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Jumpin’ Vlad Flash Cuts His Gas Gas Gas

The Ukraine/Russia conflict has suffered some headline fatigue of late, and more than a little complacency by the world’s financial markets, as China’s slowdown fears grabbed centre-stage.

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

The Ukraine/Russia conflict has suffered some headline fatigue of late, and more than a little complacency by the world’s financial markets, as China’s slowdown fears grabbed centre-stage. With a nod to the Rolling Stones in the title of today’s newsletter, the economic ripples of the Ukraine conflict are back on the front pages. Equity markets overnight took fright at ominous comments from Russian officials around nuclear war, but it was Russia’s announcement that Poland and Bulgaria would have their gas supplies cut off from Russia from today, unless they paid for them in Roubles, that jarred market nerves.

It seems that the weaponisation of its energy supplies by Russia has now begun, possibly driven by previously reluctant members of NATO getting on board and supplying heavy weapons to Ukraine. Germany has already stated it could painfully manage if Russia banned energy exports. Poland has said it’s gas storage is at 80%, but Bulgaria gets near 90% of its gas supplies from Russia, and its only oil refinery is owned by a Russian company. I am assuming though, that the European Union now has contingencies in place to assist immediately affected members. If this is just the start of further energy escalation by Russia, the European Union faces challenging times ahead.

That likely explains why oil prices only reversed their losses from Monday and didn’t shoot into space. Oil prices seem destined to range in a wide by choppy range. Russia concerns rightly supporting dips, while China’s slowdown fears cap gains with lots of noise in between.

Russia’s natural gas aside, markets swung back into full risk-aversion mode overnight. US yields fell, suggesting that investors were heading for shelter in that space. (bond prices move inversely to yields) The US Dollar soared, with the Euro and the risk-sentiment-correlated Australasian currencies coming in for negative attention. EUR/USD has now well and truly broken its 1985 trendline support and if Russia decides to play its gas supply card, a move below parity is on the cards.

The Nasdaq led the equity market wipe-out overnight, with its near 4.0% retreat led by Tesla, which fell by 12.20%. You could look at it two ways. Either Elon Musk sold his latest stock awards to generate the $21 billion in cash for his part of the Twitter buyout, or the street is starting to wonder how he could possibly effectively run Tesla, Starlink, Space-X and Twitter simultaneously. I do as well.

The mood will remain dark thanks to after-market Q1 results announcements by Microsoft and Alphabet. Microsoft produced an on-expectation set of results, led by the Azure Cloud division, and maintained an upbeat macroeconomic outlook. Alphabet, unfortunately, missed forecasts, thanks to a deceleration in YouTube revenues. That doesn’t really surprise me, like Meta’s platforms, advertising is now becoming intrusive in both its volume and quality, detracting from the core product. I, for one, am sick of being asked if I have pre-diabetes or having an old guy telling me I need to buy off-market cryptos for immediate capital gains.

Alphabet’s results will increase nerves about the outlook for the tech heavyweights that are announcing this week. That sector has been the last man standing in the Nasdaq index. Meta announces tonight and if my recent user experience with them is anything to go by, there is downside risk again in their results. Expect more hitting of the dislike button by US equities tonight if Meta disappoints once again. It will fall to Apple and Amazon to stop the rot.

The overnight data dump from the US was solid, if not spectacular. Durable Goods rose in March, recovering from their Ukraine slump in February. The house price indexes booked another month of gains in February, while CB Consumer Confidence remained high at 107.30 and the Richmond Fed Manufacturing Index for April was steady at 107.30. Perhaps the only blot was slowing New Home Sales, which rose by 763,000 in March versus 835,000 in February as rising mortgage rates bite. Certainly, there was nothing to suggest an impending slowdown or jarred nerves around impending Fed hikes.

Today in Asia, South Korean Consumer Confidence held steady at 103.80 and China Industrial Products YTD (YOY) rose by a much higher than expected 8.50%. that has steadied the ship in Mainland China equity markets today as the rest of Asia heads to the exit door. The big surprise has been Australian Inflation, which hit 5.10% YOY for Q1 today, well above the 4.60% rise expected.

Although the Reserve Bank of Australia is a long way from the inflation debacle that the Reserve Bank of New Zealand has created, it will ramp up the pressure on the RBA to shift its ultra-dovish stance sooner. The Australian Dollar has rallied temporarily today on that assumption. Interestingly, the RBNZ Deputy Governor is making a speech today, in Ireland on macroprudential policy implementation. At least the assembled central bankers will learn what not to do.

