what is crude oil?

All eyes on OPEC+

Oil prices are continuing to creep higher ahead of the OPEC+ meeting on Wednesday. Markets are now expecting a large output cut in excess of one million barrels per day, for which there is seemingly plenty of support. But with the economic outlook becoming gloomier by the day, will the alliance go far enough to achieve the $90-100 oil they so clearly desire? I suspect any cut will be accompanied by strong language over the prospect of further action which may make up for any shortfall, should they take a more conservative approach.

A hot jobs report may spoil the party

All this talk of peak rates has excited the gold bulls, with the yellow metal leaping above $1,700 and gaining momentum. The sustainability of any rebound will ultimately depend on how long traders can convince themselves peak rates are priced in. Looking back at past periods of optimism, we may be on borrowed time. Of course, rates can only go so far and the RBA has already taken the decision to tak

Crude Oil: Between Slowing Demand and Shrinking Supply

Crude Oil: Between Slowing Demand and Shrinking Supply

Sebastian Bischeri Sebastian Bischeri 12.04.2022 16:47
Coronavirus in China, fights in Ukraine, sanctions against Russia – what else could raise concerns about oil supply in an already tense market? An economic slowdown in China, which appears to have adopted a “zero-tolerance” epidemic policy, was weighing on oil prices as the country’s COVID case count rose. Lockdown that has locked 25 million people in their homes Finally, some restrictions in Shanghai are being eased in certain neighborhoods following growing dissatisfaction with the very strict lockdown that has locked 25 million people in their homes. That lockdown has caused food shortages and forced thousands of citizens into isolation in specialized centers, consequently causing a food delivery surge and staff shortages. Related article: ECB To Shock Markets In The Following Week!? US Dollar Rate Under Pressure As Well! 7 million barrels a day of Russian exports, supposed to be lost due to sanctions, could not be fully replaced In Ukraine, fears of fighting, which could intensify in the eastern region (around the Donbas), are also stirring the markets. Meanwhile, OPEC Secretary General HE Mohammad Sanusi Barkindo warned the European Union on Monday that the 7 million barrels a day of Russian exports, supposed to be lost due to sanctions, could not be fully replaced, reports the financial press. Such concerns may again raise fears about the supply of black gold in an already tight market. It was added that the current and future sanctions on Russia could create one of the worst oil supply shocks ever and it would be impossible to replace those volumes, as OPEC signaled it would not pump more. WTI Crude Oil (CLK22) Futures (May contract, daily chart) Henry Hub Natural Gas (NGK22) Futures (May contract, daily chart) Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien BischeriOil & Gas Trading Strategist * * * * * The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Oil’s outlook, gold steadies

Crude Oil Price Chart - How Will The Price Of Crude Oil Change Amid The Reduce Of Production?

Alex Kuptsikevich Alex Kuptsikevich 13.04.2022 12:18
The price of oil rose more than 6% on Tuesday, with the main driver being news that Russia is sharply cutting its oil production. Reuters sources report a fall in production in the first days of April to 10.32m BPD, down from an average of 11M in March and 11.06M in February. But the same sources report that only 9.76M was produced on Monday, noting an increasingly rapid drop in production. By comparison, the low point of Russian oil production at the deep of the coronavirus restrictions was 9.37M barrels. Russia probably has not yet solved the problem of drastically changed logistics due to sanctions A 12% drop in production or 1.7M BPD in just a month and a half calls this quarter's global oil stockpile growth projections into question. Another source, the International Energy Agency, expects Russian production to fall by 1.5M BPD in April and 3m BPD in May. A gradual production ramp-up cannot offset such a dip. Neither will it help to reduce forecasted demand growth rates. Russia probably has not yet solved the problem of drastically changed logistics due to sanctions. But investors should also bear in mind how devastating the sanctions have been on the energy sectors of Iran and Venezuela, where production decreased 2-4 times from the pre-sanctions peak. The falling volumes of these countries have been replaced by Russia, the US and Saudi Arabia, but there is little indication that the latter two have the strength to pick up the former's export share. A sharp fall in Russian production has brought worries about energy shortages back to the market Oil prices have been bouncing back since March 24th on reports of increased sales from strategic reserves by the US and its allies. Meanwhile, OPEC+ has increasingly failed to keep up with its quotas, not just because of Russia but because of all other members. A sharp fall in Russian production has brought worries about energy shortages back to the market. These reports have helped oil stay within the uptrend formed in early December. It will not be surprising if the oil price manages to bounce back from this five-month support in the coming days, again going on to storm levels above $110. Until recently, the USA has been unable to take advantage of the situation and has been increasing its production much more slowly than it has since the global financial crisis. Perhaps we will see a change in this situation in the weekly US oil production and reserves data published later today.
UK Inflation Influences GBPUSD Price Line, USDCAD Shows Canadian Dollar Strength, Crude Oil Price (USOIL) Has Been Rising Gradually

UK Inflation Influences GBPUSD Price Line, USDCAD Shows Canadian Dollar Strength, Crude Oil Price (USOIL) Has Been Rising Gradually

Jing Ren Jing Ren 14.04.2022 08:55
USDCAD tumbles towards daily support The Canadian dollar surged after the BOC’s aggressive rate hike of 50bp. The pair’s recovery came under pressure at 1.2670. A bearish RSI divergence shows a loss of momentum in the rally and the ensuing break below 1.2580 acts as confirmation of underlying weakness. A combination of stop losses and momentum selling could further depress the greenback. An oversold RSI may attract some bargain hunters and 1.2480 is a major level to keep the rebound intact. In fact, its breach could cause extended losses beyond 1.2400. Related article: ECB Interest Rate Decision Is Coming! European Indices (DAX, CAC40) To Plunge Or Rise? What About Forex Pairs? GBPUSD breaks resistance The pound recoups losses as the UK’s March CPI beats market expectations. Overall sentiment ticked down after the pair dropped below the psychological level of 1.3000. However, a swift bounce above 1.3080 is an encouraging sign for the bulls as it forced the bears to cover their positions. 1.3180 is the next resistance and a bullish breakout could bring the sterling back to 1.3300 and open the door to a reversal. The RSI’s overbought condition may lead to a pullback. And 1.2990 is the immediate support should this happen. USOIL grinds resistance WTI bounces as major trading houses plan to trim purchases of Russian crude. The price is slowly recovering from the daily demand zone around 94.00. This could be a consolidation phase after the recent wild ride. The RSI’s double-dip in the oversold territory triggered a buy-the-dips behavior. A break above 105.00 could cause a broader recovery to 115.00. The RSI’s swing into overextension may limit the impetus. The psychological level of 100.00 is a fresh support and 94.00 is a critical floor to keep the price afloat.
Uranium Prices Rising Amidst Russia-Ukraine Conflict, Oil Futures Seeing Large Gains, Lumber Price - Commodities in the Current Market

Uranium Prices Rising Amidst Russia-Ukraine Conflict, Oil Futures Seeing Large Gains, Lumber Price - Commodities in the Current Market

Rebecca Duthie Rebecca Duthie 14.04.2022 08:55
Commodities update by FXMAG.COM Value of lumber had increased by 1.25% As a result of the possibility that Uranium exports from Russia may be banned, the price of the commodity has increased by at least 50% As of market close yesterday, Oil futures saw a rise of nearly 4% as a result of the Ukraine and Russia coming to a dead end on negotiations The Price of Lumber and its relationship with mortgage prices and inflation. As of market close yesterday, the value of lumber had increased by 1.25%, showing small signs of recovery after the price fell by 6% on Tuesday. The price of Lumber falling consistently over the past month could be explained by the increase in the inflation rate which has put a dent in the home improvement market, thus weakening the demand for Lumber. Another potential explanation for the price of this essential commodity falling could be due to the supply chain issues the Lumber market was experiencing last year having being solved, easing supply pressures and subsequently lowering prices further. Lumber Price Chart Related article: ECB Interest Rate Decision Is Coming! European Indices (DAX, CAC40) To Plunge Or Rise? What About Forex Pairs? Uranium Prices Rising Amidst Russia-Ukraine Conflict. As a result of the possibility that Uranium exports from Russia may be banned, the price of the commodity has increased by at least 50% and according to Bank of America, they don't suspect the price surge to begin slowing down. As the war in the Ukraine continues, there is more possibility for the rising commodity prices to continue. Uranium Price Chart Related article: Wheat Futures Prices Influenced, By Weather, Naturally! Oil Futures Seeing Large Gains As of market close yesterday, Oil futures saw a rise of nearly 4% as a result of the Ukraine and Russia coming to a dead end on negotiations. As of the market open today, the price has dropped slightly to $102.95. The graph below shows the major gains made by this commodity yesterday. Crude Oil Price Chart Sources: Finance.yahoo.com, markets.businessinsider.com
Is The OPEC+ Decision Only Economic? Oil Is Caught Between Fears Of A Reduction In Demand

Price Of Crude Oil (WTI) And Natural Gas (NGAS) Boosting US Dollar (USD) Which Jumps High

Alex Kuptsikevich Alex Kuptsikevich 15.04.2022 09:57
Energy prices continue to fly into the stratosphere, adding 30% since the start of April, strengthening at twice the rate of March. The last time US gas was this expensive was in October 2008. Energy, oil, and gas have a very high price elasticity Demand for American gas has surged as Europe tries to cut back on purchases from Russia as much as possible. But this also puts the current commodity sharply in short supply. Energy, oil, and gas have a very high price elasticity, meaning that a supply or demand shift of just a couple of per cent leads to a much higher price change. Thus, the US provokes soaring prices on domestic markets by providing Europe with gas. Oil also receives a strong upward marches, not only as of the closest substitute but also as another Russian export that the world is in a hurry to abandon. Oil prices managed to stay in an uptrend WTI was back above $105, and Brent closed Thursday above $110, returning to levels of two weeks ago. Oil prices managed to stay in an uptrend, albeit this time as a slider amid accelerating gas prices. The performance of oil and gas prices is supported by US export figures, which is favourable for the Dollar. Notably, in contrast to the historical correlation, energy is rising with the Dollar, although more often than not, a rising dollar pressures energy. As one of the leading energy exporters, having strengthened its position, the states will economically have the most negligible impact on the economy compared with most developed countries that are net importers of oil and gas. Fed can raise interest rates more quickly Higher energy costs may not prevent the Dollar from moving somewhat up further but may strengthen it by giving the Fed carte blanche to tighten policy more forcefully. The Fed can raise interest rates more quickly, but it can also push them to higher levels without the risk of seriously hurting the economy.
The Oil Market Opened Today With A Gap, What Happen Next?

(USOIL) Crude Oil Price To Jump Above $110!? Soaring Coffee Demand

Rebecca Duthie Rebecca Duthie 15.04.2022 10:54
Summary: Price of Crude oil prices skyrocketed High global demand for coffee Price of platinium is rising again after the UK announced further sanctions on top Platinum suppliers The price of US Crude oil reflects the market's volatility and its liquid nature, the commodity is also used as a benchmark for global economic activity At the start of the Russia-Ukraine conflict, the price of Crude oil prices skyrocketed to unprecedented levels. The fall in the price that followed came after the White House's announcement that the US was considering releasing record breaking amounts of US crude oil in an attempt to combat shortage fears. The price is once again on the increase due to the high expectations on demand for US Crude coming hand-in-hand with the limited supply. US Crude Oil Price Chart Related article: Terra USD (USDT), Shiba Inu (SHIB), Polygon (MATIC) Update. Take a Look at What Happened in the World of Cryptocurrency Today  Coffee is second to Crude oil when it comes to popularity in the commodities market Despite the high global demand for coffee, the price is still falling due to unfavorable weather conditions during the growth phase, this comes in addition to the high increase in the cost of shipping also. Coffee Price Chart Platinum as a commodity in the current market The price of platinum increased earlier this month as a result of the rising in demand for the commodity. However, shortly after the initial increase, the price began to fall again and given the current conflict between Russia and the Ukraine, this is not very surprising (Russia is the second largest producer of Platinum after South Africa). The price is rising again after the UK announced further sanctions on top Platinum suppliers, sparking fears of shortages. Platinum Price Chart Sources: capital.com, Tradingeconomics.com, Finance.yahoocom, Dailyfx.com
Forecasts For Q4: The Power And Gas Crisis Will Reach Its Peak

(USOIL) Crude Oil Price Crisis!? Fed To Boost (USD) US Dollar? UK Inflation Rate Surprised Many This Week, What About The Following One? Economic Calendar by FXMAG.COM

Mikołaj Marcinowski Mikołaj Marcinowski 16.04.2022 17:59
Today, tomorrow and on Monday many countries around the world celebrate Easter. Friday was a day free for many stock markets and banks too. As we wrote yesterday forex market was live so we may say it had some time to stock (sic!) up. The following week is going bring many news and next proves of hawkish rhetoric of Fed, ECB and BoE. Monday – Going East – Chinese GDP On Monday many, many countries – Germany, Italy Spain, Australia and more has a day free. Only in China, very early in the morning GDP and Industrial Production are printed. Previously Gross Domestic Product amounted to 4%. Another indicator released at 3 a.m. – Industrial Production hit 7.5% previously. Related article: Deutsche Bank Shook DAX! French Election, Inflation And ECB Are Factors Which Shaped DAX (GER 40), CAC40, FTSE 100 And IBEX35 - Top Gainers, Top Losers Tuesday – RBA Meeting Minutes – NZD/USD To Plunge Again!? It’s good to have a look at RBA Meeting Minutes in the morning. The document will be released at 2:30 a.m. and may let us prepare NZD rate prediction. At 1:30 p.m. we focus on the data coming from the USA. Building Permits release previously amounted to 1.865M. This indicator let us diagnose the real estate market in the United States. Wednesday - Crude Oil Price To Skyrocket!? CAD/USD And NZD/USD May Fluctuate! First release of the day is Chinese PBoC Loan Prime Rate which takes place at 2:15 a.m. Previously this indicator amounted to 3.7%. At 1:30 p.m. you better follow CAD/USD and other pairs with Canadian dollar as Core CPI may shake the rate. Indicator amounted to 0.8% previous time. Later in the afternoon investors should follow the release of Existing Home Sales (6.02M) and, what’s most important – Crude Oil Inventories. ON April 13th Crude Oil Inventories hit 9.382M! Very late in the afternoon we focus on New Zealand where CPI (Q1) is released. Let’s follow NZD forex pairs then. Thursday – Huge Gain Of US Dollar Index (DXY) Amid Hawkish Fed!? Follow Euro To US Dollar (EUR/USD) and GBP/USD Fluctuations! What Will BoE And ECB Do? Naturally next Fed decision is made in May, but before it happens we all stay updated with the current Fed rhetoric expressed by i.a. Jerome Powell who speaks at 6 p.m. on Thursday. What’s more it’s going to be a really, really market moving day as alongside Powell, BoE’s Bailey and ECB’s Lagarde speaks as well! Additionally, at 10 a.m. the EU CPI is released. After the recent interest rate decision ECB’s rhetoric is definitely worth a follow! Article on Crypto: Hot Topic - NEAR Protocol! Terra (LUNA) has been seeing a consistent downward price trend, DAI Should Stay Close To $1 Friday – GBP/USD To Plunge!? UK Manufacturing PMI Release And BoE’s Lagarde Speaks Again The following week ends with some important releases. We begin with UK Retail sales, Manufacturing PMI, Services PMI and German Manufacturing PMI. In the afternoon Canadian Core Retail Sales (2.5%) is released. The day ends with ECB’s and BoE’s representatives’ testimonies. Source/Data: Investing.com Economic Calendar
End Of Crude Oil Price Crisis!? Price Of Crude Oil Amid Said Arabia And G-7 Acts

