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Asia Bets on China Stimulus

Mainland China stocks are leading the way higher today after China’s Inflation data showed a still very benign inflation landscape

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Asian equities

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

Mainland China stocks are leading the way higher today after China’s Inflation data showed a still very benign inflation landscape. Inflation YoY in April climbed to 2.10% (1.8% exp), and Inflation MoM for April increased by 0.40% (0.20% expected). PPI also eased to 8.0% from 8.30% last month. In the context of the inflation landscape elsewhere in the world, China is in a very sweet spot at the moment, markets today are pricing that it gives China’s Government room to unleash some juicy stimulus GFC-style.

Of course, what the market wants, and what the market gets are often two different things, especially where the Chinese Government are concerned. Premier Li continues to make noises about the potential for broader economic support, but with China still hell-bent on covid-zero, even if it crushes the economy, and the PBOC showing no signs of loosening the liquidity tap, along with the continuing rhetoric of “targeted stimulus,” I’m not seeing any signs, yet that China has moved away from its deleveraging stance. Even opening the taps now would be of limited impact if workers can’t leave lockdown to build roads or go back to factories.

That sort of mixed messaging doesn’t do markets any favours, but China isn’t the only one guilty of it. The rent-a-crowd of daily Fed speakers are also a bit “mixed.” We saw some big ranges in stocks and bonds overnight as increasingly frantic markets chase their tails in the vice grip of recessions and Fed hiking/inflation. The Fed’s Loretta Mester, on Bloomberg television, didn’t help things by saying “we don’t rule out 75 forever,” meaning 75bps hikes could happen. ​ US longer-dated yields fell quite heavily overnight as the street tentatively priced in “peak-hiking,” but the more rate-sensitive 2-year was unchanged. This kind of mixed messaging isn’t at all helpful and may be why equities gave back some gains overnight.

The US National Federation of Independent Business (NFIB) survey overnight suggests US inflation isn’t going to fall precipitously soon. The price change and 3-month pricing plan sub-indices were as robust as ever, suggesting cost increases, and the ability to pass them on to consumers is as robust as ever. That isn’t stopping the US Federal Government, now looking nervously at mid-terms in November, from trying to do something about inflation as diesel and gasoline prices soar. President Biden has hinted a temporary suspension of Federal fuel taxes could be on the cards, and he is actively exploring removing the Trump-era tariffs on Chinese goods to push the CPI lower. That has given US equity futures a leg up today. However, even if we may be nearing the top of inflation, that doesn’t mean it will suddenly drop; it could just as easily move sideways at the levels globally for some time.

One risk factor constantly being ignored when it shouldn’t be, is the Ukraine war. Ukraine has announced the suspension of west-bound gas exports through a compressor hub, ostensibly because Russia is siphoning the gas to its vassals in Donetsk. It is trying to redirect flows to another interchange that remains under Ukrainian control. Naturally, Gazprom disagrees, but the threat of disruption to European gas supplies appears to be pushing oil sharply higher in Asia today, helped along by stimulus hopes from China. All bets are off on inflation if Russian gas gets cut to Europe.

New Zealand has announced today that it will fully reopen borders in about six years, I mean weeks’ time on July 1st. The New Zealand Dollar is 0.25% higher, but that is due to a modest risk-sentiment recovery. Like everything to do with the Covid recovery by the government and the Reserve Blank, it is too little, too late. AUD/NZD above 1.1000 might encourage some Australian skiers to venture across the Tasman Sea for the winter season, but they’ll be shocked at how many New Zealand Pesos will be required to buy anything. New Zealand remains my no.1 pick for a hard landing later this year among developed countries unless Russian gas gets turned off to Europe.

Another central bank on a growing list having to make least-worst choices is Bank Negara Malaysia today. The Malaysian Ringgit has performed terribly these past two months, showing none of the resource-based support that the Indonesian Rupiah had achieved. In that respect, the Ringgit appears to have become a China-proxy like the Australian Dollar. Headline inflation is still quite manageable at 2.20%, but food price inflation is heading above 4.0%. That reduces the pressure on BNM to hike rates today, but like the RBI last week, and Indonesia next month, they will likely have to move soon unless they want to start burning through foreign reserves to defend the currency. Malaysia encapsulates the least-worst choices facing many an Asian central bank as 2022 goes on, especially as China’s PBOC seems quite happy to allow the Yuan to continue depreciating in a back-door stimulus for exporters.

The evening’s highlight will be the US Inflation data. April Core Inflation YOY is expected to ease from 6.50% to 6.0%, with Headline Inflation YoY expected to ease to a still-eye-watering 8.10%. Expect a binary outcome from the data. Lower prints will see peak-Fed hiking priced in, good for equities and bonds, bad for the US Dollar. Stubbornly high prints see more Fed tightening. Bad for equities and bonds, but good for the US Dollar.

Keep an eye on official US Crude Inventory data as well, particularly the refined gasoline and distillates categories. The US has plenty of oil but seems to be struggling to refine it into diesel, like the rest of the world. We could see a sharp move higher by WTI if the sub-category’s inventories fall sharply, and it will be another headwind for equities as well.

Finally, cryptos have a volatile session, Bitcoin had an impressive rally intraday before losing much of those gains to finish 3.0% higher at $31,000.00. Bitcoin failed just ahead of resistance at $33,000.00 overnight, a bearish technical development. Failure of $30,000.00 likely signals the next wave down for Bitcoin which should target $17,000.00 in the weeks ahead. (or days) I am watching the (un)stable coin situation, with 1 to 1 to the US Dollar pegs breaking in the space. I have warned before that so-called stable coins made me nervous due to the opacity of do they actually have one US Dollar in reserves for every (un)stable coin issued. Turmoil here could result in more downward pressure in the cryptocurrency space.

