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Global Stocks on Brink of Bear Market as Oil Slides; Ruble Sinks

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London Stock Exchange Group Plc

Turmoil returned to global markets as oil plunged and European stocks sank to the lowest levels in 13 months, fueling a rush into haven assets.

Earnings exacerbated the rout, sending MSCI Inc.’s gauge of global equities to the brink of a bear market. Russia’s ruble and Mexico’s peso fell to records, while bets mounted on an end to Hong Kong’s dollar peg. Yields on 10-year Treasuries dropped below 2 percent and the yen jumped to a one-year high.

“There are a lot of things behind” the selloff, said Steven Schwarzman, the chief executive officer of Blackstone Group LP, in an interview Wednesday with Bloomberg Television’s Erik Schatzker from Davos, Switzerland. “You have economic things such as the slowing of the U.S. economy which has been pretty gradual. You’ve got energy going down so quickly that you can almost get windburn. You’ve got China as an issue which is is probably overdone. So when you put those factors together you have an unattractive brew along with the concern the Federal Reserve will raise rates and slow the economy further.”

Oil’s slump to a 12-year low is ripping through markets. Just on Wednesday, Royal Dutch Shell Plc said profit may drop at least 42 percent in the fourth quarter and Saudi Arabia was said to order a halt in selling options used to bet against its currency peg. U.S. bonds now predict the slowest inflation since May 2009. A report on Thursday will probably show U.S. crude stockpiles expanded, exacerbating the global glut.

“It’s back to oil and that’s what is driving everything,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “We can easily run more because it’s pure fear. I don’t know what we need to change this sentiment.”

Stocks

The Stoxx Europe 600 Index tumbled 2.5 percent at 8:35 a.m. in New York, with all industry groups declining. The MSCI All-Country World Index retreated 1.2 percent, extending its drop from a May high to 18.6 percent, nearing the 20 percent threshold for a bear market. More than $15 trillion has been erased from the value of global equities in the period, according to data compiled by Bloomberg.

Shell slid 5.5 percent and BHP Billiton Ltd. dragged commodity producers lower, falling 6.9 percent after trimming its full-year iron ore output forecast. Zurich Insurance Group AG declined 8.7 percent after forecasting a second straight quarterly loss for its biggest unit.

Standard & Poor’s 500 Index futures slid 1.6 percent. Goldman Sachs Group Inc. slipped 1.9 percent after reporting a 65 percent drop in fourth-quarter profit as an agreement to settle a U.S. probe into its handling of mortgage-backed securities reduced earnings.
The cost of living in the U.S. dropped in December, led by a slump in commodities, and New-home construction in the U.S. unexpectedly fell, government reports showed to day.

Emerging Markets

The MSCI Emerging Markets Index dropped the most in two weeks, sinking 2.8 percent to the lowest on a closing basis since May 2009. The gauge is down more than 12.6 percent this year, the worst start since records began in 1988.

Hong Kong’s Hang Seng China Enterprises Index tumbled 4.3 percent as oil producers plummeted and a drop in the city’s dollar spurred concern over capital outflows. The Shanghai Composite Index slipped 1 percent.

Russia’s Micex Index declined 1 percent and the Bloomberg GCC 200 Index of equities in Gulf markets lost 3.6 percent. Saudi Arabia’s Tadawul All Share Index sank 5 percent and Dubai shares slid 4.6 percent. Egypt’s benchmark tumbled 5.3 percent.
Russia’s ruble weakened as much as 3.1 percent to a record 81.0490 against the dollar. The Mexican peso fell to a record 18.4775 per dollar and is down 6.4 percent this year, making it Latin America’s worst performing major currency.

Saudi Arabian banks are under orders to stop selling currency products that allow investors to make cheap bets on a devaluation of the riyal, according to five people with knowledge of the matter. The Saudi Arabian Monetary Agency told banks not to sell options contracts on riyal forwards at a meeting in Riyadh on Jan 18., the people said, asking not to be identified as the information is private.

Hong Kong’s dollar traded near its weakest level since 2007 and forwards contracts sank as China’s market turmoil fueled speculation the city’s 32-year-old currency peg will end. Contracts to buy the currency in 12 months fell as much as 0.3 percent to HK$7.8904 per dollar, beyond the HK$7.75-HK$7.85 range that it can trade within under the existing exchange-rate system. The spot rate dropped to as low as HK$7.8272, within 0.35 percent of the weak end of its band.

Commodities

West Texas Intermediate crude lost as much as 4 percent to $27.32 a barrel before trading 3 percent lower. Inventories probably increased by 2.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration Thursday.

Industrial metals dropped on prospects for slower economic growth in China and sustained low oil prices. Copper fell as much as 1.1 percent.

Gold rose as renewed losses in equities spurred demand for less risky assets, with Citigroup Inc. saying bullion’s rationale as a haven was now back in vogue and prices may be supported over the first quarter.

Soybeans in Chicago dropped from the highest in almost four weeks on bets that ample supply in South America will damp prices.

Currencies

The yen strengthened 0.8 percent to 116.68 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.9 percent to 127.19 per euro. The euro was little changed at $1.0908.