End Of Crude Oil Price Crisis!? Price Of Crude Oil Amid Said Arabia And G-7 Acts

Alex Kuptsikevich Alex Kuptsikevich 09.05.2022 15:09
Brent crude is back below $110/bbl, losing 2% since the start of the day on Monday. At the beginning of May, oil largely remained within the trends of previous months. There are still accumulating risks that oil will break down this support, giving the start of a correction. Since last month, bulls and bears have been concentrating on pulling the tug-of-war near the 50-day average Brent maintains an upward trend, but it is also running near a line that passes near the lows of the last five months. Since last month, bulls and bears have been concentrating on pulling the tug-of-war near the 50-day average, which has been pointing upwards since the beginning of the year. Saudi Arabia has cut its oil price premium to buyers in Europe and Asia Positively for oil, the G7 has declared a phase-out of Russian oil purchases, and OPEC has indicated a commitment to a rate increase of 432k a month. But at the same time, Saudi Arabia has cut its oil price premium to buyers in Europe and Asia. Locally, traders should pay attention to the dynamics of Brent near $112 Also playing out locally against oil was the news that Russia has stabilised production after a dip in April. In addition, drilling activity is picking up in the US, which promises a rise in output in the next few months. There is also more incentive for Saudi Arabia to increase its production. Brent remains in a triangle on the technical analysis side, retreating from its upper boundary. Locally, traders should pay attention to the dynamics of Brent near $112, where the area of previous local peaks is located. Bears, for their part, may cheer up in case of consolidation under $104, where purchases were strengthened last week. A move out of the 104-112 range could increase volatility in oil.
Oil pullback ends, gold steadies

Crude Oil (WTI) Pullback Ends, Gold Price (XAUUSD) Steadies | Oanda

Ed Moya Ed Moya 11.05.2022 22:15
Oil  Energy traders are bullish on oil prices again as China’s COVID situation shows signs of improving and after the dollar eased following a hot inflation report that did little to change short-term Fed rate hiking expectations. The oil market can’t justify oil prices below USD 100 given the potential shock that will occur once the EU is able to move forward with their ban on Russian crude. ​ ​ WTI crude tentatively pared gains after the EIA crude oil inventory report posted a surprisingly large build with stockpiles. ​ This report was full of surprises as US production declined by 100,000 bpd, the first drop since January. Read next: Stock Market Showing Signs Of Slight Recovery Amidst U.S CPI Report Release| FXMAG.COM The oil market seems to have made up its mind and it will focus on how tight supplies will be and not the eventual demand destruction that might happen later this year. ​ Gold slides after CPI report Gold prices tumbled as the dollar surged following a hotter-than-expected inflation report that will likely force the Fed into delivering more tightening than they were initially thinking. â€‹ Today’s inflation report proves that Fed Chair Powell made a mistake last week when he removed the option of a 75-basis point rate hike at the next policy meeting. The overall takeaway for much of Wall Street however is that the Fed is still poised to deliver consecutive half-point rate increases at the June and July FOMC meetings. Read next: Earnings Season: (DIS) Disney Stock Price Awaits Earnings Announcements| FXMAG.COM Gold gave up a majority of its gains after the inflation report but found massive support around the USD 1830 level, which is where the 200-day simple moving day resides. ​ Gold was close to showing signs of stabilizing as many investors were hoping for a sharper deceleration of pricing pressures, which was supposed to pave the way for a dollar pullback and a peak in with the rally in Treasury yields. Gold is tentatively holding onto the USD 1830 level and should continue to stabilize, but that may get tested if a steady wave of Fed speak raises market expectations for more aggressive tightening later this year. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Euro To The US dollar Pair May Move Upward

Will Petrol Prices Scare Drivers Again!? Crude Oil Price Reaches Really High Levels! US Dollar (USD) To Slowdown Its Skyrocketing? | Saxo Bank

Saxo Bank Saxo Bank 17.05.2022 11:09
Summary:  Market sentiment is mostly stable after a rare, uneventful day for global markets. Crude oil has pulled to a new local high as petrol prices in many countries have risen to record highs. The US dollar is on its back foot, helping to spark a sharp gold rally from capitulation lows after the precious metal had broken down through all major support levels. The mood in Asia brightened overnight on hopes China is set to ease its clampdown on the tech companies.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - S&P 500 futures closed just above the 4,000 level yesterday as US equities failed to extend their gains from Friday’s session. Tesla shares fell 6% as bubble stocks and crypto related companies fell almost 5% suggesting weakness in technology stocks continues. While the Empire State manufacturing PMI figures yesterday were from a little region of the US, they surprised significantly to the downside hitting levels typically consistent with low economic activity or even a mild contraction. S&P 500 futures are pushing higher trading around the 4,024 level with yesterday’s high at 4,043. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) rallied 2% and 1% respectively on prospect of relaxation of Covid restrictions in China.  JPMorgan’s 180-degree reversal to turn overweight in Chinese internet stocks also help the market sentiment. Alibaba (09988), Tencent (00700), Meituan (03690) and JD.COM (09618) gained about 5% to 6%. Auto makers, batteries and semiconductors surged on the prospect of normalization of supply chain from lockdown. Great Wall Motor (02333) rose over 10%. Ganfeng (01772) rose 6.7%. Hua Hong Semiconductor (01347) gained 6%.  Stoxx 50 (EU50.I) - European equities continue to trade at levels lower than a year ago as weakness is still widespread due to the war in Ukraine with BOE chief Bailey warning yesterday of the extreme risks related to galloping food prices and security of supply. Stoxx 50 futures are trading just below the 3,700 level this morning with the 50-day moving average at 3,732 being the key resistance level to watch on the upside. USD pairs – the US dollar weakened rather sharply yesterday as risk sentiment continued to stabilize. Traders should be on the lookout for whether the sell-off could extend sufficiently to trigger a tactical reversal in the USD bull trend. Levels worth watching include the 1.0500 resistance area in EURUSD, 0.7050-0.7100 resistance zone in AUDUSD, and 1.2400 resistance in GBPUSD. The Apr. Retail Sales report up later today could trigger market volatility. JPY pairs – JPY crosses have bounced hard from the steep sell-off late last week as risk sentiment has stabilized since Friday and, to a lesser degree, as bond yields pulled back higher. The volatility looks excessive relative to coincident developments. USDJPY will watch US treasury yields over the US data today with resistance around 130.00, while a break down through the important 128.00-127.50 area and consolidation back toward 125.00 likely needing a significant consolidation lower in US treasury yields. AUDJPY and GBPJPY have been particularly volatile JPY pairs since a one-off meltdown last Thursday that has now largely been erased. Gold (XAUUSD) trades higher supported by a softer dollar, higher oil prices and tailwind from silver (XAGUSD), as the industrial metal sector receives a boost from the prospect of easing lockdowns in China. The recent loss of momentum which helped attract fresh tactical short sellers was driven by the relentless rise of the dollar and the markets belief in the FOMC’s ability to bring down inflation without hurting growth. With the latter increasingly seeing downgrades, the risk of recession has not gone away, and it raises the question of whether real yields may pause following its March to May near 1.5% jump. Further weakness below 0.09% may signal a period of consolidation in US ten-year yields. Gold needs to break above its 200-day moving average at $1838 to force a further improvement in sentiment. Crude oil (OILUKJUL22 & OILUSJUN22) returned to an eight-week high overnight after China signaled it would start unwinding lockdowns in the Shanghai. Also underpinning prices is the continued strength in the price of fuel products, driven by strong demand and restrained refining capacity. Recently led by a record high price of RBOB gasoline future. Global demand has yet to show signs of demand destruction and with Chinese demand starting to recover the risk of higher prices remains, not least considering Europe’s continued efforts to reduce its dependency on Russian oil and gas. HG Copper (COPPERUSJUL22) has bounced back after hitting a seven-month low last week, and as we highlighted in a recent update, the market has been under pressure due to China lockdowns, and with those now starting to ease a bid has returned. If the change in sentiment towards a more favorable outlook takes hold, hedge funds may soon be forced to cover a short position which according to the latest COT report doubled to a two-year high in the week to May 10. The industrial metal sector slumped 25% during since early March as China closed, but with lockdowns now easing, stimulus policies focusing on the property sector and infrastructure will likely support a recovery. What is going on? High yield credit spreads continue to widen, signaling rising stress in corporate debt markets.  One measure of credit spreads, the Bloomberg US Corporate High Yield Average option-adjusted-spread, has widened to above 450 basis to US treasuries, the highest levels since late 2020. Back in late 2018, the spread peaked at 537 basis points just before the Powell Fed pivoted to easing policy. Lockdowns start to ease in Chinese cities. China’s nationwide (excluding Hong Kong) new local cases fell to 1,049 (sharply lower from the April 13 high of 29,317 cases), of which 823 cases from Shanghai and 52 cases from Beijing.  Shanghai reported three consecutive days of zero community (i.e. outside of quarantine) transmission.   The municipality expects to gradually resume public transportation services from May 22.  Starting from today train services and air flights to and from other Chinese cities is gradually resuming services.  The Shanghai government expects that the lockdown will be completely lifted in June.  Chinese tech stocks trade higher on hopes for easing stance from regulators. A symposium hosted by a prominent advisory body today in China has sparked hopes for a revival of tech stocks as executives of prominent companies like Baidu Inc were invited. JP Morgan Chase & Co. analysts yesterday announced upgrades to ratings on major Chinese tech names like Alibaba and Tencent Holdings. Bank of England Governor Bailey fears “apocalyptic” risk from rising food prices. Governor Bailey testified before a parliamentary committee yesterday and said the rise in prices is “a major worry not just for this country but for the developing world.” Bailey bemoaned the series of supply shocks that are driving a cost-of-living crisis for the many UK citizens as the price of food and energy, in particularly have risen sharply, the latter a direct result of the Russian invasion of Ukraine. Bailey also noted a 1.3% fall in the size of the labor market, which also limits economic growth potential. Deputy Governor Ramsden added that “we hear companies telling us that even people on median incomes are overextended.” RBA opening the door for bigger rate hikes. Minutes of the Reserve Bank of Australia's May monetary policy meeting showed that members considered three options, raising the cash rate by 15 basis points, 25 basis points or 40 basis points. The 40bps rate hike was avoided considering that the board meets monthly and would have the opportunity to review the data flowing in to decide on the size of future interest rate hikes. With inflation being seen as a key concern and Q1 inflation hitting 5.1% - the fastest pace in two decades – this likely suggests that there is room for 40bps (or more) of rate hikes in the upcoming meetings. What are we watching next? The European Commission downgraded GDP forecasts for 2022 and 2023. The EU Q1 GDP estimate is out later this morning. Official real GDP growth in both the European Union and the euro area is now forecast at 2.7 % in 2022 and 2.3 % in 2023, down from 4.0 % and 2.8 % (2.7 % in the euro area) in the last forecast released in February 2022. The forecast for 2022 is likely too optimistic. Several countries are facing a very challenging economic environment (stagflation risk in Germany and risk of technical recession in France, for instance). France’s wage negotiations are kicking off. According to a blog article published by the Bank of France last week, wages are likely to increase by 3% this year, on average. From 2014 to 2020, wages barely moved (+1 %). This is still not enough to cope with higher inflation (4.8 % YoY in April). April U.S. retail sales are out today. Expect the positive momentum to remain in place. Several factors are pushing retail sales up: solid auto sales, significant cash savings buffers (built during the pandemic) and rising wages (though they are not keeping pace with the increases in the cost of living). In the short-term, we believe consumer spending will remain robust and the domestic economy will be in a good position. Earnings Watch. As with many earnings release dates for Chinese companies they are postponed and that happened to Meituan yesterday. The Q1 earnings release has been postponed to 23 May. Today’s focus in Europe is Vodafone which could show its qualities as a defensive company during the current declines and then Nibe Industrier which is big on air-to-heat water pumps which are a declared preferred technology by the EU in its quest to become independent of Russian natural gas. In the US session, the focus will be on Walmart, Home Depot, JD.com and Sea Ltd. The two big retailers Walmart and Home Depot will provide great insights into consumer behaviour in their outlook. Today: Engie, Vodafone, Nibe Industrier, Sonova, Walmart, Home Depot, JD.com, Sea Ltd Wednesday: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 0900 – Euro zone Q1 GDP forecast 1005 – UK Bank of England’s Cunliffe to speak 1230 – US Apr. Retail Sales 1315 – US Fed’s Harker (non-voter) to speak 1315 – US Apr. Industrial Production and Capacity Utilization 1400 – US May NAHB Housing Market Index 1700 – ECB President Lagarde to speak 1800 – US Fed Chair Powell Interview at event 1830 – US Fed’s Mester (voter) to speak 2030 – API Weekly Report on U.S. oil and fuel inventories 2350 – Japan Q1 GDP estimate 0130 – Australia Q1 Wage Price Index Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Drivers Don't Want To Pay More For Petrol. Crude Oil Price: the latest upward momentum? | FxPro

Drivers Don't Want To Pay More For Petrol. Crude Oil Price: the latest upward momentum? | FxPro

Alex Kuptsikevich Alex Kuptsikevich 17.05.2022 12:17
Crude oil has added 15% since last Wednesday, rising to $112/bbl WTI and $113/bbl Brent. Both grades reached new two-month highs on Tuesday morning, despite a decidedly bearish news backdrop. Since early April, WTI has seen a sequence of higher highs and higher lows A sharper than previously estimated slowdown in China and not yet agreed package with Russian Crude oil phased embargo was met with buying in Crude, despite those suggesting lower demand and higher supply. Since early April, WTI has seen a sequence of higher highs and higher lows. Oil’s dip under the uptrend line last week only encouraged buyers, kick-starting the latest upward momentum. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM This is the third time Brent has reached that horizon, from which it has rolled back in April and early May. A consolidation above $114 could signal a new buying wave and quickly take prices to the $120 area - near the late March peaks. It should not be surprising if WTI becomes more expensive than the heavier Brent in a few weeks In this case, the North Sea Brent lags behind the US WTI as the supply-demand balance favours the latter. It should not be surprising if WTI becomes more expensive than the heavier Brent in a few weeks, restoring the historic balance broken by tight OPEC+ quotas and once rampant US production. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Nevertheless, be prepared that the oil rally that started from lows in April 2020, culminating in the war events in Ukraine, is coming to an end. The global economy and energy consumption are slowing to recover while the cartel continues to raise quotas. Temporarily, due to lower investment in production in previous quarters, OPEC has not kept pace with production increases. Still, this balance will change sooner rather than later, promising to keep the price from rising.
The Governor Of The Central Bank Of Finland Thinks CBDC Is The Solution To The Problem

