Connect with us

Markets

Festive Season Dominates Asian Markets

Published

on

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

With Hong Kong and Australia closed today, along with the UK this afternoon, and a number of secondary locations, it is hardly a surprise that Asian markets are quiet today. The weekend headline newsreel was relatively quiet. Omicron cases are surging in the US and Europe, and although markets have well and truly priced in a less virulent strain, the disruption to goods and services from isolating workers, notably air travel, seems to be the main fallout so far. That is only likely to cause short-term nerves, with the global recovery story for 2022 still on track. The divergence between Brent and WTI this morning can likely be laid at that door.

In China, Industrial Profits rose by a healthy 38% (YTD) YoY Nov versus 42% for October, but well above the forecast 34%. Uncertainty in the property sector continued to be a drag in otherwise broadly strong data sector-wise. On that note, the PBOC on Saturday said that they would safeguard the legal rights of home buyers and provide greater support for the real economy. The targeted stimulus is a theme in recent times from China, as opposed to previous Stimulus strategies. Reuters also reported that Evergrande had made progress restarting home construction and that its Chairman said it would deliver 39,000 units in December. That batch of positive news, though, is being offset by increasing omicron cases in China, leaving markets in a holding pattern.

The data calendar globally, is unsurprisingly, fairly thin this week, especially for tier-1 releases. Headlines will continue to dominate intraday moves in thin trading. For Asia, the highlight will be on Friday when China releases official Manufacturing and Non-Manufacturing PMIs. The recent fall in industrial commodity prices should boost Manufacturing, while Non0-Manufacturing looks vulnerable to downside risks around consumer sentiment and virus restrictions.

Otherwise, experience tells me this week will be a feast or a famine, with little in between. Either the headline reel will spur ugly intraday moves on holiday-thinned liquidity, or volatility will remain so flatline, that if it were an ECG, the doctors and nurses would be yelling code blue. In the meantime, pondering how to make the best use of Christmas leftover food may be a more productive course of action.

On one final note, I would like to acknowledge the passing of Arch Bishop Desmond Tutu over the weekend. I had the privilege of spending a couple of hours with him as part of my MBA in Cape Town in 2014. A formidable intellect, a kind heart, a patriotic South African and a great sense of humour was my overriding impression. I know this as he made me stand in the corner facing a wall for a while for being a Kiwi, as penance for the All Blacks beating the Springboks in rugby. He gave his heart to try to heal South Africa and gave more to society as a whole than he ever took. We need more people like him in the world. R.I.P Archbishop Tutu, it has been an honour.

Asian equities hover between slightly mixed and unchanged.

Asian equities are off to a quiet start this week, with little in the way of concrete drivers from the weekend to drive price action, Australia, New Zealand, and Hong Kong markets closed, as well as the UK this afternoon. With volumes holiday-thinned, the Nikkei 225 is 0.25% lower, while the Kospi is down 0.10%.

Mainland China is slightly in the green after positive headlines from Evergrande and the PBOC over the weekend, which is being tempered by rising virus cases. The Shanghai Composite is 0.18% higher, and the CSI 300 has eked out a 0.05% gain.

Regionally, Singapore is unchanged while Kuala Lumpur has gained 0.65% and Bangkok 0.20%. Taipei is 0.86% higher, with Manila down 0.10% and Jakarta up 0,15%. US futures have restarted trading today and are having a quiet session as well.  Nasdaq futures gained 0.25%, S&P 500 futures 0.10%, while Dow futures are unchanged. It looks like only bored Minnesota dentists are playing in the space today.

Short of a headline surprise, I expect Europe to follow much the same pattern this afternoon.

US Dollar trades sideways.

Currency markets are in holiday mode and will likely remain so until the middle of next week. The dollar index barely changed from Friday at 96.11, marking three days of sideways trading. If anything, the US Dollar looks vulnerable to positive headlines still on the virus front this week with support between 95.80 and 95.85 the important level to monitor. Liquidity is further reduced in Asia due to several regional centre holidays.

Major currencies continue to tread water with EUR/USD at 1.1320, GBP/USD at 1.3410, USD/JPY at 114.40, AUD/USD at 0.7235, NZD/USD at 0.6820 and USD/CAD at 1.2810. None of that has been much different since last Thursday. The return of US markets this afternoon and the gnomes of Wall Street should see volatility pick up slightly this evening.

Asian currencies continue range trading as 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.

USD/TRY fell by nearly 6.0% on Friday as intervention and the central government’s effective Lira value guarantee on deposits for retail savers continues to play out. USD/TRY has risen by 3.50% today though and USD/TRY looks to be forming a base ahead of 10.0000 now. The authorities in Turkey may find engineering further Lira rallies harder going from here, and I will be watching their foreign reserve data going forward for more signals of when to re-enter the short Erdogan trade.

Brent crude and WTI stage rare divergence.

Oil prices traded sideways on low liquidity and participation on Friday, Brent crude easing slightly to $75.90 a barrel, and WTI easing to $73.20 a barrel. In Asia today, however, we are seeing a rare divergence in pricing direction. Brent crude has risen 0.70% to $76.40, while WTI has fallen by 0.65% to $73.20 a barrel.

I believe two different stories are in play here to explain the price action. CNN reported over the weekend, based on satellite photos, that Saudi Arabia is manufacturing ballistic missiles with Chinese assistance just outside of Riyad. An escalating arms race between Saudi Arabia and Iran is as good a reason to buy Brent crude as any.

In the US, hundreds of flights have been cancelled over the weekend due to staff shortages as airlines employees are forced to isolate themselves due to Covid-19 infection, notably omicron. Lower travel equalling lower economic activity in the US equals lower WTI, the US oil benchmark. Momentum is muted though, and I doubt either story will have a lasting impact on oil prices.

Brent crude has resistance at 77.05 a barrel, its 100-day moving average (DMA). It has support at $75.70. WTI has resistance at $74.10, its 100-DMA, and support at $72.30 a barrel.

Holiday risk-hedging lifts gold.

Pre-holidays risk-hedging appears to have lifted gold higher on Friday, rising 0.27% to $1808.50 an ounce. In Asia, volumes are muted, with gold edging another 0.13% higher to $1810.80.

Gold’s attempts to stage a meaningful recovery remain unconvincing, with traders cutting long positions at the very first sign of trouble intra-day. It faces a 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.

With the US Dollar looking more vulnerable to positive virus sentiment at the moment, gold could potentially move higher throughout this week, but I wouldn’t put my house on it sustaining those gains.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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