The rest of the day’s data calendar is strictly second-tier across the globe today. With the Fed in a pre-meeting blackout, markets will probably remain in risk aversion mode, fearful of expanding energy weaponisation by Russia, and more Covid-zero policy-related bad news from China. In all likelihood, Meta’s results this evening will define the US session in a binary outcome. Poor results will probably have a greater impact on equities in the current environment.

China is the one bright spot for Asian equities today.

The buy-the-dip rally yesterday quickly ran out of steam in New York as Tesla stock plummeted and Russia announced an impending ban on natural gas exports to Poland and Bulgaria. Although US data held steady, the miss in earnings by Alphabet has darkened the move and the overnight price action across asset classes suggested a full-on move to defensive positioning. US equities had a terrible day at the office. The S&P 500 fell by 2.80%, the Nasdaq tumbled b 3.93%, and the Dow Jones retreated by 2.38%. The S&P has fallen through its February lows, while the Nasdaq is in danger of testing its 4,100 February low. Only the Dow, with its value orientation, is holding steady, albeit a 1-year sideways range.

In Asia, the giant falls overnight in US markets have proved irresistible to bargain hunters once again. US futures have edged higher. S&P futures have added 0.45%, Nasdaq futures 0.50%, and Dow futures 0.70%. The price action looks optimistically corrective in nature.

In Asia, China is the one bright spot as markets have risen in response to a slow day for Covid-zero headlines, and better than expected Industrial Profits data. In a rerun of yesterday, the Shanghai Composite has risen by 0.40% with the narrower Shanghai 50 gaining 1.25%. The CSI 300 has rallied by 1.13%, but tellingly, Hong Kong’s Hang Seng has only edged 0.10% higher. Yesterday we saw similar gains by Mainland indexes, only for rallies to evaporate later in the day. I suspect, like yesterday, there is a little “national team” help around today. Nothing has materially changed with China’s situation and the rallies today should be treated with caution.

Elsewhere, it is a sea of red in Asia with a split once again, between the more Nasdaq-correlated North Asia heavyweights, and the more value-orientated markets of ASEAN. Japan’s Nikkei 225 has slumped by 1.45%, with South Korea’s Kospi tumbling by 1.15%, and Taipei retreating by 1.70%. Singapore is down just 0.10%, with Kuala Lumpur 0.30% lower, and Jakarta easing by 0.60%. Manila has fallen heavily by 1.75%, and Bangkok is just 0.05% lower.

Australian markets are also lower today, but not as badly as I feared after much higher than expected inflation data. Australia’s heavy resource base makes it a potential winner the more aggressive Russia becomes in the international energy and resource market. That seems to be limiting the losses in the lucky country which usually has a high US correlation. The ASX 200 is down 0.72%, while the All Ordinaries have fallen by 0.70%.

Nothing about Russia’s move to band natural gas exports to Poland and Bulgaria today can be construed as bullish for European equities. Nor can the threat of widening Russian retaliation in this space be either. As such, I expect European markets to open sharply lower today and stay that way, regardless of developments elsewhere.

US markets will be dictated by whether the FOMO gnomes of Wall Street are in bargain-hunting mode, or not. Meta’s quarterly results are likely to have the final say on whether the overnight meltdown pauses for breath or doesn’t pass go on its way directly to jail.

US Dollar soars on risk-aversion.

The US Dollar soared overnight as risk aversion swept financial markets, with the Euro having a particularly painful session as Russian risks accelerated. The dollar index smashed through 102.00 on its way to a 0.56% gain to 102.30, where it remains in Asia today. At these levels, the dollar index is potentially testing the upper boundary of a 5-year triangle. A weekly close above 103.00 resistance this week will have me pondering making a call for the 120.00 region in the months ahead. In the short-term, support lies at 101.00 followed by 99.75.

EUR/USD had a torrid session as the Russia energy risks started coming true. EUR/USD fell by 0.70% to 1.0635, before booking a tiny gain back to 1.0645 in Asia. The 1985 support line is now well and truly broken and a move back below parity in the coming months is suggested. Widening Russian energy weaponisation will hasten that outlook. In the near-term, the technical picture, potential energy sanctions on Russia, and a widening US/Europe interest rate differential, suggest EUR/USD will now test support at 1.0600 en route to 1.0300. Resistance is at 1.0760 and 1.0810.