The Commodities Feed: US gasoline tightness | ING Economics

ING Economics ING Economics 18.05.2022 07:45
Your daily roundup of commodities news and ING views Learn more on ING Economics Energy The oil market has seen a partial recovery in early morning trading today, after Brent settled more than 2% lower yesterday. Reports that the US is looking to ease some sanctions against Venezuela contributed to yesterday’s weakness, with it thought that the easing could see a partial resumption of Venezuelan oil to Europe. Any increase is likely to be rather limited, at least in the short term.   There are growing concerns over the refined products market. What started out as a tight middle distillate market appears to be spreading into the gasoline market, at least for the US. At a time when US gasoline inventories should be building ahead of the driving season, inventories instead have declined for most of this year. These are now below the low end of the 5-year range.  Gasoline demand should only increase over the coming months and, in the absence of a pick up in refinery runs, the gasoline market is likely to continue to tighten. The tighter gasoline market appears to have also contributed to a narrowing in the WTI/Brent discount, given the  need for higher US refinery runs, which should be supportive for US crude demand. Gasoline stocks in the ARA region of Europe are more comfortable, and are at least at a decade high for this time of the year. Given the tightness on the US East Coast and more comfortable European stock levels, we would expect to see a pick-up in European gasoline flows to the US East Coast in order to help alleviate some of this tightness. API numbers released overnight confirm the tightening in the market. US crude oil inventories are reported to have fallen by 2.4MMbbls, whilst stock levels at Cushing, the WTI delivery hub, fell by 3.1MMbbls. It was the gasoline market which saw the largest decline, with stocks falling by 5.1MMbbls over the last week. EIA numbers will be released later today. The EU carbon market saw some strength yesterday, with the market breaking above EUR91/t. The European Parliament’s Environmental Committee voted yesterday on reforms to the EU ETS. The committee agreed on the need for more aggressive carbon emission reduction targets. The committee would like to see emissions covered by the ETS fall by 67% by 2030 from 2005 levels, this compares to the initial proposal for a 61% reduction. In order to achieve this, the committee has  recommended that the amount of emission allowances should be reduced by 4.2% in the first year the reform starts, and then this reduction should increase by 0.1% each year through until 2030. The committee also wants to see the phasing out of free allowances between 2026 and 2030, and the full implementation of  the EU Carbon Border Adjustment Mechanism (CBAM) by 2030, which would be 5 years earlier than currently proposed. In addition,  the Environmental Committee wants to phase out free allocations for the aviation  sector  by 2025, which would  be 2 years earlier than the Commission had proposed. The proposal will also see maritime transport included in the ETS from 2024, which would cover 100% of intra-EU routes, and 50% of emissions from extra-EU routes coming in and out of the EU initially. Finally, the committee also agreed on the implementation of another emission trading  system for commercial buildings and transport, which would start in 2025, whilst private buildings and transportation will be excluded  from this new ETS until at least 2029. This latest proposal will be put to a vote  in parliament next month, after which negotiations between member states will likely start. Metals Latest reports that Shanghai might start relaxing its two-month lockdown after three days of zero community transmission, along with better-than-expected retail sales and consumer spending data from the US, were constructive for risk assets yesterday. Most base metals settled higher on the day, with LME aluminium closing more  than 2% up. Shrinking LME inventories have provided some support  to aluminium. The latest LME data shows that on-warrant inventories for the metal fell for an eighth consecutive day to a new record low of 230kt yesterday. Turning to steel, and China Iron & Steel Association (CISA) said that China will keep its restrictions on new steel capacity intact and would push for more mergers and acquisitions within the industry. Due to ongoing Covid-related restrictions, steel demand has remained under pressure recently, but this should improve as the Covid situation improves. Mysteel expects China’s steel demand over 2H22 to rise by 10% compared to 1H22, whilst YoY growth is expected to hit 15% in 2H22. This growth is expected  to be supported by local government policies. Agriculture CBOT wheat continued to trade firm yesterday, even after India relaxed its stance with its recently announced export ban on wheat. New directives from the Indian government indicate that the restrictions will not apply to wheat shipments that have already been handed over to the customs department for clearance and loadings. However, the export restrictions will still apply to wheat sales where the shipments are not yet finalised through the issuance of irrevocable LoC. Reuters reported that only around 400kt of wheat (out of around 2.2mt of wheat currently at ports) would be eligible for relief and likely to be exported. The relaxation is unlikely to provide much relief to the global market. TagsWheat Oil Metals Gasoline EU carbon Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Podcast: BoJ losing control. Geopolitical risks for Tesla

Fed hawks may not let the equity rally extend! | MarketTalk: What’s up today? | Swissquote

Swissquote Bank Swissquote Bank 18.05.2022 10:58
The US equity markets rallied yesterday after taking over a positive session from the Europeans. However, the US retail sales data didn’t necessarily hint at slowing spending, and Jerome Powell didn’t say things that investors would normally like to hear. Powell’s words didn’t hit the investor appetite immediate, but mixed activity in US futures hint that appetite may not remain as strong in the coming sessions. In the FX, the US dollar eased from two-decade highs. Gold trades around the $1800 mark and crude oil bumps into solid topsellers approaching above the $115pb   The EURUSD rebounded past the 1.05 and Cable traded past 1.24. Yet, prospects of higher US rates, and the positive divergence between the Fed and other central banks should prevent the dollar from falling significantly. Eurozone’s final inflation data is due today, and should confirm a rise to 7.5% in April, an eye-watering number which should keep the European Central Bank (ECB) hawks and the euro bulls alert, and help the single currency consolidate its latest gains against the US dollar. Gold trades around the $1800 mark and crude oil bumps into solid topsellers approaching above the $115pb. On the earnings front, the US retailers reveal mixed earnings but they all agree on one thing: inflation impacts activity. Watch the full episode to find out more! 0:00 Intro 0:22 Market update 2:06 Jerome Powell is decided to bring inflation down! 2:48 High EZ inflation to keep euro bulls alert 3:41 ...but the dollar may not ease much! 4:42 Gold under the pressure on rising rates 5:31 Crude oil bumps into topsellers past $115pb 6:47 US retailers reveal mixed results, but agree that inflation is an issue Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
More Expensive Coffee!? Weather Conditions In South America Can Limit Crops. (WTI) Crude Oil Price Recovering, Palladium Prices Rise Amidst Concerns Around Supply

More Expensive Coffee!? Weather Conditions In South America Can Limit Crops. (WTI) Crude Oil Price Recovering, Palladium Prices Rise Amidst Concerns Around Supply

Rebecca Duthie Rebecca Duthie 18.05.2022 12:35
Summary: With China likely to ease lockdowns and the Russian oil embargo, WTI Crude prices are rising. Coffee futures prices are rising again amidst concerns around supply. Concerns around supply heighten for Palladium.   WTI Crude Oil recovering WTI Crude Oil futures have been recovering this week after the poor market performance last week. Going forward, it is likely that the market will see oil prices go up, therefore raising gas prices as well. Despite the lockdowns in China suppressing oil demand, the possibility of the lockdowns being lifted the market will see the demand rise. The Russian oil embargo is likely to get tighter, which is heightening investors' concerns around the supply of oil, which is also pushing up the price. U.S President Joe Biden's attempt at reducing prices through releasing some of the U.S Crude Reserves into the market has not made a very noticeable impact so far, the release is expected to last until November. WTI Crude Oil Futures Price Chart Read next: (XAUUD) Gold Regains Investor Interest As The Dollar Weakens, NGAS Prices Going Up, Cotton Price Rising Along With Concerns Around Supply   Coffee futures recovering amidst supply concerns Coffee futures prices are recovering in the wake of the poor market performance of last week. The prices are rising again over concerns around weather conditions in South America as the coffee farmers in Brazil are expecting frost in the coming days. The adverse weather conditions could affect the coffee crop and lead to a poor harvest in the future. There are also expectations on smaller supplies from Columbia. With concerns around coffee supplies across the board, the price of futures is rising. Coffee Jul ‘22 Futures Price Chart Concerns around Palladium supply are pushing up the futures prices Palladium futures rose above $2000, it is possible that the market could continue to see this growth as the reduced supply from Russia continues and a deficit supply from South African suppliers heighten concerns. South African producers are facing operational challenges, causing their output to decrease. Palladium Jun ‘22 Futures Price Chart Read next: Commodities Prices Recovering After Poor Performance Early Last Week - Brent Crude Oil Prices, Silver Prices Fall As Investors Shy Away From Precious Metals & Corn  Sources: tradingeconomics.com, finance.yahoo.com  
Oil dips ahead of OPEC+, gold flat

Oil falls on Venezuala and EU, gold dips | Oanda

Jeffrey Halley Jeffrey Halley 18.05.2022 15:30
Venezuela/Europe send oil lower Overnight, oil prices touched multi-week highs until the US announced it was starting a process, potentially leading to an easing of sanctions on Venezuela. That immediately saw oil reverse all its impressive intraday gains and both Brent crude and WTI finished slightly lower on the day. The EU effectively allowing European importers to pay for Russian gas via roubles should take the edge off European gas prices and flow through to oil prices. Brent crude finished 1.05% lower at USD 112.70 a barrel, having tested USD 116.00 intraday. WTI, by contrast, finished just 0.10% lower at USD 113.60 a barrel, having also tested USD 116.00 intraday. Prices are unmoved in Asia. Tight API inventory data and soaring diesel prices in the US have combined to send WTI to a premium over Brent and is likely to limit the downside for both contracts, Venezuela, or not. Tonight’s official crude inventory data dump will now be closely watched, and sharp falls in gasoline and distillates inventories could increase the WTI premium over Brent crude. Brent crude has resistance at USD 116.00 and support at USD 111.50 a barrel. WTI has taken resistance at USD 116.00 a barrel as well, with support at USD 111.50. Any progress on Venezuela’s supply returning to international markets is potentially a game-changer and should mean the top of my longer-term range, at USD 120.00 a barrel, remains intact. Gold’s price action doesn’t inspire confidence Despite the US dollar falling heavily overnight, and risk sentiment rising generally, gold prices fell 0.53% to USD 1815.00 an ounce overnight, easing to USD 1814.50 in Asia. US yields climbing higher may have played a part, but the direction of the US dollar has been more important of late. When gold falls as the US dollar falls heavily, we should all take that as a warning sign, suggesting lower prices are the path of least resistance. As such, I believe gold’s downside risks have ratcheted higher. Support lies at USD 1789.00, followed by USD 1780.00 an ounce. Failure of the latter suggests a deeper correction to USD 1700.00. That move could occur quite quickly if USD 1780.00 fails. Gold has resistance at USD 1836.00, followed by the 200-DMA at USD 1836.80, and then USD 1850.00 an ounce. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Commodities: Prices Are Rising, Heatwaves In US And China Affects The Production Of Cotton

The Commodities Feed: Another week passes with no EU ban | ING Economics

ING Economics ING Economics 20.05.2022 08:36
Your daily roundup of commodities news and ING views Tank farm for storage of petroleum products in Volgograd, Russia Energy It appears that another week will pass with the EU still unable to agree on a Russian oil ban. While it is taking longer than expected to come to an agreement, we believe that member states will eventually come to a deal. How much of an impact this will have on the market will depend on how watered down the final agreement is relative to the proposal. The effectiveness of the ban will also depend on the actions of countries outside the EU. Bloomberg reports that China is looking to potentially buy Russian crude for its strategic reserves. Although this shouldn’t come as too much of a surprise if China is set to increase its share of Russian oil purchases. The significant discounts available for Russian crude will prove very tempting for some buyers, like China and India. Self-sanctioning will already be affecting Russian oil flows to the EU, even in the absence of an official oil ban. This has left the EU to look elsewhere for alternative supplies, and whilst the US is an obvious candidate (given the expectation of relatively strong supply growth), we could in fact see US crude exports coming under pressure given the narrowing that we have seen in the WTI/Brent discount. The July WTI/Brent discount narrowed to less than US$2/bbl at one stage this week, after starting the month at more than a US$4/bbl discount. Inventories continue to point towards a tightening of the refined products market in Europe. The latest data from Insights Global show that gasoil inventories in the ARA region fell by 31kt over the week to 1.55kt, leaving inventories at multi-year lows. However, the big move over the week was in European gasoline inventories. Gasoline stocks in ARA fell by 342kt to 1.05mt. This decline over the week has seen gasoline inventories fall from more than a 5-year high to just below the 5-year average. Singapore also saw a further tightening in light distillate stocks over the week, with inventory levels declining by 815Mbbls to 13.74MMbbls, leaving them hovering just above the 5-year average. Clearly, the tightness that we are seeing in the US gasoline market is spreading into other regions. And given that the driving season is still ahead of us, we would expect to see further declines in inventories, which should prove supportive for gasoline prices over the summer. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM European gas prices came under pressure yesterday. TTF fell by more than 3.7%, which saw the market settling at its lowest levels since the start of the war. European gas storage continues to improve due to strong LNG inflows. Storage in Europe is almost 41% full at the moment compared to a 5-year average of around 44% for this stage of the year. The gap between current inventories and the 5-year average continues to narrow. Assuming we go through injection season with no significant disruption to Russian gas flows, Europe should enter the next heating season with a comfortable inventory. However, this is a big assumption, and the risk of disruption is likely to continue to keep the market trading at historically high levels. US natural gas prices also came under pressure yesterday, selling off almost 2.7%. Weekly storage data shows that US gas storage increased by 89Bcf over the week, which was slightly higher than the 5-year average of 87Bcf. Agriculture The latest data from the Indian Sugar Mills Association shows that sugar production in India has increased to around 34.9mt so far this season. The association reported that around 116 sugar mills were still operating as of 15 May. ISMA maintained its export estimate at around 9mt for the current year, with around 8.5mt of export sales already made. The food ministry reported that sugar exports have increased to around 7.5mt as of 18th May, already surpassing last year’s 7.2mt of exports. The ministry estimates that around 3.5mt of sugar equivalent would be diverted to ethanol this year and expects this to grow with targets of around 6mt by 2025. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Read this article on THINK TagsSugar Russian oil ban Natural gas Gasoline shortage Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Follow FXMAG.COM on Google News
What Do We Learn From New York Climate Week? What Should Companies Pay Attention To Considering Sustainability?

Green Energy Stocks To Dominate Markets In The Near Future? | America's growing bioenergy market needs clearer monitoring and more innovation | ING Economics

