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Stock Selling Continues, Europe in Focus, Gold Benefits on dollar rally break, Oil rises, Bitcoin back Above $20k for Now

US stocks are declining after a weekend filled with global central bank hawkishness reinforced the message that global central bank tightening will deliver pain to households and businesses.

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Traders Wall Street

By Edward Moya

US stocks are declining after a weekend filled with global central bank hawkishness reinforced the message that global central bank tightening will deliver pain to households and businesses.  Friday’s sharp selloff is continuing as expectations for the global energy crisis to persist, which will keep inflation risks elevated and lead to a rapid deterioration of economic data.

Powell sent a short and direct message that there won’t be a Fed pivot anytime soon and that has markets positioned for further equity weakness.  Investors were expecting that once the US got some ugly data, perhaps a couple negative NFP reports, that the Fed would come to the rescue, but that might not be the case.  Premature loosening won’t be happening on the first signs that the economy is slowing down quickly and that raising doubts for anyone who bought stocks earlier this month.

All about Europe this week

The ECB rate decision will show that the current inflation narrative will force them to deliver massive rate hikes that will kill growth.  Over the weekend, ECB’s Rehn said their next step is a significant rate move in September and that it should be by at least 50 basis points. The latest round of ECB talk has been hawkish and that should have markets leaning towards expecting a 75 basis point rate hike.

The European Union Commissioner Ursula von der Leyen is preparing an emergency intervention and structural reform of the electricity market.  Drastic measures are needed to salvage the European economy as the risks of extremely higher energy costs could trigger a severe recession.  Czech officials have suggested capping natural gas used for power generation.  The EU is expected to meet on September 9th and is expected to show some plan on tackling the energy crisis.

Gold

Non-interest bearing gold got crushed early as more global central bank rate hikes are getting priced in.  Gold is edging higher as the dollar rally halted as the euro rises on expectations the ECB will deliver more rate hikes than investors initially thought.  If the dollar does not rally here, that could provide some relief for gold.  If equities remain in risk aversion mode as the speculative money that bought risky assets this month grows nervous economic growth is about to collapse, gold might be able to stabilize here.

Gold was vulnerable to a plunge towards $1700 but it is starting to show some resilience.  With the UK on holiday, today’s moves might be meaningless.  The true test for gold will come tomorrow.

Oil

The one trade that everyone can agree upon is that the oil market will likely remain tight.  Oil rallied on rising risks of a potential civil war that could put Libyan output at risk and over growing expectations that OPEC+ is positioning themselves to cut production.  What is also helping oil today is that despite risk aversion running wild, the dollar rally is on hold.

Oil has been trending lower but the supply side risks are too great and prices need to find a home above the $100 a barrel level.

Bitcoin

​Over the weekend, Bitcoin dipped below the coveted $20,000 price point as risk aversions grew following more global central bank hawkish talk from Jackson Hole.  Bitcoin is showing some resilience here as it has clawed back above the $20,000 level, despite widespread stock market weakness.  Crypto traders are not used to seeing Bitcoin withstand a rout on Wall Street, so this could be a promising sign.  Crypto bulls will be tested here as the risk for further risk aversion are high given the trajectory of the global economy.

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

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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