GBP/USD fell through 1.2700 and 1.2760 overnight, on its way to a 1.30% loss to 1.2575, where it remains in Asia. Sterling is guilty by association with the Euro, with Brexit nerves around Northern Ireland, a too dovish Bank of England, and a soaring cost of living all weighing on the currency. That said, the relative strength index (RSI) is now at extreme oversold levels, meaning some sharp relief rallies are now possible. The technical picture is now signalling further losses to 1.2200 and potentially sub-1.2000 in the weeks ahead. GBP/USD would need to reclaim 1.3050 to change the bearish outlook.

Falling US yields and perhaps some haven flows into Yen itself eased the upward pressure once again on USD/JPY overnight. USD/JPY fell 0.70% to 127.25 overnight, drifting to 127.65 in Asia. USD/JPY risks remain heavily skewed higher, thanks to a hawkish Fed. Support remains at 127.00 and 126.00, with resistance at 129.50 and 130.00.

AUD/USD reclaimed most of its overnight losses today after higher than expected inflation data increased the pressure on the RBA to start tightening policy sooner. AUD/USD has rallied by 0;66% to 0.7170 today having closed below support at 0.7150 overnight. ​ AUD/USD could spend the next few sessions consolidating between 0.7150 and 0.7250 but remains vulnerable to another US equity or Russia/China risk-aversion move. NZD/USD slumped another 0.90% to 0.6370 overnight and ominously, has not coat-tailed the AUD higher today. Short-term rallies back to 0.6700 are possible, but it remains on track to test 0.6525 and potentially, 0.6400 this week.

USD/CNH and USD/CNY traded sideways overnight and are almost unchanged at 6.5850 and 6.5540 today. The PBOC set another neutral USD/CNY fixing this morning, possibly signalling that the Yuan selloff has gone far enough for now. Additionally, stronger Industrial Profits data and a quiet Covid-zero news ticker today appear to be lending the Yuan temporary support. The plethora of China risks are now complicated by Russia’s energy militancy, and thus USD/Yuan risk remains heavily weighted to the upside, even if some short-term pullbacks are possible thanks to very overbought short-term technicals.

USD/KRW and USD/THB rose sharply overnight, but some stability in the Yuan, and lower US yields, is allowing Asia currencies to pause for breath today. Whether the relief is temporary or not is up for conjecture. A Russia-derived spike in energy prices again will certainly increase downward pressure on regional currencies. USD/MYR finally steadied and USD/INR mysteriously unwound yesterday’s palm-oil-ban gains. Like the Philippines, it appears that Bank Indonesia is back capping US Dollar gains, as is the Bank of Korea apparently.

Oil trades sideways in Asia.

Oil markets reversed their losses from Monday overnight, rising after Russia announced natural gas export bans on Poland and Bulgaria from today unless they paid in Roubles. Brent crude rose by 2.85% to $105.40, and WTI rallied by 3.10% to 101.60 a barrel. In Asia both contracts booked one per cent gains in early trading but have since given all of those back to be almost unchanged from the New York close.

The rally, spurred by rising China Industrial Profits, which alleviated slowdown fears, has evaporated as quickly as it began, suggesting that Asia markets remain much more concerned about China’s slowdown than events in eastern Europe. That complacency could come back to bite them. If Russia makes little progress in its latest offensive, the Kremlin could lash out and widen those export bans if Europe doesn’t accept the Rouble blackmail. Once Germany is included, we can assume energy prices will be heading higher once again. For now, risk aversion is capping oil’s gains.

With that in mind, I am sticking to my guns and continue to expect that Brent will remain in a choppy $100.00 to $120.00 range, with WTI in a $95.00 to $115.00 range.

Gold ponders its next move.

Gold managed to gain some risk aversion support overnight, shrugging of a much stronger US Dollar to post a modest 0.40% gain to $1904.50 an ounce. In Asia, upward momentum has quickly subsided, gold reversing 0.35% lower to $1898.50 an ounce.

The question now is, has gold’s correction lower run its course, and are we approaching levels to buy, given an escalation in geopolitical risks once again? The price action suggests not as gold rallied only modestly overnight and has quickly given back those gains today. It remains anchored at the bottom of this week’s range. Gold has support at $1891.50 and $1880.00 an ounce. Failure of $1880.00 signals a capitulation trade targeting triangle support at $1835.00, and then $1800.00 an ounce. On the topside, gold has resistance at $1915.00, $1940.00, $1980.00, and $2000.00 an ounce.