ING Economics ING Economics 20.05.2022 00:00
Bioenergy is a crucial pathway to net-zero emissions by 2050. The bioenergy market in the US has been growing and diversifying, with strong growth potential seen in carbon capture and storage (CCS), renewable diesel, and renewable natural gas. Addressing the environmental impact of bioenergy needs clear monitoring and more innovative solutions Bioenergy is a form of renewable energy derived from organic material   Bioenergy, a form of renewable energy derived from organic materials (or biomass), will play a pivotal role in helping the world achieve net-zero emissions by 2050. With a wide range of application options in sectors such as transport, heating, and electricity, bioenergy is forecast to account for 19% of total energy supply in 2050 and will contribute to 13% of the emissions reduction between 2020 and 2030 under the International Energy Agency's (IEA) Net-Zero Emissions (NZE) scenario. Emissions reductions by mitigation measure in the Net-Zero Emissions scenario, 2020-50 Source: International Energy Agency   In the US, the development of bioenergy has been accelerating and expanding. In the transport sector, the US is home to the world’s largest biofuels market, and the demand for biofuels in North America is expected to grow more than any other region through 2026 under the IEA’s baseline scenario. Growth will continue to be led by a diversification of biofuels supply beyond conventional ethanol, as advanced biofuels like renewable diesel and renewable natural gas (RNG) keep gaining momentum. Sustainable aviation fuels (SAFs) are another point of growth; these will be covered in a later article. Biofuel demand growth by region in the baseline scenario, 2021-2026 Source: International Energy Agency   But the deployment of and investment in bioenergy is rising in other sectors as well, led by mounting action from corporates and investors across sectors to decarbonise their businesses and portfolios. So, let's take a look at the growth prospects of various bioenergy applications in the US, as well as the challenges they face.   Examples of bioenergy-related corporate climate strategies: Oil and gas: ExxonMobil identifies biofuels as one of its core solutions for its net-zero ambition. The company announced in early 2022 that it would acquire a 49.9% stake in Biojet AS, a Norwegian biofuels company, to receive up to three million barrels of biofuels per year. ExxonMobil is also investing $125m in California-based Global Clean Energy to purchase up to five million barrels per year of renewable diesel. Petrochemicals: Dow sees the creation of a circular economy through recycling and using bio-based materials as a focus area to accelerate sustainability. The company is expanding an agreement with Fuenix Ecogy Group to ramp up circular plastics production. It has also signed agreements with Gunvor Petroleum Rotterdam and Texas-based New Hope Energy to purify pyrolysis oil feedstocks derived from plastic waste. Power: Southern Company last year took ownership of the Meadow Branch Landfill Methane Recovery Facility, the renewable natural gas facility located in Tennessee, to strengthen its RNG capacity as part of the company’s strategy to achieve net-zero emissions by 2050. Biofuels: Federal policies will have a net positive effect on US production this year The main federal policy to support the US biofuels market is the renewable fuel standard (RFS), which requires refiners to blend certain volumes of biofuels in gasoline each year. The RFS benefited biofuels production – especially that of fuel ethanol – in the past, although in recent years the RFS has become more susceptible to policy uncertainty. The Environmental Protection Agency (EPA), which is in charge of setting RFS mandates, last December proposed to retroactively lower biofuel mandates for 2020 and 2021 but set 2022 requirements slightly above pre-pandemic levels. This will put pressure on refiners to blend more biofuel into their gasoline production this year, resulting in a net positive impact on the biofuels industry. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM In addition, the EPA has proposed the rejection of all outstanding small refinery exemption (SREs) waivers pending for the 2016-20 compliance years. SREs give small refiners that process less than 75,000 barrels per day (bpd) of oil and can demonstrate economic hardship caused by the RFS an exemption from complying with the rules. If implemented, this decision would substantially raise the demand for biofuel credits. A federal policy that will specifically boost the production of ethanol is the Biden administration's plan to allow E15 gasoline, a fuel that uses a 15% ethanol blend, to be sold between June and September. E15 gasoline is typically banned in summer due to worries about air pollution. E15 consumption is low also because of retail availability, automobile compatibility, and safety concerns. But heightened oil prices amid the Russia-Ukraine war have made the case for more E15 gasoline sales to ease prices. State level policies are a powerful addition At the state level, California’s low-carbon fuel standard (LCFS), the backbone of a carbon intensity-based cap-and-trade system, has been playing a substantial role in incentivising biofuels production in and near the state. The LCFS aims to achieve a 20% reduction in the carbon intensity of California’s transportation fuel pool by 2030, with compliance standards set for each year. Carbon intensity (CIs) based on composite of gasoline and diesel fuels under the LCFS Source: California Air Resources Board   Since last year, LCFS credits (supply) generated from low-carbon fuels have increasingly outgrown LCFS deficits (demand), which has led to a 23% fall from the record high LCFS price of $206/metric ton to $158/metric ton in March 2022. This is mainly because the demand for gasoline and LCFS credits has not recovered from the pandemic, whereas the production of low-carbon fuels keeps growing steadily. The biggest driver of recent LCFS credit generation is renewable diesel, followed by electricity, which has been boosted by the continuing adoption of electric vehicles. LCFS total credits and deficits for all fuels reported Note: Cumulative bank refers to total number of banked credits Source: California Air Resources Board LCFS credit generation by fuel type *Hydrogen, Renewable Naphtha, Propane, Innovative Crude & Low Complexity/Low Energy Use Refining, etc.. Note: Project based credits are issued post verification and may not be included. Source: California Air Resources Board   It remains to be seen whether this deficit trend will be temporary or permanent; we also don't know how the expected implementation of similar programmes in adjacent jurisdictions will alter the LCFS system in California. In addition to the Clean Fuels Program in Oregon which is already in place, Washington State is expecting to implement its Clean Fuel Standard in 2023 and a federal fuel standard is set to come into force in Canada in the same year.  Other US states including New Mexico, Colorado, Minnesota, and states in the Northeast and Midwest are also in various stages of developing LCFS-style systems. These programmes will provide effective additions to the federal RFS programme in driving biofuels demand. Renewable diesel takes the lead in advanced biofuel deployment The production of biomass-based diesel – namely biodiesel and renewable diesel – has taken off in the US and is set to increase further. Of the two, biodiesel dominates the bio-based diesel market, but renewable diesel is seeing faster growth. This is partly because renewable diesel is compatible with existing distribution infrastructure and engines. With the same composition as fossil diesel, renewable diesel does not have a blending limit, whereas biodiesel typically accounts for up to 20% of fossil diesel in the US, because of insufficient regulatory incentives despite higher blends being available. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Renewable diesel’s ability to lower carbon intensity, particularly in trucking and aviation, has prompted several US refineries to invest in greenfield projects and/or convert traditional plants to process renewable diesel. Refineries set to complete conversion between 2022-23 include Marathon Petroleum’s Martinez refinery in California, CVR Energy’s Wynnewood refinery in Oklahoma, and HollyFrontier’s Cheyenne plant in Wyoming, etc. Planned renewable diesel capacity in the US is expected to reach 6bn gallons by 2025, up from less than 2.4bn gallons estimated for 2021. One major challenge to the growth of both biodiesel and renewable diesel is feedstock availability and costs. It is estimated by Bloomberg New Energy Finance (BNEF) that the demand for bio-based diesel feedstock will more than double from 2020 to 38.3bn pounds (17.4bn kilograms) in 2022, and soar to over 64bn pounds (19bn kilograms) in 2024. Prices for bio-based diesel feedstock have also climbed since 2020, causing some companies to postpone their renewable diesel projects. US estimated bio-based diesel feedstock use and implied future demand from capacity additions Source: Bloomberg New Energy Finance   In the long term, despite the growth momentum for bio-based diesel, the Energy Information Administration forecasts that bio-based diesel will remain a small part of the diesel market, accounting for less than 8% of US diesel production in 2050. This is partially due to competition from food consumption and electric vehicles (EVs), which will be discussed in a later section. Nevertheless, that 8% still translates into roughly 0.23mn bpd of production, a considerable absolute amount. RNG to see demand build up in the power sector Another promising advanced biofuel which is set for growth is renewable natural gas (RNG), or biogas that has been upgraded to replace fossil gas. RNG production capacity in the US increased at a compound annual rate of 35% between 2017 and 2021, thanks to $1.7bn of investment from oil and gas companies. Looking forward, RNG demand is projected to jump from 0.2 trillion cubic feet (Tcf) today to between 2.3 and 3.2 Tcf in 2040, according to BNEF. The fuel is forecast to be capable of displacing 6-12% of the US natural gas demand. RNG can be produced from various sources. Landfill has the strongest supply and cost advantage – most landfill RNG projects can be economical at $10/MMBtu or lower; landfill accounts for more than 60% of the RNG credits generated under the RFS and more than 90% of the RNG credits under the LCFS. In contrast, RNG produced from manure is more costly – at $30/MMBtu or higher – but remains attractive under the LCFS as it offers one of the lowest carbon intensities of less than -300 gCO2e/MJ. Importantly, although RNG demand from transportation dominates now, the majority of demand for RNG by 2040 will come from the power sector. In California, where the LCFS is advanced, RNG already contributes to 98% of natural gas used for transportation, mostly in municipal buses and trucking. The can add risks to future project returns if the produced RNG cannot be contracted in time. There is a potential in the long term for more RNG to be used in shipping, though it will encounter competition from other biofuels or synthetic fuels. RNG producers are starting to pivot their focus away from the transport sector. Archaea Energy is aiming to sell its RNG to natural gas utilities through long-term offtake agreements. The company plans to allocate 65% of its RNG production to non-transport applications. Admittedly, electricity generation from RNG today is more expensive than from conventional gas and the contribution of RNG to the grid is limited. Yet demand is likely to be sustained in the future, driven by climate commitments from commercial/residential customers and precuring requirements set for utilities. California now mandates utility company SoCalGas to increase RNG’s share of gas deliveries from 4% in 2021 to 12.5% by 2030. ­Oregon passed legislation to allow RNG to account for 30% of a utility’s purchases by 2045; the state is also letting utilities recover prudently incurred costs to meet the target. A handful of other states are considering similar policies. Outlook for US renewable natural gas demand Source: Bloomberg New Energy Finance   The favourable outlook for RNG/biogas can also augment the production of bio-fertilisers, which can be generated from the waste from biogas production. This will help meet the rising demand for bio-fertilisers in the US, spurred by growing preferences for organic food, as well as concerns over the likely harmful effects of chemical fertilisers on both health and the environment. US to pioneer in BECCS development The US is poised to lead the deployment of bioenergy with carbon capture and storage (BECCS) technology, a high-potential application of bioenergy. BECCS involves converting biomass to heat, electricity, or liquid fuels while capturing and storing the CO2 that is emitted during the conversion process. Since the growing of plant biomass absorbs CO2, BECCS can achieve net negative emissions when the emitted CO2 from bioenergy generation is permanently stored. Indeed, the UN's Intergovernmental Panel on Climate Change highlighted in its most recent report the need for carbon removal technologies for the world to reach net-zero emissions. The US is already a front-runner in CCS – it is home to 36 of the 71 new CCS projects added worldwide during the first nine months of 2021. On top of this, several BECCS networks are emerging in the Midwest thanks to lower costs of bioethanol production. Summit Carbon Solutions, for instance, is progressing with a project to link more than 30 ethanol biorefineries across Iowa, Minnesota, Nebraska, North Dakota, and South Dakota. With a total potential capturing capacity of 8 Mtpa, the network would be the largest of its kind globally. Valero Energy and BlackRock are partnering with Navigator Energy Services to develop an industrial-scale CCS network that would connect biorefineries and other industrial plants across five Midwest states. The challenges facing bioenergy The use of bioenergy is not without controversy. The main challenge is the negative impact of bioenergy generation from excessive land use. From an environmental point of view, growing feedstocks such as soybeans and corn can lead to more deforestation, degradation of soil, and harmful changes to ecosystems. From a social point of view, despite yield growth potentials, the more feedstock is used for biofuels, the less there will be for food production. This has been exacerbated by the Russia-Ukraine war, which has disrupted the global food supply chain as both countries are major exporters of several leading crops. Hence, concerns have arisen in the US that the increasing use of crops for biofuels will limit food supply and add pressure to food prices. To tackle the problem in the long term, there needs to be a switch away from conventional, food-based biofuel feedstocks to advanced biofuels which use non-food crops, municipal solid waste, and agricultural and forest residues. The IEA forests that 60% of the global bioenergy supply in 2050 will need to come from sources that do not need dedicated land use to achieve net-zero emissions. Accelerating advanced biofuel production requires stronger incentives compared to those for conventional biofuels. In the US, the federal Biomass Crop Assistance Program provides financial assistance to producers of advanced biofuel feedstock. The Biden administration has also included in its FY23 budget $245m to accelerate the R&D of next-generation biofuel technologies. Another challenge is that the traditional use of bioenergy (burning wood or traditional charcoal) remains controversial as it can cause more emissions and deforestation. The EU still categorises bioenergy as green in its Taxonomy, but has strengthened the criteria to exclude certain forms of wooden biomass from qualifying as “renewable”. In the US, the EPA sees bioenergy as a cleaner fuel, while also recognising its negative potential if not managed well. Moreover, bioenergy-based solutions face scepticism that the supply chain – which involves biomass growing, transportation, storage, and processing – can emit more CO2 and harm the environment. That is why more precise monitoring and reporting of life-cycle emissions along a bioenergy technology’s supply chain needs to be in place. Finally, competing low-carbon technologies can complicate the growth of bioenergy. In the transport sector, the massive adoption of EVs will be a major threat to the demand for biofuels. As mentioned above, RNG developers are expanding their business footprint to the power sector, though these developers will likely encounter competition from renewable energy. Nonetheless, biofuels are still likely to maintain their niche in transportation, especially in heavy-duty trucks and aeroplanes, as it will be challenging for EVs to provide long-haul services without a step-change in technology. Global bioenergy supply in the Net-Zero by 2050 Scenario, 2010-50 Source: International Energy Agency Read this article on THINK TagsUnited States Renewables Net zero Energy Transition Biofuels Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Follow FXMAG.COM on Google News
FX Daily: Talking up the euro

US Close – Stocks Near Bear Market, Crude Oil Price Higher On Supply Concerns, Gold Price (XAUUSD) Pops, Bitcoin (BTC/USD) Stabilizes | Oanda

Ed Moya Ed Moya 19.05.2022 23:51
US stocks edged lower as Wall Street became more focused over a deteriorating growth outlook that could see stubbornly high pricing pressures for the Fed into a much more aggressive tightening cycle. It doesn’t seem like we will see a deceleration in pricing pressures and that has many traders worried that the Fed will send the economy into a recession.  Right now markets are functioning properly but if we see another 5% decline with stocks, credit conditions will worsen and that could provide the Fed an excuse to stop tightening so aggressively.  Tighter financial conditions will hurt the parts of the economy that are doing well and further selling of stocks could remain the theme if the S&P 500 enters a bear market.  The S&P 500 is looking vulnerable here as more strategists slash their forecasts as recession risks rise.  Fed (Federal Reserve) Fed’s George affirmed the board’s stance that a half-point rate increase pace is appropriate.  The Fed remains focused with fighting inflation and they will remain aggressive with tightening policy until liquidity becomes a concern.  FX (Forex) The dollar is in freefall as investors buy up Treasuries over concerns that the economy is headed for a rough patch. The dollar was ripe for a pullback and today’s across the board weakness might continue a while longer. Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM US Data A wrath of US economic data painted a gloomy picture of the economy: Jobless claims rose, the housing market is clearly cooling, another Fed regional survey showed the weakest print since early in the pandemic and the leading index turned negative.  Weekly jobless claims rose from 197,000 to 218,000. The Philly Fed manufacturing outlook fell sharply from 17.6 to 2.6.  Surging mortgage rates and record home prices led to a drop in April existing home sales  Crude Oil Price Crude prices rallied as the EU nears a key deadline to pay for Russian oil with a roubles account.  The oil market just has too many risks to supplies and still a strong short-term travel outlook both in the EU and US.  WTI crude should be well supported at the $100 level as US production is slowly increasing. Recession fears are rising but that impact won’t be felt for quite a while, which means the oil market won’t see imminent crude demand destruction. Crude inventories are too low for oil traders to turn bearish with WTI crude. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Gold Price Gold is acting like a safe-haven again as recession fears are triggering massive demand for Treasuries, which is sending both yields and the dollar lower. The US labor market is showing signs of weakness and that could lead fears that consumer spending will deteriorate much faster than most are expecting. The dollar is getting sold against everything and that is great news for gold. Right now, investors are looking for safety and Treasuries and gold should both outperform in the short-term.   Bitcoin (BTC) Bitcoin is hovering around the $30,000 level as investors continue to shy away from stocks.  A weaker dollar and bear market stock fears are making Bitcoin attractive again.  It seems the fallout from all the stablecoin drama that sent cryptos sharply lower is finally fading.  Bitcoin looks poised to consolidate here, but bulls should be happy to see prices are not mimicking what happens with the stock market.   Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
Tips for beginner traders in EUR/USD and GBP/USD on July 22, 2022