The Australian dollar slid 0.8 percent to 68.52 U.S. cents, extending this year’s decline to 6. percent. The kiwi touched the weakest level since Sept. 30.

The Canadian dollar, which has fallen every day this year, slipped to the lowest since 2003 amid speculation the central bank will cut its benchmark interest rate to a level last seen during the 2009 financial crisis.

The Bank of Canada decides on interest rates Wednesday, and private-sector economists are almost evenly divided on whether it will cut the policy rate to 0.25 percent.

Bonds

Treasuries climbed, pushing 10-year yields to the lowest since October, as investors sought the safety of sovereign debt. The benchmark 10-year note yield fell nine basis points to 1.97 percent, according to Bloomberg Bond Trader data. That’s the biggest drop since Dec. 11.

The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, shrank as much as three basis points to 1.37 percentage points, the narrowest since May 2009.

The yield on similar-maturity German bunds sank five basis points to 0.50 percent, while that on U.K. gilts fell seven basis points to 1.63 percent.

The cost of insuring corporate debt resumed increases. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies rose for the 10th time in 11 days, climbing three basis points to 99 basis points. An index of default swaps on junk-rated companies jumped 19 basis points to 397 basis points, the highest in more than a year.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Gold Hit 26.8% ROI YTD, the Highest Increase in Value Among Top Assets

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Gold Bars

Gold Delivers 26.8% Return on Investment Year-t-Date

As the world’s earliest form of currency, gold has long been considered a reliable store of value. Unlike banknotes, stock, or other assets, the precious metal managed to preserve the investors’ wealth throughout the years, especially in times of turmoil in the financial markets.

According to data presented by AksjeBloggen, gold hit a 26.8% YTD return on investment, the highest increase in value among top assets.

Gold Return Rate 8.5% Higher than in 2019

Investors tend to focus on gold in times of market volatility, considering it to be a ‘safe haven’ in crises like the coronavirus. In 2019, the value of gold increased by 18.3%, revealed the Blackrock data. The precious metal continued the impressive performance in 2020 with a 26.8% YTD return, 8.5% more than in 2019.

Statistics show that last year, the S&P 500 index increased in value by 31% but was outperformed by Nasdaq, which grew by 35.2%. The MSCI Europe index rose by 26.1% in 2019. China A-shares followed with a 22.3% ROI.

However, the COVID-19 crisis had a massive impact on popular assets, causing a sharp fall in their values during the first half of 2020. The Blackrock data revealed the Nasdaq YTD return hit 23.9%, 11.3% below the 2019 performance. China A stocks reached 10% ROI YTD, much under the 22.3% return in 2019.

Statistics show the S&P 500 index had an 8.4% value increase in the nine months of 2020, almost four times less than in 2019. MSCI Emerging Market Index reached a 4.9% value increase in the same period, compared to 13% in 2019.

The Blackrock data show that crude oil, FTSE 100, and MSCI Europe index witnessed the most significant drop in the nine months of 2020, with their values falling by 34.6%, 22.4%, and 11.5%, respectively.

Global Demand for Investment Gold Surged by 100% YoY

Although many investors value gold as an important portfolio asset, the economic downturn caused by the COVID-19 pandemic led to a surge in global demand for the precious metal.

The World Gold Council data showed the global demand for investment gold increased significantly since the beginning of the year.

In the fourth quarter of 2019, it amounted to 279.2 metric tons. By the end of March, this figure jumped by more than 93% to 539.6 metric tons. The increasing trend continued in the second quarter of the year, with global demand for investment gold hitting 582.9 metric tons, an almost 100% jump year-over-year.

Statistics indicate the global demand for gold for investment purposes hit a record-breaking 1,152 metric tons in the first half of 2020, the highest figure so far.

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Oil Prices News: Oil Gains Following Drops in US Crude Inventories

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markets energies crude oil

Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level

Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.

The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.

Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.

The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.

Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”

Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.

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Oil Prices Gain on Tuesday Despite Expected Surge in Global Oil Supplies

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Oil

Oil Prices Rise Despite Expected Surge in Global Oil Supplies

Oil prices gained on Tuesday despite Libya opening Sharara oil field for production, labour in Norway reaching an agreement with oil firms to return back to work and oil workers in the U.S returning to the Gulf of Mexico region after the Hurrican Delta.

Brent crude oil, against which Nigerian oil price is measured, gained 1.77 percent to $42.46 per barrel as at 11:15 am Nigerian time on Tuesday.

While the US West Texas Intermediate (WTI) crude oil gained 2 percent to close at $40.22 per barrel.

The improvement in prices was after oil prices plunged as much as 3 percent on Monday following a resolution reached by Libyan rebels and government to commence oil production at the nation’s largest oil field, Sharara Oil Field.

This coupled with labour agreement with oil firms in Norway was expected to boost global oil supplies and eventually weighed on prices and disrupt OPEC+ production cuts strategy.

However, prices surged after Nancy Pelosi said she would commence talks on $1.8 trillion stimulus package following President Trump’s return to the White House after he was rushed to hospital following a positive COVID-19 test.

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