

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

With Christmas upon us, I was pondering how the world has changed and what better place to start than the first Die Hard movie, a Christmas favourite now, and Alan Rickman’s attempted thief of US bearer bonds. As the lead bad guy in the film, Mr Rickman gleefully extols that by the time the authorities know he and his gang have stolen the bearer bonds, “we’ll be on a beach, earning 20%.”

That was 1988; in 2021 it just wouldn’t ring as true. “By the time they find out, we’ll be on a beach, earning errrrr 1.50%. Or if had stolen bunds, it would be “by the time they find out, we’ll be on a beach earning err…-0.50%. Hang on, it’s not worth getting shot by John McCain for -0.50%, grab some of the Greek 10-years as well. What? 0.70%!? Crime doesn’t pay anymore. Ok chaps, Plan B. Call that crypto broker back in Belize, lets circle back to those password locked JPG’s they call NFT’s, find me that investment banker’s number who was flogging SPACs, buy me some technology stocks and let’s reactivate that Reddit account, there’s plenty of suckers in there we can rob without getting shot.”

Mr Rickman’s quandary nicely encapsulates 2020 and 2021 when one thinks about it. Die Hard in its original form could never be made in 2021. Nevertheless, the bottomless amounts of zero per cent money from the world’s central banks continue to pump up asset prices everywhere, economic equality-be-damned. That situation is about to change though, with the Federal Reserve beginning the monetary normalisation path in 2022.

Markets continue to dismiss omicron because that’s what they want to believe, and the US data dump overnight had strong showings from the PCE Index, Durable Goods and Michigan Consumer Sentiment. Assuming omicron is a storm in a test tube, and I certainly hope it is, there was nothing to deter the Fed overnight. The omicron-is-mild rally could well continue into January now, but reality will bite in February I believe, as the end of the Fed taper moves into sight.

Don’t discount omicron though, much of the developing world, including the author, were vaccinated with Sinovac which doesn’t appear to work against the new variant. We can also take off our western-centric blinkers and note that China is in the same situation, it will remain shut for all of 2022 now. And while rich countries continue with their vaccine and pill lolly scramble, the majority of the world will still provide fertile ground for more variants to emerge.

Still, assuming we move through omicron and Vladimir Putin decides to spend his winter holidays in Russia and not “overseas,” policy normalisation by the Fed will the theme of 2022. Perversely, China may assist this process as their Covid-zero policy keeps the border shut and the Renminbi strong as their giant trade surplus gets recycled into local currency. China will become an exporter of inflation instead of deflation going forward, another uncomfortable reality for consumers globally, but another reason for the Fed, and perhaps others, to hitch their wagons to fighting inflation and teaching the world once again, that the natural cost of capital is not zero per cent.

2022 may yet make crime pay for Alan Rickman as his bearer bond yields improve. In the meantime, yippee ki-yay everybody, stay safe, eat a lot, and happy holidays from me in Jakarta. I shall return next week, fear not. But, for now, my attention turns to making pavlova (invented by Kiwis, not Aussies,) and the bringing of my 5kg organic, free-range turkey from Bali.

Asian equities mixed in pre-Santa session.

Thankfully, reporters have stopped asking me if we will get a Santa Claus rally in stock markets, as it has well and truly arrived. Wall Street rose again overnight after a strong procession on US data and markets convincing themselves even more, that omicron is a mildly symptomatic storm in a teacup. The S&P 500 rose by 0.62%, while the Nasdaq jumped by 0.82%, with the Dow Jones moving 0.52% higher. Santa and his reindeer may be serving a compulsory quarantine on arrival, but he has still managed to drop off some record highs for the holiday season.

US index futures are closed and Asia itself is having another mixed performance today in line with similar cautious sentiment displayed over the week. The Nikkei 225 has crept 0.10% higher, with the Kospi rising by 0.60% and Taipei climbing by 0.35%. Hong Kong has risen by 0.20% but Mainland exchanges have edged lower. The Shanghai Composite and CSI 300 are 0.35% lower.

Singapore and Jakarta have risen by 0.30% while Kuala Lumpur has edged 0.10% lower. Bangkok has eased by 0.15%, and Manila has retreated by 0.70%. Australian markets are determined to end what is effectively their last trading day for the year on a bright note. The ASX 200 and All Ordinaries have followed Wall Street 0.50% higher today.