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.

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Markets

Asia Starts the Week Cautiously

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Asian equities

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

Recessionary concerns continue to hold back the buy-the-dippers in Asia today, with Asian stock markets completely ignoring the strong rally by US index futures this morning. It is always worth taking Monday morning price action with a grain of salt and regional markets are probably placing more emphasis on a flat close by Wall Street, especially given another day of intra-session histrionics which saw the 3.0% swings intraday.

Reaction to the Labour win in the weekend federal election in Australia has been muted. The new Prime Minister has already stated the obvious that the Australia/China relationship will remain challenging. Labour’s win had been expected and to a certain extent priced in anyway, the only variable is that after the 3 million postal votes have been counted, will Labour have an outright majority, or be forced into a coalition agreement with the independents, the big winners this weekend, or the greens. The Australian Dollar is higher this morning, but that is a US Dollar story, while stocks are unchanged.

China sparked a local equity rally on Friday after the 5-year loan prime rate was cut by 0.25%. That is supportive of the mortgage market and was a boon to an under-pressure housing sector. Unfortunately, some of that work was undone this morning when the PBOC set a surprisingly strong CNY fix. USD/CNY was fixed at 6.6756 versus market expectations at 6.6934. A stronger Yuan is weighing on Mainland equities today but has been supportive of Asian currencies generally. China continues to try and support growth by targeted stimulus while keeping the purse strings tight and attempting to deleverage swaths of the economy. Simultaneously, its maintenance of the covid zero policy has resulted in sweeping lockdowns across the country, including Shanghai and Beijing, increasing global supply chain disruption, and also torpedoing domestic economic activity. Little wonder that Chinese equities continue to play the cautious side, and so is the rest of Asia.

The economic calendar is light in Asia today. Most interesting will be Singapore Inflation this afternoon, and I can confirm, having been there last week, that the Red Dot is more expensive than ever. Inflation YoY in April is expected at 5.50%. A higher print than that will increase the chances of an unscheduled tightening by the MAS, supportive of the Singapore Dollar, but likely to be a negative for local equities.

Germany releases its IFO Business Climate for May this afternoon, expected to remain steady at 91.40 as the Ukraine conflict continues to crush confidence. More important is likely to be the May Services and Manufacturing PMIs from Germany, France, and the Eurozone tomorrow. For obvious reasons, there is plenty of downside risk in that data. The Euro has staged a semi-decent recovery over the last week, although I put that down to weaker US yields and rising hard-landing fears in the US, than Europe turning a corner. Ukraine-related risks only have upside for Europe and weak PMI data tomorrow should confirm the Euro recovery as a bear market rally.

The US releases Durable Goods, expected to be steady at 0.50% on Wednesday. Second estimate Q1 GDP on Thursday, and on Friday, Personal Income and Expenditure and the PCE index for April. The data should show the US is maintaining growth and that inflationary pressures are slowing, but not falling. To a certain extent, that is old news now, but I believe the real story will be in the US and the rest of the world, that inflation may be slowing, but it isn’t falling, and could just trade sideways at high levels for the rest of the year. Don’t put that stagflation definition back in the desk draw just yet. And I’ll say it again, stagflation does not provide fertile conditions for a stock market rally, so no, I don’t think the “worst is over.” The intraday tail-chasing histrionics of stock markets across the globe suggests they don’t either.

The Asia-Pacific has a frisky week ahead on the central bank front though. Both the Bank of Korea and Bank Indonesia, as well as my own national embarrassment, the Reserve Bank of New Zealand, all have policy decisions. The Bank of Korea should hike by another 0.25% this week, maintaining a steady course of rate hikes for the months ahead with inflation modest by Western standards. Bank Indonesia may also be tempted to follow the Philippines’ lead from last week and hike another 0.25%. However, BI has been a reluctant hiker and may wish to see if the palm oil export ban has eased food inflation. It could pause this month as it is still very much in a supporting the recovery mode.

The Reserve Bank of New Zealand is in a world of pain of its own making. Tomorrow’s Retail Sales have upside risks despite the soaring cost of living and will add to the pressure on RBNZ to get more aggressive in reeling in inflation. Anything less than 0.50% on Wednesday with guidance suggesting more 0.50% hikes ahead will see the New Zealand Dollar punished. Having continued maintaining zero per cent interest rates, and unforgivably, maintained QE, even as the economy surged spectacularly, the RBNZ is now in a monetary box canyon. Pain will be necessary to put inflation back in the box in New Zealand and it, and Sri Lanka, are at the top of the list for a hard landing this year.