Asian equities are mixed.

It was an inconclusive session overnight in New York as recession fears and lower oil prices seemed to weigh on value stocks while the buy-the-dip gnomes piled back into growth as longer-dated US yields headed lower. The S&P 500 edged 0.25% higher, while the Nasdaq gained 0.98%, but the Dow Jones ended the session 0.26% lower. In Asia, that has continued with Nasdaq futures rising 0.75%, S&P 500 futures rising 0.35%, and Dow futures edging 0.23% higher.

Part of the rally in US futures could be explained by China’s stock market outperformance today. With inflation data benign, China markets have quickly moved to price in room for heavier China stimulus going forward. That has seen the Shanghai Composite jump higher by 1.63%, the CSI 300 rally by 2.04%, and the Hang Seng gain 1.62%.

Elsewhere in the Asia-Pacific, the performance is more mixed as China recession fears and Fed rate hikes continue to buffet local markets. The more Nasdaq aligned Nikkei 225 has risen by just 0.12%, but the Kospi has slipped 0.20% lower, with Taipei unchanged. Singapore is down by 0.60%, with Kuala Lumpur edging 0.15% higher ahead of the BNM policy decision. Jakarta is 0.60% higher, while Bangkok has lost 0.50% and Manila is 0.70% lower. In Australia, the All Ordinaries have slipped by 0.12%, and the ASX 200 has lost 0.28%. Overall, the picture is one of the markets left to their own devices after an inconclusive US session and a slow headline reel in Asia.

European markets are likely to take fright at potential trans-Ukraine natural gas disruptions and track lower initially. US markets will continue to be buffeted by the Fed speaker rent-a-crowd, with US inflation data set to define the session.

Currency markets consolidate.

Currency markets were content to leave the equity FOMO gnomes to chase their tails overnight, while currencies traded sideways ahead of US inflation data tonight. The dollar index is almost unchanged over the past 24 hours at 103.80 this morning. ​ A daily close above 104.00 will signal rapid gains to 105.00 and in the bigger picture, the technical picture still says a multi-month rally to above 120.00 is possible. Support lies at 103.50 and 102.50.

Likewise, EUR/USD and GBP/USD are almost unchanged over the past 24 hours, trading at 1.540 and 1.2335 today. A move above 1.0600 or 1.2400 could see a further short squeeze worth another 100 points, but the overall technical picture remains very bearish. Only a sharp fall in US inflation tonight changes the picture temporarily.

USD/JPY is trading sideways at 130.35 today with the price action most notable overnight for the fact that USD/JPY did not fall with longer-dated yields. In the short end, 2-years were almost unchanged and that is perhaps where we should look for directional signals in the near term. Overall, the US/Japan rate differential and technical picture suggest further USD/JPY appreciation is a matter of when, and not if.

AUD/USD and NZD/USD have consolidated at the bottom of their ranges these past two days. AUD/USD is at 0.6960 today, with NZD/USD at 0.6305. Of the two, the NZD/USD looks most vulnerable to further losses, but both are being buffeted as risk-sentiment indicators. Failure of 0.7300 or 0.6250 will signal another move lower is beginning.

The Asian currency space was quiet overnight, prices moving sideways. Much the same price action has been seen in Asia today and it appears that the US inflation data tonight will be the next directional spark. Lower inflation should be Asia FX supportive, while higher inflation will be negative for Asian currencies. The Malaysian Ringgit could see some volatility this afternoon over the BNM policy decision. It could move sharply higher if BNM surprises with a hike.

Oil rallies in Asia.

Oil prices continued falling overnight as China slowdown nerves and increasingly, US recession fears weighed on prices. In Asia, we have seen a sharp bounce as energy markets price in most China stimulus after benign inflation data, with Ukraine gas disruption likely having a flow-through impact on oil prices.

Overnight, Brent crude finished 3.55% lower at $101.50, and WTI closed 3.45% lower at $99.00 a barrel. Prices have jumped in Asia with Brent crude rallying by 3.30% to $104.80, and WTI leaping 3.10% higher to $102.05 a barrel. I suspect the gas disruptions in Ukraine are having a steadily increasing impact, as hopes of more China stimulus alone would not just the bounce we have seen today. As a result, I see more upside to oil prices in Europe this afternoon. US Natural Gas has moved 2.50% higher today, after rallying 4.0% higher overnight.

Brent crude has formed a triple top at $114.75 a barrel, which will be a formidable barrier in the near term. It has support at $101.50 a barrel. I am sticking to my broader $100.00 to $120.00 a barrel wider range ahead for now. WTI has resistance at $111.50 with support at $98.50 a barrel. Once again, I remain comfortable with a $95.00 to $115.00 a barrel outlook in the medium term.

Gold looks shaky.

Gold’s price action can only be described as negative overnight. Despite lower US yields and a sideways US Dollar, gold fell by 0.84% to $1838.50 an ounce, taking out support at $1850.00. In Asia, gold is unmoved from the New York close with little interest from regional players ahead of US inflation data.

Gold is now just above the triangle apex at $1835.00, the breakout of which in early February, signalled the gold rally to $2060.00 an ounce. A daily close under $1835.00 would be an ominous technical development although it must be said, gold’s recent price action suggested downside risks were in play.

Failure of $1835.00 sets up a test of support at $1820.00 and then potentially $1780.00 an ounce. Failure of the latter suggests a deeper correction to $1700.00. Gold has resistance at $1850.00 and $1882.00 an ounce, its 100-day moving average. I foresee more whipsaw trading ranges in the days ahead.

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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green energy - Investors King

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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capital market - Investors King

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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