Asian markets look very much to be in book-squared waiting-for-midday-to leave-mode. I expect the positive momentum to continue into Northern hemisphere markets this evening, and if omicron remains a side-lined issue, we could see this rally extend into the New Year.

US Dollar trades sideways.

Currency markets look like they have closed for the year now, with overnight trading featuring modest ranges unless you are trading Turkish Lira. The dollar index is almost unchanged overnight, trading at 96.06 today. 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 has hardly moved, trading at 1.1330, but still faces resistance above 1.1360. Only a move above 1.1400 suggests a medium-term low could be in place. Improved risk sentiment, especially around omicron, given the UK caseload, appears to be lifting Sterling. It has risen 0.45% to 1.3415. GBP/USD has recaptured 1.3400, signalling a medium-term low. Such is the Prime Minister’s unpopularity in the UK right now, if Boris gets the push over Christmas, Sterling will likely rally once again. USD/JPY is at 114.30 today after US yields edged higher overnight.

The three risk-sentiment amigos, the CAD, AUD, and NZD continued booking modest gains overnight. 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. Price action this morning has seen all three edges lower, suggesting that investors are trimming long positions into the holidays.

Asian currencies continue range trading as the PBOC. Once again, set a weaker Yuan fixing. The Asian interbank market looks to have closed shop for the year now. A stronger Yuan continues to backstop Asian FX from negative sentiment shifts.

Another rally for oil.

The omicron is not-as-bad-as-we-thought trade continued to push oil markets higher overnight, with positive US data reinforcing the theme that the momentum of  US recovery continues and that the US consumer is alive and well and spending.

Brent crude rose 1.55% to $76.75 a barrel. WTI rallied by 1.0% to $73.70 a barrel. With some US futures closed in Asia, only Brent crude is trading this morning and some profit-taking is evident. Brent crude is easing 0.70% to $76.20 in thin trading. $74.75 and $74.45 are initial support, with resistance at 76.90 a barrel, the 100-day moving average (DMA), capping gains overnight. WTI rose through resistance at $73.00 which becomes support. Resistance is at $74.10 initially, it’s 100-DMA.

Gold side-lined overnight.

In line with tight ranges in currency markets and US bonds, gold was side-lined overnight, rising just 0.27% to $1808.50 an ounce. With gold futures closed in Asia, it remains around those levels.

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.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Energy

Nigeria Partners with ECOWAS and Morocco to Launch $26B African Gas Pipeline

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Gas-Pipeline

The Nigerian government, in partnership with the Economic Community of West African States (ECOWAS), Morocco, and Mauritania, has announced plans to advance the $26 billion African Atlantic Gas Pipeline project to drive economic growth across Africa.

This development was revealed on Monday, November 5, by Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), at the ECOWAS Inter-Ministerial Meeting on the Nigeria-Morocco Gas Pipeline Project.

Speaking at the meeting, which was attended by ECOWAS Ministers of Hydrocarbons and Energy as well as representatives from Morocco and Mauritania, Kyari stated that, once completed, the project will connect 13 African countries.

Represented by Olalekan Ogunleye, NNPC’s Executive Vice President for Gas Power & New Energy, Kyari said this will be Africa’s largest pipeline project.

Ogunleye confirmed that progress has been made with the front-end engineering design completed, the phase two study finalized, and work ongoing for environmental and social impact assessments as well as land acquisition and resettlement.

He emphasized NNPC’s readiness to execute the project: “Today, we come together to make significant progress in the African Atlantic gas pipeline project, which is a transformative initiative connecting at least 13 African nations in shared prosperity and development. These achievements underscore our capability to deliver this landmark project, supported by strong regional collaboration.”

Ekperikpe Ekpo, Minister of State for Petroleum Resources (Gas), described the project as a game-changer for the regional economy, stating, “We stand at a critical juncture where these agreements can reshape our energy landscape, strengthen our economies, and uplift our people.”

He also highlighted that the project will increase Africa’s presence in the global gas market, noting that “the agreements demonstrate a strong commitment to advancing hydrocarbon and energy trade across ECOWAS, enhancing access to natural gas in West Africa, and expanding Africa’s global footprint in the gas market.”

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Crude Oil

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

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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.

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Crude Oil

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

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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.

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