WCU: Comeback week for industrial and precious metals | Saxo Bank

Ole Hansen Ole Hansen 20.05.2022 18:11
Summary:  The commodity sector continued to find support this past week, despite the hurricane sweeping across global stock markets where the S&P 500 so far has recorded its fourth biggest drawdown since 2010. Gains this past week were concentrated in industrial and precious metals - sectors that have suffered setbacks during the past two months. In addition, the risk of a global food crisis continues to support the agriculture sector while a tight fuel-product market kept crude oil range bound despite economic growth worries. The commodity sector continued to find support this past week, despite the hurricane sweeping across global stock markets. US stocks posted their biggest daily drop in almost two years on Wednesday, driven by surging inflation, weak earnings and the prospect of aggressive monetary policy tightening hurting economic growth. Nevertheless, the Bloomberg Commodity Spot index managed to climb by 1.6% and, while we are seeing the fourth biggest drawdown in the S&P 500 since 2010, the commodity sector continues to highlight the need for both supply and demand to keep prices stable. With the supply of many key commodities – from grains and coffee to fuel products and some industrial metals – being challenged, the sector is likely to remain supported despite softer growth; especially considering the prospect for a government-supported stimulus boost to a post-lockdown China. Growth in the country has been increasingly challenged by its stubborn adherence to the dynamic zero-Covid policy despite mounting economic and social costs. Gains this past week were concentrated in industrial and precious metals – sectors that have suffered setbacks during the past two months. In addition, the risk of a global food crisis continues to rise, with Russia’s aggression in Ukraine and poor weather conditions being the main culprits for the disruption to a lower supply of key food commodities. The grains sector hit a fresh record high with the Bloomberg Grains Spot Index sprinting to a +30% gain on the year. Soybeans led the rally, followed by wheat with corn registering a small loss in the week. Global worries about a food crisis persist with disruptions in shipments from the Ukraine, one of the world’s most important supplier of high-quality wheat and sunflower oil causing ripples around the world. Ukrainian farmers have almost completed the sowing of spring wheat for the 2022 harvest and the overall rate of this year's spring crop sowing is 25% lower than at the same date in 2021, the agriculture ministry said on Friday. A couple of positive supply news, however, helped ease but by no means remove worries about a global food crisis. Palm oil slumped after Indonesia ended its short-lived export ban. Wheat which earlier in the week surge to fresh highs in Europe and the US on worries about supplies from India saw prices ease on forecast for a bumper crop year in Russia. However, comments from agriculture analysis firm Gro Intelligence that the world only has 10 weeks’ worth of wheat consumption in reserve will keep prices supported. At least until we get some more clarity over production levels in Europe and North America, both areas that have seen a challenging weather-related start to the growing season.In our latest industrial metal-focused update, we wrote that the precious metals sector was looking to China for a rebound and, indeed, this week saw some of the signals that China is starting to turn more supportive. Before then, the Bloomberg Industrial Metal Index had lost 25% since the early March peak, with the main catalysts – aside from global growth worries – being China and its zero-Covid policy. Outbreaks in Shanghai and Beijing have been met with a prolonged period of lockdown, hurting economic growth and creating major bottlenecks across global supply chains.This week in China, we saw retail sales slump 11% and youth unemployment hit a record 18.2%, as well as economists forecasting downgraded GDP. Responding to these developments on Friday, Chinese banks cut their 5-year loan rate by a record 0.15 basis points. Keep in mind, this is happening while the rest of the world is going in the opposite direction, and it highlights the Chinese government’s willingness to support the economy. More support will likely follow as the government seeks to support infrastructure and property projects, which are both critical for industrial metal demand.Around the timing of the early March peak in prices, stock levels of the four major industrial metals held at warehouses monitored by the LME and Shanghai Futures Exchange stood at 1.77 million tons. Instead of rising as demand according to the price action showed weakness, this level has continued to fall, reaching 1.43 million tons this week – a 19% decline during this time.It highlights our view that a global economic slowdown does not prevent industrial metals from moving higher, despite supply potentially struggling to keep up with demand not only from China, but also from the energy transition away from fossil fuels. A transition that, in name, is green but actually is very black when you consider the number of different metals that are needed in the process. These range from aluminum, copper and nickel to more exotic metals like rare earth minerals, cobalt and lithium.High-Grade Copper: Despite the month-long correction, HG copper remains rangebound, having so far failed to properly challenge key support in the $4 per pound area. As it stands, the recovery this week has taken HG copper back to its 21-day moving average, with a break above signaling a loss of negative price momentum. If realised, it may soon force speculators to cover a net short which, in the week to May 10, doubled to reach a two-year high at 17.7k lots or 201k metric tons. Source: Saxo Group Gold, in a downtrend since mid-April, found a fresh bid amid continued turbulence across global stock markets. During the past month, gold suffered from the double blow of a stronger dollar and the FOMC signaling an aggressive pace of future rate hikes to combat inflation at the highest level in decades. This is fine if the economy does not suffer too much of a setback, thereby raising the risk of recession. What changed this week has been dismal earnings news from large US retailers raising the risk of a deeper than expected economic slump.We maintain a bullish outlook for gold, given the need to diversify amid a troubled stock market and the mentioned potential increased risk of a FOMC policy mistake driving yields and the dollar lower. From the chart below, gold has its work cut out, and a great deal of work is needed to mend the damage done during the past month. However, the first sign of improvement has been the break above the 200-day moving average at $1839 – with the next big challenge being $1868, the 38.2% retracement of the 210-dollar April to May correction.Silver, supported by the bounce across industrial metals, seems to have found its footing following a 22% correction, which – at one point – extended below previous support around $21.50. With speculators having cut their positions to neutral, any renewed upside momentum is likely to attract fresh buying from underexposed funds. Crude oil spent most of the week challenging the upper end of the trading range that has prevailed for the past six weeks. However, relative calm market action during this time has been hiding a market in continued turmoil where major opposing forces have managed to keep it rangebound. During this time, the U.S. government has injected millions of barrels in a failed attempt to suppress the price while Chinese demand has suffered due to its zero-Covid strategy.The fact the market has not fallen below $100 highlights the underlying strength with tight supply of key fuels, self-sanctioning of Russian crude oil, OPEC struggling to increase production and unrest in Libya all supporting the market. With China potentially starting to ease lockdowns and with unrest in Libya still growing, the short-term price risk remains firmly skewed to higher prices.During the past few weeks, the focus has turned from a rangebound crude oil market to the product market where the cost of gasoline, diesel and jet fuel have surged to levels not seen in years (if ever). The combination of refinery maintenance, a post pandemic reduction in capacity as well as self-sanctioning of Russian products have all led to incredible tight markets. Especially in North American refineries, where they are running flat out to produce what they can and, in turn, benefitting from mouthwatering margins.So, despite the prospect for slower global economic growth, the price of crude oil remains supported. If we stick to our wide $90 to $120 range call for Brent during the current quarter, while still considering structural issues (most importantly the continued level of underinvestment and OPEC’s struggle to increase production), this will continue to support prices over the coming quarters. US natural gas had another rollercoaster week, ending up off the highs after twice finding resistance around $8.5/therm. The current price is up by 200% compared to the same time last year, with record exports via LNG, flat production growth and a recent heatwave across the southern states increasing demand for cooling. However, the weekly injection of 89 billion cubic feet (bcf) to 1732 bcf was in line with expectations and helped reduce the deficit to the 5-year average to 15.2%. In addition, the milder weather ahead and Europe suffering from a temporary bout of LNG indigestion could suggest a period of stable prices. However, overall rising global demand and a sharp discount to prices in Europe and Asia is likely to prevent any significant weakness during the coming months. Source: Saxo Bank
Saudi's Are Threatening To Reduce To Reduce Oil Supply!?

Crude Oil Calm, Gold Price (XAU/USD) Rises | Oanda

Jeffrey Halley Jeffrey Halley 23.05.2022 14:34
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 USD 112.55 on Friday, gaining another 0.70% to USD 113.30 a barrel in Asian trading. WTI rose 0.40% to USD 110.55 on Friday, gaining another 0.35% to USD 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. Overall, I am expecting Brent crude to bounce around in a USD 111.00 to USD 117.00 range this week Brent crude has resistance at USD 116.00 and support at USD 111.50 a barrel. WTI has resistance at USD 113.00 and USD 116.00 a barrel, with support at USD 108.00. Overall, I am expecting Brent crude to bounce around in a USD 111.00 to USD 117.00 range this week. Follow FXMAG.COM on Google News Gold rises on weaker US dollar Gold prices rose on Friday, climbing just 0.24% to USD 1844.00 an ounce. In Asia, they have gained 0.42% to USD 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 USD 1860.00 and then USD 1885.00 an ounce, its 100-day moving average. Support is at USD 1845.00 and USD 1840.00, followed by USD 1832.00 an ounce. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Learn more on Oanda
Russia's Crude Oil Still Flows To Japan, Negative Trade Balance In Japan

What's The Future Of Energy Stocks? High Crude Oil Prices And No New Investments | Conotoxia

Conotoxia Comments Conotoxia Comments 24.05.2022 12:29
A paradox seems to be emerging in the oil market. Typically, high prices caused companies to increase investment so they could produce more, boosting their profits and meeting demand. Currently, this may not be the case. Investors were also concerned that high oil prices could reduce fuel consumption around the world Oil prices are still above the $100 per barrel mark, but oil production companies are not expected to invest in exploring new fields or starting new drills. Representatives of the world's largest company, Saudi Aramco, are even announcing that the world may face a serious supply crisis in the oil market. Energy companies may be afraid to invest in this sector in the face of pressure related to politicians' attitude toward energy transformation and renewable energy sources - Reuters reports. Thus, energy companies may keep their current profits to themselves instead of investing until regulations and laws lead to a reduction in their market share. This, in a way, may explain why OPEC may care about high oil prices and why the cartel is not increasing production to the levels it declared earlier. Additionally, investors were also concerned that high oil prices could reduce fuel consumption around the world. Moreover, at the annual economic summit in Davos, political and business representatives highlighted the risk of a global recession in the face of multiple threats. IMF Managing Director Kristalina Georgieva said she does not expect a recession in major economies, but cannot rule it out. Meanwhile, lingering concerns about tight global supply and hopes for a return of demand in China provided some support for oil prices as Shanghai prepares to reopen and lift restrictions. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM In contrast, rising oil prices and slowing economic growth will significantly constrain demand growth for the remainder of 2022 and into 2023, according to a May IEA report. In addition, prolonged restrictions in China, where the government is battling the spread of the Covid-19 virus, are causing a significant slowdown in the world's second-largest oil consumer. For the full year, global oil demand is forecast to average 99.4 mb/d in 2022, up 1.8 mb/d year-on-year. If refiners cannot keep up with the pace of demand growth, consumers could come under additional pressure With the easing of restrictions in China, increased summer car traffic and further increases in jet fuel prices, global oil demand will rise by 3.6 mb/d from its April-August low. If refiners cannot keep up with the pace of demand growth, consumers could come under additional pressure. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Follow FXMAG.COM on Google News
XAUUSD: A Technical Look At Gold Price

What's It Going To Be Drivers? Crude Oil Drifting, Price Of Gold Price (XAUUSD) Edges Higher | Oanda

Craig Erlam Craig Erlam 24.05.2022 14:19
Oil rally stalls Oil prices are relatively flat on Tuesday as global economic fears and the prospect of tighter restrictions in Beijing take some of the heat out of the rally. Brent and WTI are trading right at the upper end of the range they’ve been within the last couple of months, with tight supplies, easing restrictions in Shanghai and a potential EU ban on Russian oil imports driving the price higher. As has been the case for months now, there are so many countering forces in the market that it can be hard to keep up. Not to mention sentiment in the broader markets drastically changing from one day to the next. It’s quite a challenging market right now but one thing is clear, it’s still extremely tight and those pressures will keep prices elevated. Just not quite as much as it would if not for the recession warnings and Chinese Covid cases. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Gold edges higher Gold is aiming for a fifth consecutive winning day on Tuesday as a softer dollar and slightly lower US yields have allowed for a recovery in the yellow metal. It is trading back above USD 1,850, with USD 1,875 and USD 1,900 being the next big tests. If USD 1,850 fails to hold as support, the next test below falls around USD 1,835, with USD 1,800 then being the key support below that. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
When The Global Economy Recovers, We Can Expect Demand To Rebound

Crude Oil Rangebound, Gold Price (XAU/USD) Shines | Oanda

Ed Moya Ed Moya 24.05.2022 20:02
Oil looking for direction Oil prices remain directionless as energy traders try to assess how significant the deceleration in economic activity will be for the short-term crude demand outlook. The oil market remains tight but the COVID situation in China points to a gradual pickup in demand and that might keep this market rangebound a while longer. Saudi Prince Faisal bin Farhan noted that the kingdom has done what it can for global oil markets and that should mean production increases will remain slow. Oil prices will likely remain supported above the USD 100 level for the rest of the year. ​ ​ It looks like the only thing that will send oil back to the pre-COVID levels is demand destruction across the world’s largest economies and that probably won’t happen. WTI crude pared gains after a steady stream of weakening US economic data, but the overall outlook is still ok and a recession is unlikely until 2024. Gold Gold prices are surging as Treasury yields plunge following a wave of risk aversion that stemmed from disappointing earnings and deteriorating economic data from the US. ​ Non-interest bearing gold is a safe-haven again and it could be on the verge of a major breakout if prices can recapture the USD 1885 level. A peak in Treasury yields is in place and now the dollar looks like it is ready for a pullback as the ECB is ready to raise rates which is good news for the euro. ​ Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM There might be no stopping gold right now as the wall of worry on Wall Street continues to grow. ​ Gold should remain supported as inflationary pressures weigh further, China’s COVID situation remains a big unknown, and corporate America continues to slash outlooks. Follow FXMAG.COM on Google News This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recession Fears Continue To Rattle the Commodity Markets - Brent Crude Oil, Silver Futures Touch 4-week lows, Corn Futures Reach 6-week Highs.

The Commodities Feed: Further US gasoline draws | ING Economics

ING Economics ING Economics 25.05.2022 08:37
Your daily roundup of commodities news and ING views Energy The oil market has traded firmer during the morning session in Asia. API numbers overnight were once again supportive for the market. Crude oil inventories are reported to have increased by 567Mbbls over the last week. However, there were continued product draws, with gasoline and distillate stocks falling by 4.22MMbbls and 949Mbbls respectively. The tightening in the US gasoline market will raise concerns over supply as we move into driving season. Tightness in the US is pulling in gasoline from elsewhere, including Europe, which is also looking increasingly tight. The US energy secretary has also not ruled out restricting petroleum exports, given rising prices. Up until now the US administration has been reluctant to go down this route and instead has focused on releases from the Strategic Petroleum Reserve.  Whilst these releases may offer some relief to crude oil prices, they may do little to ease gasoline shortages if the bottleneck is on the refining side. It’s looking unlikely that differences over an EU ban on Russian oil imports will be resolved at next week’s meeting of EU leaders. The Hungarian Prime Minister has reportedly said that meetings on 30 and 31 May would not be an appropriate place to discuss the ban, whilst the European Commission President has also made similar comments. Therefore, the uncertainty over a Russian oil ban looks as though it will hang over markets for quite a bit longer. We continue to believe that the EU will eventually agree on a ban and, assuming it is not too different to the current proposal, we would expect  the move to be supportive for prices, particularly over 2H22. Austrian Gas Grid Management (AGGM) announced the results of its recent purchase tender for natural gas for strategic reserves. The tender attracted 189 bids, which ended up seeing AGGM buying 7.7TWh of storage at an average price of EUR124.50/MWh including storage costs through until April 2023. This price is well above the current prompt price in Europe of around EUR85/MWh.  Austrian gas storage levels are well below average at the moment - inventories are 29% full compared to a 5-year average of almost 45% at this stage of the year. EU allowances saw somewhat of a recovery yesterday, following the weakness seen over the past week due to EU plans to sell EUR20b worth of allowances from the Market Stability Reserve. The Dec-22 contract rallied by 4% yesterday to settle at EUR81.32/t, although it is still some distance from the more than EUR92/t we saw it trading at early last week. The catalyst for yesterday’s move appears to be comments from an EU official who was more supportive about the role that financial institutions play in the EU carbon market. This comes after the EU Parliament’s Environment Committee supported a proposal to restrict speculative activity in the EU carbon market. Agriculture There appears to be a growing trend of protectionist measures taken by governments around the world, given concerns over food security and inflationary pressures. After India recently surprised the market with a ban on wheat exports, the Indian government has now announced that it will limit sugar exports to 10mt in the current 2021/22 season, which ends in September. India is set to be the third-largest sugar exporter this season, behind Brazil and Thailand. The announcement is somewhat surprising, given that India has had a very strong sugarcane crop this season. However, as reflected in the price action, the market is not too concerned at the moment about this export limit, given that most in the market have been expecting Indian sugar exports this season to total around 9mt, so below the export limit. The bigger concern is that we see other countries taking similar action when it comes to agricultural commodity exports. Apart from the action taken by India, Malaysia is also set to ban chicken exports, whilst Indonesia has gone back and forth on a palm oil export ban. Read this article on THINK TagsSugar Russian oil ban Oil Natural gas EU carbon Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Crude Oil And Price Of Gold (XAU/USD) Head Higher | Oanda

Jeffrey Halley Jeffrey Halley 25.05.2022 14:24
White House unnerves oil markets Oil prices continued to range trade overnight, finishing almost unchanged in New York. Asia, though, has seen both Brent crude and WTI rise. A couple of items seem to be behind the move. A sharp 4.20 million drop in gasoline inventories late in New York from the API Inventory data is likely supportive, with gasoline prices becoming a major issue in the US. Following on from that, White House officials explicitly refusing to say possible crude export restrictions were off the table appears to have spooked Asian suppliers. The last thing the world needs right now is US crude oil export restrictions with global supplies already tight. That saw both Brent crude and WTI spike 1.0% higher in early Asian trade, although those gains have eased as the session has gone on. Brent crude is 0.90% higher at USD 114.70 a barrel, and WTI is 0.65% higher at USD 110.90 a barrel. The White House likely needs to “clarify” its stance, least it creates unintended consequences by pushing crude prices higher. Brent crude, notably, is testing multi-week resistance today. Brent crude is testing resistance at USD 114.70 today, which is followed by USD 116.00, with support at USD 112.00. Failure of USD 116.00 could set up a retest test of my medium-term resistance at 120.00. ​ WTI is taking comfort from the White House stance and is sitting in a USD 108.00 to USD 112.00 a barrel range. Nevertheless, a topside breakout by Brent crude will almost certainly drag WTI higher as well, precisely what President Biden doesn’t want. Gold rises once again Gold had another decent overnight session, buoyed by lower US yields and a still-weakening US Dollar. Gold finished 0.69% higher at USD 1866.50 an ounce. In Asia, some US dollar strength has seen it weaken slightly by 0.40% to USD 1859.00 an ounce. Overall, although I acknowledge gold’s upward momentum, I remain sceptical of its longevity until it manages to hold on to material gains in the face of US dollar strength. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM The technical picture continues to remain supportive, and it seems only a marked US dollar recovery will cap gold’s rally. Gold took out resistance at the double top at USD 1865.00 an ounce which becomes intraday support, followed by USD 1845.00 and USD 1840.00 an ounce. It should now target USD 1886.00, its 100-day moving average. That would open up a test of USD 1900.00, although I suspect there will be plenty of option-related selling ahead of that level. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
US Indices - S&P 500 And Nasdaq Decreased On Friday!