In China, Shanghai restrictions are continuing to ease, although mass testing was ordered for one district today. Unfortunately, while China must get lucky 100% of the time, the virus only has to get lucky once. The inescapable fact other covid zero countries discovered. Thus, there is still a huge risk of Shanghai restrictions coming back. Beijing is taking a different approach to Shanghai but is in its own virus quagmire as well. That should hold back the optimism in Chinese equities and will be a drag on oil prices as well. Friday’s China Industrial Profits YTD in April data will retreat from March’s 8.50% surprise. Depending on who you talk to, it could be +2.0% to -5.50%, Either way, it has downside risks. With China tinkering with stimulus, deleveraging, and maintaining covid zero, don’t go bottom fishing just yet.

Asian equity markets are mixed

Asian equity markets are having a mixed session, mostly trading from the weaker side after a volatile session on Friday saw the gnomes of Wall Street finish the day almost unchanged, after unwinding some ugly intra-day losses. The S&P 500 finished 0.01% lower, the Nasdaq lost 0.30%, and the Dow Jones rose just 0.03%.

For some reason, US index futures are rallying impressively today, perhaps in a delayed reaction to the easing of long-dated yields on Friday, or just in another act of mindless following the leader we saw throughout last week. S&P 500 futures have rallied by 0.85%, Nasdaq futures have jumped by 1.05%, and Dow futures have climbed by 0.55%.

Asia, however, isn’t taking the bait, with most regional markets trading on the soft side after Beijing tightened virus restrictions in parts of the city, and Shanghai’s Jingan district closed shops and told residents to stay at home. Japan’s Nikkei 225, ever a slave to movements in the Nasdaq has posted a reluctant 0.63% gain today, but South Korea’s Kospi is unchanged, while Taipei has risen by 0.38%, with Bangkok climbing by 0.40%.

Otherwise, it is a sea of red. Mainland China’s Shanghai Compositae has fallen by 0.50%, with the CSI 300 slumping by 1.05%. Hong Kong’s Hang Seng has tumbled 1.90% lower, with Singapore down 0.50%, Kuala Lumpur is unchanged, Jakarta lower by 0.60%, and Manila down 0.40%. Australian markets have quickly unwound the post-election bounce this morning as well, the All Ordinaries now unchanged, while the ASX 200 has dipped into the red, edging 0.10% lower.

With no positive developments around the Ukraine situation over the weekend, and everyone important probably lowering their carbon footprint in Davos anyway, Asia’s negative price action should see European markets start the day weaker. A soft German IFO survey may darken the mood. US markets remain a complete turkey shoot of mind-bending sentiment intraday sentiment swings.

US Dollar eases in Asia after firm CNY fixing

The US Dollar posted modest gains on Friday, despite weaker US bond yields, ad traders reduced US Dollar shorts into the weekend. The dollar index rose 0.15% to 103.05. A firm CNY fixing by the PBOC seems to have been the catalyst for more US Dollar weakening today, along with a slow newsreel over the weekend. That has allowed risk sentiment to reassert itself modestly, pushing the dollar index 0.33% lower to 102.69 today. It seems US recession fears are weighing on sentiment ever more heavily for now, and the technical picture suggests the US Dollar correction has more to go. A close below support at 102.50 could see the dollar index test 101.00 before the reality of a hawkish Fed reasserts itself.

EUR/USD has risen by 0.35% to 1.0590 today, continuing its recovery from its 1.0350 lows last week. A test of 1.0650 and possibly even the 1.0800 37-year breakout line remain possible, but this is a weak US Dollar story and I believe that any rally above 1.0700 will be hard to sustain in the medium-term. In a similar vein, GBP/USD has traced out a low at 1.2155 last week and has risen 0.40% to 1.2545 in Asia. A test of 1.2650 is possible this week but like Europe, the United Kingdom’s structural headwinds leave the longer-term picture still bearish.

The fall in US long-dated yields on Friday has pushed USD/JPY down to 127.35 this morning. Given the weight of long USD/JPY positioning, failure of support at 127.00 could trigger a capitulation trade potentially targeting the 125.00 support area. At those levels though, given the trajectory of US and Japan interest rates, being short becomes a dangerous game.