Crude Oil steady, Gold Price (XAU/USD) Dips As US Dollar (USD) Rises | Oanda

Jeffrey Halley Jeffrey Halley 26.05.2022 15:59
Oil markets slumber Oil prices had another comatose session by their standards, barely rising from the day before. Nevertheless, both Brent crude and WTI have held on to all their recent gains, suggesting the weaker side is the upside in prices for now. While China slowdown fears are receding in the minds of traders, for now, fears persist around the increasing tightness of the US diesel market, and I suspect not ruling out export controls has unnerved international markets, and rightly so. I expect prices to remain firm for the rest of the week, with the global data calendar fairly light. Brent crude rose 0.60% to USD 114.35 overnight, where it remains in an equally quiet Asian session. WTI rose 0.40% to USD 110.70, adding just 20 cents to USD 110.90 a barrel in Asia. Brent crude has resistance at USD 115.00 and USD 116.00 today, with support at USD 112.00. A rally through USD 116.00 could set up a retest test of my medium-term resistance at USD 120.00. ​ WTI is taking comfort from the White House stance and is sitting in a USD 108.00 to USD 112.00 a barrel range. Nevertheless, a topside breakout by Brent crude will drag WTI higher as well, allowing a test of the USD 115.00 to USD 116.00 resistance zone. Gold weakens on US dollar strength Gold fell by 0.70% to USD 1853.25 an ounce overnight, retreating another 0.45% to USD 1845.00 an ounce in Asia. As I have touched on before, the true test of gold’s underlying strength will be maintaining gains in the face of a US dollar rally. The fall by gold over the last 24 hours in the face of modest US dollar strength does not fill me with confidence. Further US dollar strength could see gold face one of its ugly downside shakeouts. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Gold has nearby support at USD 1842.00, followed by USD 1836.00 an ounce. Failure sees the possibility of a mini-capitulation by longs that could reach as far as USD 1780.00 an ounce. On the topside, gold has resistance at USD 1870.00, followed by USD 1886.00 an ounce, its 100-day moving average. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
When The Global Economy Recovers, We Can Expect Demand To Rebound

OPEC+ Meeting Takes Place This Week! BRENT Crude Oil Climbed Really High Last Week Reaching Over $119. Weaker US Dollar (USD) Let Metals Get Stronger | ING Economics

ING Economics ING Economics 30.05.2022 08:24
Your daily roundup of commodities news and ING views Tank farm for storage of petroleum products in Volgograd, Russia Energy Oil finished last week off strongly. ICE Brent settled above US$119/bbl, which took its gains for the week to more than 6%. Tightness in the refined products market continues to prove supportive for crude oil prices, as healthy refinery margins should see refiners maximize their run rates. Last week, there were also reports that the US administration was talking to the domestic industry to see whether they could bring back shut refining capacity in order to help improve refined product supply. Over the weekend, EU diplomats failed to come to an agreement on the EU’s proposed ban on Russian oil ahead of a 2-day summit with EU leaders starting today. There are reports that despite concessions provided to Hungary, which would exclude oil that flows through the Druzhba pipeline from the ban, Hungary is still blocking the agreement. Hungary wants EU funding in order to help them increase pipeline capacity from Croatia and also for refiners to be able to switch to alternative crude. Diplomats are expected to meet ahead of the summit today, however, it’s unlikely that members come to an agreement when they meet, given that talks have not progressed enough.   The latest positioning data show that speculators increased their net long positions in ICE Brent by 12,639 lots over the last reporting week, which left them with a net long of 197,072 lots. This is the largest position that speculators have held since early March. However, it is still some distance from the roughly 333k lots they held back in October last year. The move over the week was driven predominantly by fresh longs, with the gross long increasing by 8,831 lots. Given the move that we have seen in the market since last Tuesday, the current net-long position is likely to be even larger. OPEC+ are set to meet on Thursday to discuss their production policy for July. We continue to expect no change in the group’s approach and expect confirmation that they will increase output levels by a little over 400Mbbls/d over the month. However, as we have seen for several months now, it is unlikely that members will produce anywhere near their agreed output levels. Metals Base metals rebounded on Friday along with other risk assets. A weaker dollar last week offered a temporary boost to the metals complex. LME nickel jumped over 7% at one stage on Friday, which saw the market hit an intraday high of US$29,100/t (highest since May 9). Total open interest in the LME nickel market dropped to 161,884 contracts on Wednesday last week, the lowest since 2012. Over the weekend, Shanghai said it would remove ‘unreasonable curbs’ on businesses and manufacturers from 1 June. The city also unveiled fresh economic support measures. It is set to abolish the so-called whitelist, allowing more businesses to resume from 1 June; however, some doubt that workers will be able to leave their compounds to return to work from this week. Among the 50 policy measures announced by Shanghai officials, the city will cut some purchase taxes, issue more quotas for car plates, and subsidise electric vehicle purchases. These policy measures for Shanghai may provide some relief, but are unlikely to turn around the overall slowdown in demand.  The focus will be on how quickly economic activity improves following the easing of restrictions. More importantly, the scale of stimulus is an important factor to keep an eye on. Major base metal inventories have remained in a downward trajectory in the China onshore market after logistics improved, and are still low compared to historical levels. This suggests that markets have a relatively smaller pile of metal to work with if business returns to normality. However, as market dynamics move back towards a favourable import arb, the scale of import flows remains to be seen. Agriculture CBOT corn saw speculators liquidating longs over the last reporting week with a pick-up in US corn plantings. CFTC data shows that money managers reduced their net long position by 48,242 lots over the last week to 291,469 lots. The move was predominantly driven by longs liquidating. Money managers reduced gross longs by 30,976 lots over the week, whilst increasing fresh shorts by 17,266 lots. The speculative net long in CBOT corn has now dropped to the lowest level in more than six months. Read this article on THINK TagsRussian oil ban Russia-Ukraine Refined product Nickel China Covid Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Information On The Euro To US Dollar Currency Pair

EUR/USD Performs Quite Well, Euro Is Supported By ECB. US Jobless Data Incoming, So Does NFP- How Will They Affect (USD) US Dollar Index (DXY)? Bank Of Canada (BoC) May Boost Canadian Dollar (CAD)! Is It Time To Buy (AMZN) Amazon Stock? | Swissquote

Swissquote Bank Swissquote Bank 30.05.2022 10:03
The week starts on a positive note after the rally we saw in the US stocks before last week’s closing bell. European futures hint at a positive open. The US 10-year yield stabilized around the 2.75% mark, and the US dollar index is now back to its 50-DMA level, giving some sigh of relief to the FX markets overall. Bonds and Equities One interesting thing is that we observe that the equities and bonds stopped moving together since the 10-year yield hit 3% threshold, suggesting that investors started moving capital to less risky bonds if they quit equities, instead of selling everything and sitting on cash. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM US Jobs Data, Expensive Crude Oil   That’s one positive sign in terms of broader risk appetite and should help assessing a bottom near the actual levels. But the end of the equity selloff depends on economic data. Released on Friday, the US PCE index fell from 6.6 to 6.3% in April. Due this week, the US jobs data, and the wages growth will take the center stage in the Fed talk. Weak dollar pushes the major peers higher, but the rising oil prices preoccupy investors this Monday. The barrel of US crude is above $117, and the news flow suggests further positive pressure. But till where?   Watch the full episode to find out more! 0:00 Intro 0:24 Market update 1:04 Equity, bond correlation is down since US 10-yield hit 3%! 2:58 Economic data is key: what to watch this week? 4:22 BoC to raise rates 5:09 EURUSD pushes higher 6:10 Oil under positive pressure: OPEC, UK windfall tax 9:19 Corporate calendar: GME, HP earnings, Amazon stock split Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. Follow FXMAG.COM on Google News
Podcast: US Dollar (USD) Keeps Rising | A look At The 10-year US Treasury

Will Stock Market Performs Equally Well As In The Previous Week? Next Earnings (e.g. HPQ, GME) Are Printed, Brent Crude Oil Trades Higher | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 12:29
Summary:  Today we look at the squeeze in equity markets that extended aggressively into the close of last week, with this week off to a strong start, in part on hopes for a shift in Chinese covid policy. We also look at the dissonances in the narrative should China drive new global demand that reaggravates inflationary dynamics as some of the recent market rally has been on hopes that inflation fears and anticipated Fed tightening policy have peaked for the cycle. We also highlight the stress in the VC space, Hungary's Orban boxing above his weight class, the dynamics in the crude market as Brent crude posted its second highest weekly close for the cycle last week, earnings ahead and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
Walt Disney Results Are Beyond  All Expectations. Large Chinese Company Fires More Than 9K Employees!!! Market Newsfeed - 11.08.2022

We Could Say High Prices Of Crude Oil, Metals And Other Commodities Are About Not Only Negative Effects, But Also About A Profit For Some People | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 12:42
Summary:  Commodities have seen hefty prices increases in the past two years, which is bad for inflation and for life in general but is one of very few asset classes where a profit can be made in very depressed markets.​ It’s hardly news that the cost of living – or inflation – is going up at a rate which the world hasn’t seen for decades. Food is getting more expensive, electricity is going up, it is more costly to buy and build stuff. In short, everything you want to do and consume costs (a lot) more than it did a year ago.There is one area – or in finance lingo, asset class – which is the root cause of this situation, and it has politicians and economists scratching their heads to find solutions: commodities. Commodities are the basic input to everything we do. It covers energy production, raw materials, metals, food, etc.When you look at commodities from a societal point of view, there isn't a lot of good news:“In short, what happens in the commodity sector is troubling. The Bloomberg Commodity Index is up 24% on the first quarter and if you look at average annual returns it has almost doubled since 2020,” says Ole Hansen, Head of commodity strategy at Saxo. In this quote, Hansen points to something interesting when dealing with an asset class like commodities, because it affects both the financial markets, and day-to-day life. When investing in an index, which is up that much in such a short time, you would usually be celebrating, but it isn’t always a good thing for commodities to climb so high, so fast.“Commodities are the basic input for everything we do, which means that when they get more expensive, so does everything else. Commodities need to find a more stable level for consumers and companies alike to feel comfortable, which no one is now,” says Hansen.As Hansen describes, surging commodity prices can have grave effects on society at large especially in less wealthy parts of the world, and its solution can be a self-fulfilling prophecy. “Most people will have to wind back on their spending. This will cause an economic slowdown, which hurts, but unfortunately seems to be the only cure right now against high inflation,” he says.The other edge While commodities need to become more stable for its societal impact, the asset class remains an enticing investment opportunity in a market where it seems like it is almost the only one you can look for a profit, even if there’s an economic slowdown. This is due to the supply and demand dynamics we are experiencing right now.Central banks are hiking rates to kill – or slow – the demand side, which is yet another reason why companies and thus equities are struggling. This should, in theory, also push the prices of commodities down, but then let’s turn our heads towards the supply side.Here, especially the Russian invasion of Ukraine, and the strict COVID-19 lockdowns in China, suppress the supply of many key commodities. This creates a dramatic imbalance between supply and demand, which means that even a global economic slowdown most likely wouldn’t bring it back to an equal footing.“If I had to pick one area to look for inspiration, it would be the metal industry. There’s a lot of amped up construction in China due to the lockdowns, which means that once they are lifted, the metal space could see a substantial increase in demand from them,” says Hansen.Queued up construction in China can push metal prices, which also could be a long play on the mining sector within equities."The equity market is probably the most difficult since the 2007-2009 financial crisis years due to a combined factor of persistently high inflation and equity valuation compression from higher interest rates. We believe that the world will be in a commodity super cycle and thus should be exposed to this through mining companies both short and long term. China's slowdown is just short-term noise. It changes nothing regarding mining companies over the coming years," says Peter Garnry, Head of Equity strategy.
US Inflation Data And Gold & Silver Benefit From Softer USD

S&P 500 (SPX) Rallied, So Did Nasdaq And Dow Jones (DJI), In Europe Sentiment Can Be Affected By Very High Crude Oil Price Caused And Russian Oil Ban | Oanda

Jeffrey Halley Jeffrey Halley 30.05.2022 12:55
Asian markets rally on positive Wall Street and China hopes S&P 500, Nasdaq And Dow Jones US markets closed out the week on another positive note after US data alleviated inflation fears and thus, future Fed tightening, and showed strength among US consumers still. Realistically, after such a positive week, it would have taken a lot to knock the FOMO gnomes of Wall Street off their path of bottom-picking nirvana. The S&P 500 rallied by 2.48%, while the Nasdaq leapt by an impressive 3.33%, with the Dow Jones climbed by 1.76%. The rally has continued in Asia, with Nasdaq futures 0.90% higher, with S&P 500 futures up 0.40%, and Dow futures edging 0.10% higher. US OTC markets are closed for Memorial Day. End Of COVID Restrictions? Asia is also turning in a positive performance, following the impressive New York close, and boosted by hopes that China’s Beijing and Shanghai hubs are reopening from virus restrictions and a package of stimulus measures released by the Shanghai local government. Nikkei 225 And CSI 300 Japan’s Nikkei 225 has coat-tailed the Nasdaq 2.10% higher today, with South Korea’s Kospi gaining 1.25%, and Taipei rallying by 1.60%. In mainland China, the Shanghai Composite is a more cautious 0.30% higher, with the CSI 300 rising by just 0.40%. The ever-optimistic Hong Kong, however, had leapt 2.50% higher, boosted by hopes of an Evergrande bond deal. Follow FXMAG.COM on Google News Metals In regional markets, Singapore is up just 0.20%, while Kuala Lumpur has fallen 0.25%, and Jakarta is 0.60% lower. A Goldman Sachs report suggesting metals prices have peaked is likely weighing on all three markets, as risk sentiment swings back to more growth-stock orientated markets. Bangkok has gained 0.65%, while Manila has rallied by 1.25%. Australian markets have also liked what they have seen with Wall Street and China, the ASX 200 and All Ordinaries climbing by 1.25% today. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Russian Oil Friday’s New York close and Asia’s rally today should be enough to lift European equity markets this afternoon, although the still simmering EU import ban on Russian oil and Brent crude above USD 120.00 a barrel will temper bullish animal spirits. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
US Economy, Black Gold, China And Strategic Petroleum Reserve | Gold

WTI And Brent (Crude Oil) Trade Really High, OPEC+ Is Expected Not To Support The Price. (XAUUSD) Gold Price Seems To Pausing And Resembling "The Calm Before The Storm" | Oanda

Jeffrey Halley Jeffrey Halley 30.05.2022 14:54
Brent crude rises above USD 120.00 The disconnect between energy prices and optimism in equity markets continues today in Asia. On Friday, oil prices surged once again, driven by an unrelenting squeeze on refined products, notably diesel and gasoline, globally, with the US driving season about to begin in earnest. Brent crude rose by 1.63% to USD 119.20 a barrel on Friday, rallying another 0.70% to USD 120.05 this morning. WTI rose by 0.85% to USD 115.10 a barrel on Friday, rallying another 0.83% higher to USD 116.05 in Asia today. Markets pricing in peak virus in Beijing and Shanghai are behind the rally in oil prices today, with a China reopening likely leading to increased oil consumption. Unlike recent times, markets seem unconcerned about oil moving back to March highs, emphasising how much pent-up risk-sentiment demand there appears to be out there. We can expect no solace from OPEC+ on production increases on Thursday. The grouping cannot pump to meet its present quotas as it is, and a 430,000 bpd increase is all we can expect. Additionally, the EU Russian oil import ban is still a work in progress and if it gets over the line this week, expect supplies to tighten again. As such, the risks are now increasing of a move towards the post-Ukraine highs we saw in February. Both Brent crude and WTI are at the top of my expected medium-term ranges at USD 120.00 and USD 115.00 respectively. A weekly close above these levels would be a major signal indicating more gains ahead. Brent crude’s next technical resistance is at USD 124.00 a barrel, and then USD 132.00, with support at USD 116.00. WTI has resistance nearby at USD 116.70 a barrel, with nothing afterwards until USD 127.00 a barrel. Support is at USD 115.00 and USD 113.00 a barrel. Gold trades sideways Gold seems determined to bore traders to death after another inconclusive overnight range-trading session. It finished Friday 0.13% lower at USD 1853.00 an ounce, before gaining 0.44% to USD 186.75 an ounce in Asia today. Gold’s price action continues to suggest caution, with the US dollar sell-off not translating to any meaningful gold strength. If global risk sentiment turns lower, gold could quickly follow. Gold has nearby support at USD 1840.00, followed by USD 1836.00 an ounce. Failure sees the possibility of a mini-capitulation by longs that could reach as far as USD 1780.00 an ounce. Gold has resistance here at USD 1862.00, ​ then USD 1870.00, followed by USD 1886.00 an ounce, its 100-day moving average. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Aramco Is Confident It Can Maintain Its Market Share In Asia

It's Time For Markets To Discount EU Ban On Russian Oil! EUR/USD And AUD/USD Have Gone Up. How Will Euro Exchange Rate Change In The Following Days? Let's Watch Eurozone Inflation! | ING Economics

ING Economics ING Economics 31.05.2022 08:01
EU partial ban on oil and hawkish commentary from Fed's Waller were the headlines with the US out on holiday. Indian GDP for 1Q22 out later.  Source: shutterstock Macro outlook Global: With the US out on vacation yesterday, there isn’t too much overnight catch-up to do for Asia, though commodity markets are responding to the partial EU ban on Russian oil agreed upon yesterday. FX markets continued their recent gains against the USD though. EURUSD  has now risen to 1.0787, bringing it close to resistance levels just above 1.08. The AUD also continued to make gains, and is currently flirting with 0.72. Within the Asia FX pack, the KRW led the charge, shooting lower to 1238, with the CNY close behind in terms of gains at 6.66. Despite the holidays, the Fed’s Waller struck a more hawkish tone at a speaking engagement than his colleague, Raphael  Bostic, who had recently advocated a possible September pause in hikes. Waller, in contrast, suggested that 50bp hikes should remain on the table until inflation was closer to 2%. Newswires continue to run with stories looking for the trough in the equity sell-off, but also suggesting that the bond sell off is also over. One of those views is likely to be wrong. But whichever is the case, it is a good reflection of the current market sentiment which is looking for turning points. More choppiness ahead seems likely as a result. It is a relatively light day for G-7 macro data today. The EU’s May inflation should show a rise from 7.5% to 7.8%. But ECB rate hike intentions have been clearly flagged for now, so this shouldn’t make too many ripples. And in the US, we have house price figures and consumer confidence numbers. Consumer confidence has barely any correlation with consumer spending, so we can probably give it only a cursory examination. House prices appear to be reaching a peak in year on year growth, but until or unless they show a marked reversal in direction, can probably also be glossed over. India: 1Q22 GDP, which is released at 8pm SGT tonight, should come in at about 4.0%YoY (consensus is 3.9%YoY). That should bring the annual fiscal-year GDP growth for 2021/22 to 8.7%. For the 2022/23 fiscal year, we are forecasting 7.2% GDP growth. Rising prices and tighter monetary policy as well as global disruptions and a less helpful base comparison account for the apparent slowdown.  China: Official PMIs will be released this morning. We expect both the manufacturing and non-manufacturing PMIs will come in under 50, i.e. signalling monthly contraction. That result will mainly reflect the fact that Beijing was in lockdown for most of May, adding extra pressure on activity while Shanghai was also still in lockdown. Unemployment should remain high and will add uncertainty to the non-manufacturing PMI even if Shanghai residents resume work and production starting from 1st June.   Korea:  April monthly activity data signals that China’s lockdown dragged down Korean manufacturing production while local reopening supported services, construction, and consumption activity. Manufacturing production plunged -3.3%MoM (vs -1.3% market consensus), the first monthly drop in seven months. Meanwhile, the construction and services sectors rose modestly for the second straight month, with notable rises in hotels & restaurants and personal services (11.5% and 8.7%) respectively. Consumption fell -0.2% but mainly due to a decline in pharmaceutical consumption, while durable goods, including automobiles, rose slightly. Overall, the April data was on weak side, yet the recent approval of a supplementary budget (62 trillion KRW) and the reopening of China should boost the recovery in the coming months.  Japan: April Industrial production fell -1.3% MoM sa (vs -0.2% market consensus) the first fall in three months, with China’s lockdown hampering supply chains and production activity. However, consumer sales were relatively sound with retail sales and department store sales up by 2.9% YoY and 4.0% respectively. Meanwhile, labour conditions also improved. The jobless rate in April dropped to 2.5% (vs 2.6% market consensus and March) and the job-to-application ratio ticked up to 1.23 (vs 1.22 in March). We ought to be on the watch for tighter labour market conditions leading to wage growth, which is the key that the Bank of Japan has been looking for to gauge a sustainable inflation trend. What to look out for: EU inflation and US non-farm payrolls South Korea industrial production (31 May) Japan retail sales and job-applicant ratio (31 May) China PMI manufacturing (31 May) Thailand trade balance (31 May) Eurozone CPI inflation (31 May  US Conference board expectations (31 May) South Korea trade (1 June) Regional PMI manufacturing (1 June) Australia 1Q GDP (1 June) US ISM manufacturing (1 June) Indonesia CPI inflation (2 June) Australia trade balance (2 June) US ADP jobs, initial jobless claims, durable goods orders (2 June) South Korea CPI inflation (3 June) US non-farm payrolls and ISM services (3 June) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil extends decline, gold edges lower

Seaborne Russian Oil Has Been Banned By The EU, But Crude Oil Prices Seems To Have Already Discounted This News. Gazprom Stopping Delivery To Netherlands | ING Economics

ING Economics ING Economics 31.05.2022 08:08
Your daily roundup of commodities news and ING views Source: Flickr Energy EU members have finally agreed to a ban on Russian oil. However, the agreement has been watered down quite a bit from the original proposal. Instead of targeting all Russian crude oil imports, the EU will ban imports of Russian seaborne crude oil over the next 6 months. This would ensure supply to landlocked countries in the CEE, which are very dependent on Russian pipeline supplies. In theory, this should mean that around two-thirds of the roughly 2.3MMbbls/d of Russian oil imported will be affected. However, in practice, we believe that volumes will fall even further. The largest recipients of oil from the Druzhba pipeline are Germany and Poland, and both countries have already said that they aim to reduce Russian imports to zero. So, the ban could target closer to 90% of Russian flows to the EU. It is unlikely that this will be the final deal, as the EU will work towards reducing the dependency of Hungary and other CEE countries on Russian oil in the longer term. The full details of the agreement are yet to be published. This move is supportive for prices. However, the market has had a month to digest the potential ban, and so we suspect it is largely priced in already. This is reflected in the price action in early trading in Asia this morning. There were also further developments in the European natural gas market yesterday. Gazprom is set to halt gas flows to the Netherlands starting today after GasTerra refused to agree to Russia’s new payment terms. The amount of gas supply affected will be around 2bcm between now and October, which is when the supply contract was set to expire anyway. The Netherlands should be able to make up for these lost flows, given the strong LNG imports that we have seen this year. In addition, we are also seeing stronger gas flows from the UK via the BBL pipeline. The Netherlands is the fourth country after Poland, Bulgaria and Finland to see Russian gas flows halted. On an annual basis, these countries import roughly 20bcm of Russian gas, which is around 13% of total Russian gas flows to the EU. This will likely increase in the coming days, and it looks as though Denmark will also see flows stop, with Danish firm, Orsted, also refusing the new payment terms. Orsted has a long-term contract with Gazprom for 2bcm per year. Metals Shanghai's reopening plan and relatively benign dollar conditions spurred a rally across the industrial metals sphere. Beijing unveiled fresh guidelines to boost high-quality growth in clean energy during the new era. The country vowed to speed up the construction of major wind and solar farm projects while reiterating the aim of having 1.2 bln kilowatts of such capacity by 2030. The latest guidelines were put together by the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) and were published by the General Office of the State Council. The support from authorities should increase the odds that the renewable energy sector will continue to see strong growth and support the demand for metals such as copper and aluminium. Nickel continued its strength from last Friday and broke above US$30,000/t on Monday amid a very thin market. The 3M contract touched an intra-day high of US$30,610/t, the highest since 5 May. Speculation has grown that Indonesia may throw tariffs on nickel exports with a nickel content below 70%, which was mentioned by an official last week at a conference. However, there hasn't been any confirmation on the details of the tariff and the timing. According to MySteel, the China market continues to see inventory drawdowns in aluminium ingots and billets. Total ingot inventory has declined to 954kt as of Monday (-14kt from 26 May), while billets fell to 152.5kt. Meanwhile, LME total aluminium stocks have fallen to more than a two-decade low of 467kt. Read this article on THINK TagsRussian oil ban Russia-Ukraine Nickel Natural gas Gazprom Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Crude Oil Supply Problems Are Reflected In JP Morgan's Forecasts

Germany Meets Really High Inflation - How Will ECB And Euro (EUR) React? Bitcoin Has Increased, So Does Oil, DAX And FTSE | Swissquote

Swissquote Bank Swissquote Bank 31.05.2022 09:58
German inflation hit a fresh record high of 8.7% in May, above the 8.1% penciled in by analysts. The data gave a boost to the European Central Bank (ECB) hawks and helped the EURUSD extend gains to 1.0780. Crude oil extended rally as the European leaders finally announced their decision to partially ban the Russian oil. Can The EU Affect OPEC's Move? Bitcoin's Rally And people started asking, would the European decision to ban the Russian oil would impact the OPEC’s decision about production; would the OPEC nations pump more to replace the Russian oil for European exports? Elsewhere, the softish US yields help gold consolidate above 200-DMA, while other precious metals also gain, Bitcoin rallies above $31K and the US markets are back after a long-weekend break!   Watch the full episode to find out more! 0:00 Intro 0:25 German inflation hits record, revives ECB hawks 1:31 Europe announces to partially ban Russian oil, oil rallies 4:08 Go deeper: will EU decision affect OPEC strategy? 5:38 US LNG stocks extend rally 6:32 DAX, FTSE recover¨ 8:00 Precious metals update. Gold, platinum, palladium 9:07 Bitcoin rallies, but gains remain vulnerable Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. Follow FXMAG.COM on Google News  
US Economy, Black Gold, China And Strategic Petroleum Reserve | Gold

The EU's Ban Affects Crude Oil Price, Gold Price (XAU/USD) Wouldn't Have Become A Blockbuster | Oanda

Jeffrey Halley Jeffrey Halley 31.05.2022 22:31
Europe’s ban on Russian oil sends black gold higher The announcement that a partial EU ban on Russian oil imports has made it over the finish line sent oil prices higher overnight. Recovering PMI data from China today, and by default recovering energy consumption, has seen the rally continue in Asia. The price action by oil this past week has been ominous, suggesting that supplies of refined products is getting worse, and not better. The EU oil ban on Russia further complicates that picture and I am wondering how long markets can continue bottom-fishing elsewhere while ignoring oil’s price rise. Overnight, Brent crude rose by 2.05% to USD 121.65 a barrel, and today, it has rallied another 1.20% to USD 123.10. WTI rallied by 2.20% to USD 177.65 overnight, gaining another 0.80% to USD 118.55 in Asia today. Brent crude is now a hair’s breadth away from resistance at USD 123.80, after which there is no resistance on the charts until USD 131.60 a barrel. Support lies at USD 116.00 a barrel. WTI has taken out resistance at USD 116.70 a barrel, which now becomes support, followed by USD 116.00. The USD 120.00 region will provide some psychological, and possibly option-related resistance, but there is now nothing on the charts until USD 126.80 barrel. Markets will find no solace from this week’s OPEC+ production meeting, as outlined in yesterday’s note. If China is reopening, and Europe is limiting Russian oil, there is only one obvious direction from here, for too long, ignored by markets. Only a surprise Iran deal, unlikely as they are seizing tankers at the moment, or a capitulation to Venezuela’s autocratic government, could change the supply/demand dynamic. Neither would alleviate the squeeze in refined products underpinning the rally. Gold trades sideways Gold seems determined to bore traders to death after another inconclusive overnight range-trading session. It probed resistance around USD 1860.00 an ounce overnight but retreated to finish just 0.14% higher at USD 1855.80 an ounce, marking another inconclusive session. Ominously, gold has fallen in Asia at the first sign of US Dollar strength, Gold has eased by 0.13% to USD 1853.50 an ounce. ​ Gold’s price action continues to suggest caution, with the US dollar sell-off not translating to any meaningful gold strength. If global risk sentiment turns lower, gold could quickly follow. Gold has nearby support at USD 1840.00, followed by USD 1836.00 an ounce. Failure sees the possibility of a mini-capitulation by longs that could reach as far as USD 1780.00 an ounce. Gold has resistance here at USD 1862.00, then USD 1870.00, followed by USD 1886.00 an ounce, its 100-day moving average. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Cost Of Living Crisis Is Dampening Demand And Threatens Big Companies Like Apple

Will OPEC Suspend Russia!? Price Of Crude Oil Rises. Is Economic Slowdown Incoming? | Conotoxia

Conotoxia Comments Conotoxia Comments 01.06.2022 16:23
WTI crude oil futures rose more than 1.5 percent on Wednesday to over $116.5 a barrel, marking the sixth consecutive month of gains. The EU's decision to partially ban Russian oil sales and China's reopening after the lockdown may more than offset reports that OPEC may suspend Russia from the production agreement. Reports emerged yesterday that some producers are considering suspending Russia's participation in the OPEC+ production agreement, which could pave the way for other producers to pump more oil to markets, and that some Gulf members are planning to increase production over the next few months. Investors await weekly US crude inventories data, with markets expecting US crude inventories to have fallen last week, while gasoline and distillate inventories rose. Learn more on Conotoxia The price of crude oil in global markets appears to be fluctuating widely. Yesterday, three-month peaks were established, with a barrel of WTI already costing over $118. Later in the day, prices sharply turned back below $113. As a result, oil price volatility may still remain relatively high. Meanwhile, in the real economy, this could mean high fuel prices. We are feeling this in Poland, but Americans are also feeling it. The price of gasoline there has soared to its highest level ever at USD 4.2 per gallon.More expensive fuels are one of the main components of rising consumer inflation, and at the same time a factor for decreasing demand in other categories. The more we spend on fuel because we need to get to work, for example, the less we spend in terms of unnecessary needs, recreation or entertainment. This, in turn, is a ready recipe for an economic slowdown, which the financial markets seem to have been pricing for quite some time now. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Eyes On Iran Nuclear Deal: Oil Case. Gold Price Is Swinging

OPEC+ Leaves Investors And Markets Confused As Russia May Not Hit its Crude Oil Output Quota. Gold Price (XAU/USD) Interacts With Fed's Rate Hike Fears | Oanda

Ed Moya Ed Moya 01.06.2022 23:00
Oil Oil prices are rallying as the crude fundamentals continue to turn bullish, while uncertainty persists with how OPEC+ will handle Russia’s output quota and if the group will be able to deliver more output in the coming months. Economic data from the US shows the economy is holding up, which supports the idea that crude demand should improve and that this will be a strong driving season. OPEC+ needs to figure out how they will handle Russia’s crude output quota, but regardless the group as a whole has limited spare capacity.  This oil market will remain tight until demand destruction becomes an issue, but right now that doesn’t seem like that will happen anytime soon.  Oil rallies, gold turns positive - MarketPulseMarketPulse Gold rises on market jitters Gold is getting its groove back on safe-haven flows as investor worries return that the Fed may not be easing up its rate-hiking campaign anytime soon. Wage pressures in the US are not easing and that should keep inflationary pressures going for a few more months. The war in Ukraine could see an escalation after the US has signaled they will give Ukraine advanced rocket systems.  Gold could thrive as safe-haven flows will only grow as geopolitical risks remain elevated and over fears of aggressive global central bank tightening. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
European Union Has The Crude Oil Price Cap In Mind. How Could Russia Make Price Go Up?