AUD/USD and NZD/USD have resumed their recoveries after a quiet weekend news-wise green-lighted the sentimentalists to resume buying. AUD/USD has risen 0.60% to 0.7090, and NZD/USD has risen 0.70% to 0.6455. ​ Any rally above 0.7200 or 0.6500 will be challenging though as both currencies remain at the mercy of sudden negative swings in investor sentiment, especially from China. An RBNZ rate hike on Wednesday should allow the NZD to outperform AUD in the earlier part of the week. Beware a dovishly hawkish RBNZ statement on Wednesday though.

The PBOC has helped the recovery in risk sentiment rally by Asian currencies along today, setting the CNY at a much stronger than expected 6.6756. Most of USD/Asia is lower by around 0.25% today, although USD/MYR and USD/IDR are unchanged. It seems that USD/CNY above 6.8000 is a bridge too far now for the PBOC. But overall, they are probably more concerned about how fast it moved there, and not the overall direction of travel. In the short term, the PBOC’s actions will be supportive of Asian currencies in general. USD/INR and USD/KRW have put in decent tops at 77.80 and 1290.00 respectively. If US yields resume their move higher, I expect Asian currency weakness to reassert itself, although with regional central banks starting to hike now, we should see a slow grind, and not an abrupt sell-off.

A quiet day for oil markets

Oil prices edged higher on Friday in New York, as the persistent squeeze in refined petroleum products in the US, and ever-present Ukraine/Russia risk underpinned prices, with China slowdown and US recession noise limiting gains. Mind you, in one article I read this morning, China’s recovery hopes were supporting oil while China’s slowdown hopes were capping gains. I guess it’s not just equity markets that are very confused right now. I do note, though, that the Brent crude premium over WTI reasserted itself into the end of the week, so perhaps the worst of the US diesel and gasoline squeeze is passed for now.

Brent crude rose by 1.10% to $112.55 on Friday, gaining another 0.70% to $113.30 a barrel in Asian trading. WTI rose 0.40% to $110.55 on Friday, gaining another 0.35% to $110.90 a barrel today. The price action is consistent with a market that is not strongly leaning one way or another at the moment.

Brent crude has resistance at $116.00 and support at $111.50 a barrel. WTI has resistance at $113.00 and $116.00 a barrel, with support at $108.00. Overall, I am expecting Brent crude to bounce around in a $111.00 to$117.00 range this week.

Gold rises on weaker US Dollar

Gold prices rose on Friday, climbing just 0.24% to $1844.00 an ounce. In Asia, they have gained 0.42% to $1854.00 an ounce. Although gold’s rally has been impressive over the past week, it has yet to be proven that it is not just the result of a weaker US Dollar. The true test of its resolve will be its ability to maintain gains when the US Dollar starts rising again.

Nevertheless, the technical picture is swinging back to a further test of the upside with resistance at $1860.00 and then $1885.00 an ounce, its 100-day moving average. Support is at $1845.00 and $1840.00, followed by $1832.00 an ounce.

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Energy

Nigeria, Ghana, Others Need $60bn For Energy In 8 Years – Sylva

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The Federal Government of Nigeria has estimated that Sub-Saharan Africa would need about $60 billion in order to have electricity, energy supply and clean processing of food between now and 2030.

Minister of State for Petroleum Resources, Timipre Sylva disclosed this at the annual Symposium and Exhibition of the Petroleum Engineers (LPE) in Lagos.

He noted that an annual investment of around $35 billion could bring electricity access to 759 million Africans who currently lack it.

He added that another $25 billion a year could help 2.6 billion people globally to access clean cooking by 2030.

“Annual investments of around $35 billion could bring electricity access for 759 million people who currently lack it, and $25 billion a year can help 2.6 billion people gain access to clean cooking between now and 2030,” he said.

The need for developing African petroleum value chains has been at the forefront of African development. Investors King had earlier reported that oil will play a significant role in the African energy mix and will take the highest share over all forms in the future mix.

However, Sylva noted that with the demand of over 600 million without access to electricity, Africa must do this in a modern way.

”We must not solve one problem while creating another. Africa needs to also take care of the environment.

“We must have a clear mandate and one voice on how we are going to meet our emissions targets. China has said that by 2060, it will achieve carbon neutrality. Europe has set its target for 2025. Africa needs to do this, as well.”

Sylva also emphasized that the required expenditure is a minor part of the larger multi-trillion-dollar global energy investment required.

Despite providing below 6% of global energy use and 2% of total global emissions, Sylva believes that the continent must transition to sustainable energy use.

Africa, Sylva believes, has the potential to take a prominent role in this regard because of its vast undiscovered fossil energy deposits, which may offer more even foreign direct investment and export money.

However, the minister emphasized that Nigeria possesses the most extensive natural resources in Africa, with around 208.62 trillion cubic feet (TCF) of known gas valued at over $803.9 trillion and a potential upside of 600TCF of gas.

Sylva described the Petroleum Industry Act (PIA) as a game-changer that will assist Africa in eradicating energy crises.

“The PIA has generous incentives to enable development, distribution, penetration, and utilization of gas even as it incentivizes entry into the midstream, especially for pipelines with an additional five-year tax holiday for investment in gas pipelines.

“The PIA is a supply-side enabler, capable of provoking and triggering commercial interests and investments in gas utilization as well as treating gas as a stand-alone commodity.

“As a nation, we are following a transition pathway that combines technology, investment, business strategies, and government policy that will enable Nigeria to transition from its current energy system to a low-carbon energy system with natural gas playing a pivotal role over the next generation, roughly between now and 2060,” he added.

The minister insisted that there must be multiple pathways to the energy transition in order to ensure that no country is left behind in the process of achieving net zero by 2060.

“As a continent, we need to be intentional and recognize the need to develop hydrocarbon resources in environmentally and socially responsible ways.

“And as alluded to by the African Union, we need to be realistic in choosing the energy transition pathways which address our unique requirements and circumstances,” Sylva said.

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Markets

Another Turbulent Day

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

It’s been another turbulent session after stock markets turned sharply lower on Wednesday as investors fret over the outlook for the economy this year.

Results from Walmart and Target this week have brought into sharp focus the plight facing companies and consumers as inflation begins to bite. And that’s in a country that is still performing relatively strongly with a consumer that still has plenty of savings built up over the last couple of years. Others are not in such a fortunate position.

But inflation is catching up and profit margins are taking a hit. Soon enough though, those higher costs will continue to be passed on and consumers will stop dipping into savings and start being more careful with their spending. There’s a feeling of inevitability about the economy, the question is whether we’re going to see a slowdown or a recession.

The language we’re seeing from Fed officials isn’t filling me with confidence either. We’ve gone from them being confident of a soft landing, to a softish landing and even a safe landing, as per Patrick Harker’s comments on Wednesday. I’m not sure who exactly will be comforted by this, especially given the Fed’s recent record on inflation and past record on soft landings.

And it seems investors aren’t buying it either. A combination of these factors and no doubt more has sent equity markets into another tailspin, with Wall Street registering another big day of losses on Wednesday and poised for another day in the red today. Europe, meanwhile, is also seeing substantial losses between 1% and 2%.

Oil slips as economic concerns weigh

Those economic concerns are filtering through to the oil market which is seeing the third day of losses, down a little more than 1% today. We were bound to see some form of demand destruction if households continued to be squeezed from every angle and it seems we may be seeing that expectation weigh a little as we move into the end of the week.

Meanwhile, China is reportedly looking to take advantage of discounted Russian crude to top up its reserves in a move that somewhat undermines Western sanctions. Although frankly, it would have been more surprising if they and others not involved in them didn’t explore such a move at a time of soaring oil prices.

Still, I expect Brent and WTI will remain very high for the foreseeable future, boosted by the inability of OPEC+ to deliver on its targets and the Chinese reopening.

Gold buoyed by recession fears?

Gold appears to be finally seeing some safe-haven flows as markets react strongly to the threat of recession rather than just higher interest rate expectations. The latter has driven yields higher and made the dollar more attractive while the economic woes they contribute to seem more suited to gold inflows, it seems.

It will be interesting to see how markets react in the coming weeks if the investor mindset has turned from fear of higher rates to the expectation of a significant slowdown or recession. And what that would mean for interest rate expectations going forward. Perhaps we could see gold demand return.

Can bitcoin continue to swim against the tide?

Bitcoin is holding up surprisingly well against the backdrop of such pessimism in the markets. Perhaps because it’s fueled by economic concern rather than simply interest rates. Either way, it’s still trading below $30,000 but crucially it’s not currently in freefall as we’re seeing with the Nasdaq. Whether it can continue to swim against the sentiment tide, time will tell.

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