Oil steady, gold range-trades | Oanda

Jeffrey Halley Jeffrey Halley 07.06.2022 12:33
Oil is steady in Asia Oil’s intraday gains overnight were pared back in New York as US yields and the US dollar climbed, leaving both Brent crude and WTI slightly lower for the session. Brent crude finished 1.05% lower at USD 119.95 a barrel, and WTI finished 1.10% lower at USD 119.00 a barrel. Asian markets are very much in wait-and-see mode, with Brent crude slightly higher at USD 120.15 a barrel and WTI edging higher to USD 119.25 a barrel. Whichever way you look at it though, both Brent and WTI prices are nearing post-Ukraine highs, stripping at the days of the initial hostilities themselves. Returning Venezuelan and Libyan production to Europe and North America, should it occur, will not be material enough in the shorter term to force prices lower. Refining margins globally suggest that demand for petrol and diesel remain in heavy demand, with the refining logjam in refined products backstopping crude prices. Additionally, the damp squib OPEC+ meeting outcome, with some production bones thrown to some angry dogs, and a potential recovery in demand from mainland China has got on top of omicron, provides yet more reasons to believe that physical demand will keep prices elevated. Brent crude has resistance at USD 122.00, and USD 124.00, with support distant at USD 116.00 and USD 112.50 a barrel. WTI has resistance at USD 121.00, with distant support at USD 115.00 and USD 111.25 a barrel. Gold’s flip-flop ranging continues Gold continues to bore traders to death as range trading and reversals by a thousand cuts continue. Overnight, a stronger US dollar and firmer US yields pushed gold 0.50% lower to USD 1842.00 an ounce, where it remains in yet another moribund Asian session. The chart picture shows gold is now eroding resistance at USD 1870.00, touching USD 1874.00 an ounce on Friday. But overall, resistance at USD 1870.00 remains intact, followed by the 100-DMA at USD 1889.00, and then USD 1900.00. Support at USD 1844.00 has given way, opening further falls to USD 1830.00  and then USD 1780.00 an ounce. I do not discount a disorderly retreat if the latter fails. Gold remains at the mercy of intraday directional moves by the US dollar and US yields. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Oil extends decline, gold edges lower

Oil clutching to US 120, gold drifting | Oanda

Craig Erlam Craig Erlam 07.06.2022 18:39
Oil struggling to hold above USD 120 Oil is continuing to struggle around USD 120 on Tuesday, with Brent and WTI very slightly lower. We’ve seen USD 120 broken on a few occasions over the last week but each time it’s been quickly repelled in a sign of momentum starting to run a little thin. The fundamentals remain bullish for oil prices as China continues to reopen and the OPEC+ “production hike” does little to alleviate the tightness in the market. Still, it’s been a very strong run over the last month, with the price up more than 20% from the May lows. We could potentially see some profit-taking in the short-term but it’s hard to imagine it being too severe, barring significant growth downgrades or a surge in Covid cases in China. Gold consolidation continues As has so often been the case in recent weeks, gold is continuing to fluctuate around USD 1,850 today and showing little sign of a burst in either direction. It struggled once more around USD 1,870 on Friday, reinforcing it as a key area of resistance to the upside, while USD 1,830 continues to be the first line of support below. We may have to wait for the inflation data at the end of the week for an interesting move in either direction. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil clutching to US 120, gold drifting - MarketPulseMarketPulse
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Crude Oil: Both Brent And WTI Increased, Gold Prise Rose, But Still It Trades Quite Low | Oanda

Jeffrey Halley Jeffrey Halley 08.06.2022 14:03
Oil is steady in Asia Oil prices rose slightly overnight as tight refined supplies persist in the US, and industrial action in Norway and a shutting down of a Libyan oil field continued supporting prices at recent highs. Brent crude finished 0.75% higher at USD 120.75 a barrel, and WTI rose 0.30% to USD 119.75 a barrel. Asia is once again adopting a wait-and-see position, with Brent and WTI unchanged in regional trading. Oil prices remain at post-Ukraine invasion highs if you strip out the days when tanks rolled across the borders. Returning Venezuelan and Libyan production to Europe and North America, should it occur, will not be material enough in the shorter term to force prices lower. Refining margins globally suggest that demand for petrol and diesel remain in heavy demand, with the refining logjam in refined products backstopping crude prices. A reopening China is also supportive of oil prices. Brent crude has resistance at USD 122.00, and USD 124.00, with support at USD 116.00 and USD 112.50 a barrel. WTI has resistance at USD 121.00, with current support at USD 115.00 and USD 111.25 a barrel. Gold’s flip-flop ranging continues A weaker US dollar into the end of the New York session saw yet another mechanical response by gold, which rose 0.56% to USD 1852.50 an ounce in another snooze-fest session. In Asia, some US Dollar strength had sent it 0.25% lower to USD 1848.00 an ounce in an automatic response. Until we get a material move one way or the other by the greenback, gold’s range trading looks set to persist. Gold has resistance at USD 1870.00, followed by the 100-DMA at USD 1889.00, and then USD 1900.00. Support is at USD 1837, USD 1830.00, and then USD 1780.00 an ounce. I do not discount a disorderly retreat if the latter fails. The wider USD 1830.00 to USD 1870.00 range seems set to continue until Friday. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil edges higher, gold directionless - MarketPulseMarketPulse
Inflation In Philippines Hit 6.1%, Its Pace Is Record-Breaking. What Are The Predictions Of BSP (Bangko Sentral ng Pilipinas) Monetary Policy?

Gold Price Or FX - What's More Volatile Now? What's Ahead EURCHF And USDCHF After SNB Decision? Price Of Crude Oil Dropped. Awaiting Powell's (Fed) Testimony | Saxo Bank

Saxo Bank Saxo Bank 20.06.2022 10:26
Summary:  Equity markets tried to end last week’s grueling sell-off with a positive flourish on Friday, as oil prices dropped by the most in several weeks and firmness in safe haven bond markets kept bond yields at the low end of the week’s range. But are those developments down to investor concern that a recession is incoming? The week ahead features semi-annual testimony from Fed Chair Powell before Congress and global preliminary June PMI surveys.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Despite extreme volatility in cryptocurrencies and another “stablecoin (USDD)” losing its peg to the USD, US equities futures are starting the week on mild positive note. S&P 500 futures are trading slightly higher at the 3,690 level and will likely try to test the opening price from last Wednesday’s session at around the 3,743 level if risk sentiment remains positive today. There are no important macro events today so trading will be light, also due to today being a holiday in the US so cash equity markets are closed, and potentially take their lead from cryptocurrencies, although we expect the correlation to begin to decline with cryptocurrencies reducing itself to a small and isolated pocket of the market again. Hong Kong’s Hang Seng and China’s CSI300 Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) were fluctuating between modest gains and losses. Chinese property names surged with COLI (00688) and CR Land (01109) rising 9% and 8% respectively. According to Beke Research, secondary market home sales volume in China’s top 50 cities rose more than 20% in the first 10 days of June from last month. June Emerging Industries PMI came at 52.5, 3.6pp higher than May. With COVID outbreak, Macao gaming stocks fell. China’s 1-year and 5-year Loan Prime Rate remain unchanged. EURCHF and USDCHF The Swiss franc was in for a positive shock last week after a surprise hike – and a large 50-basis point one – from the Swiss National Bank altered the landscape for CHF traders, suggesting the central bank is less concerned with always lagging the ECB in its policy move and a moderating of concerns about the CHF level versus EUR, as a strong franc is potentially one tool that can help ease inflationary pressures. EURCHF reset lower to sub-1.0200 levels after trading between 1.04-1.05 before last week’s meeting. Focus now is on the parity level that was briefly touched in the wake of the Russian invasion of Ukraine. USDCHF is another focus, trading below 0.9700 after trading as high as parity before the decision. The 0.9500-0.9550 area is the next technical focus area there. USDJPY and JPY pairs A very challenging backdrop here for JPY traders, as the Bank of Japan’s insistence on maintaining its negative 0.10% policy rate and more importantly, the yield-curve-control policy by which it caps 10-year Japanese government bond yields at 0.25%, was seen as very JPY negative last week in the wake of a US Fed hiking the most since 1994 and the SNB executing a surprise large hike etc. At the same time, global bond markets rallied hard to close the week, particularly in the dominant US treasury market, with oil markets in a nosedive on Friday, both supportive developments for the Japanese yen. Focus for USDJPY traders remains on the 135.00+ cycle top, which may hold as long as US longer treasury yields are capped below cycle highs. To the downside, last week’s low near 131.50 was close to the prior major pivot high of 131.35. Crude oil Crude oil (OILUKAUG22 & OILUSJUL22) plunged almost 7% on Friday after growth worries signaled by the FOMC aggressive action to bring down inflation spread from the stock market and industrial metals to fortress oil and fuel. A sector which up until now has seen limited contagion risks given the tight supply outlook amid Russian sanction, OPEC+ producers struggling to raise production and lack of refinery capacity. Speculators turned net sellers of WTI in the week to June 14 following several failed attempts to break higher, potentially a signal we have entered another period of consolidation, but still with the underlying risk of eventually moving higher.  Gold Gold (XAUUSD) remains rangebound following a week of high drama that saw dramatic yield spikes being offset by growing unease about the economic outlook with recession worries on the rise as central banks step up their efforts to curb inflation. Focus on the dollar and Fed Chair Powell’s semi-annual testimony before the Senate Banking Committee on Wednesday (see below). Speculators cut bullish futures to a nine-month low ahead of last week’s FOMC rate hike announcement while total bullion-backed ETF holdings on Friday dropped to three months low, both highlighting the current uncertainty about the short-term direction. Copper HG Copper (COPPERUSSEP22) has returned to the key $4/lb support area after falling around 10% during the past two weeks on China and global growth worries. Iron ore (SCON2) traded in Singapore and metallurgical coal in Shanghai, both key inputs to the production of steel have lost around 20% during the same period. China’s slumping property market and the country’s inability to put the coronavirus behind it remain a major headwind, and one that inadvertently is supporting the efforts to curb inflation through lower input costs. Copper, rangebound for more than a year, is in the short-term at risk of breaking lower with the next level of support at $3.86 before $3.50. US Treasuries US treasuries (TLT, IEF) remained firm on Friday, keeping yields at the lower end of the week’s range and near the important tipping point around 3.20% for the 10-year Treasury yield benchmark, which was the prior yield high on the way up. US data surprises have tilted increasingly negative of late and a huge sell-off in crude oil on Friday may drive slightly lower inflation expectations if the lower prices stick. US Fed Chair Powell is up this week with semi-annual testimony before Senate and House committees on Wednesday and Thursday, respectively. Crypto rout extends with Bitcoin The largest and one of the more stable crypto assets, plunging below the critical 20k level over the weekend after it slid 15% on Saturday. This signals not just further stress in the crypto space but also broader stress in financial markets as liquidity conditions tighten. What is going on? French President Macron loses absolute majority in Parliament After the second round of parliamentary elections completed yesterday, President Macron’s centrist coalition will only win about 245 of of the 277 seats, with a leftist coalition headed by Jean-Luc Melenchon taking 131, and Marine Le Pen’s right populist National Rally at 89 seats.  The euro is taking the news in stride, but this result will hamper President Macron’s reform agenda, including his intent to raise the retirement age and reform the pension system. The tug of war between inflation and recession means room for policy error With the central banks bucking up on the tightening bandwagon last week, we are seeing a more serious fight against inflation which is set to rise further above 9% levels in the UK this week and remains in the 8% range for the US. However, this historic tightening pace following the Fed’s 75bps rate hike last week has meant further fears of an economic slowdown. A slew of weak US data reported last week also aggravated those concerns. Markets will continue to be choppy as investors weigh inflation/recession concerns, but the long-term bear trend is here to stay. The abrupt policy turn also means an increasing scope of policy error. Keeping an eye on corporate credit markets... ... after at least one measure of US high yield corporate spreads rose to a new cycle high last week above 500 basis points above US Treasury yields, above the mid-May high of 482 basis points and up over 100 basis points from the lows in early June. The two most widely tracked high yield ETF’s, HYG and JNK, closed sharply lower last week and are down around 15% (less in total return terms) from their late 2021 highs. What are we watching next? US Fed Chair Powell semi-annual testimony this week before House and Senate committees The Fed Chair will be in the hot seat this week in the required semi-annual testimony before Congress, where politicians on the committees often take a chance to grandstand on their own political positions and observations, but after several months of decades-high inflation and record gasoline prices, will this week’s testimony show that the political pressure on the Fed is mounting? The market will also watch for any new comments from the Fed Chair, although we are just a few days removed from the FOMC press conference. U.S. housing data are out on Tuesday The housing market is in a vulnerable position. Prices are up almost 40 % since the outbreak, mostly reflecting stimulus-fueled demand. But with high inflation across the board pushing consumer confidence downward and mortgage rates surging following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are tilted on the upside. Over the past few weeks, several large real estate firms such as Redfin Corporation have warned against the risk of slowdown. Expect a drop in May’s existing home sales and perhaps a new plunge in the number of new home sales after disappointing data in April (minus 16.6 %). The U.S. housing market is certainly the most vulnerable segment of the U.S. economy at the moment. It will be key to monitor the upcoming data in order to assess whether there is a material risk of recession or not. May UK CPI is out on Wednesday This will be painful. Expect a new increase to 9.1 % year-over-year in May against 9.0 % in April. Last week, the Bank of England (BoE) hiked rates by 25 basis points. This was expected. But political pressure is increasing on the central bank to do more while other developed market central banks have embraced a more hawkish tone (U.S. Federal Reserve, Reserve Bank of Australia, National Bank of Hungary, for instance). If inflation continues to rise (which is our baseline), we would not be surprised if we see the BoE go for an inter-meeting 25 basis points hike before the 4 August meet. Other central banks have done it recently, such as the National Bank of Hungary which decided a surprise 50 basis point hike to support the HUF last week. This only eased temporarily downward pressure on HUF. Earnings Watch This week’s earnings calendar is light but there are three important earnings releases to watch and those are Lennar, FedEx, and Accenture providing insights into the US housing market, logistics, and business spending dynamics (if you believe management consultancy is part of business spending). Today: Kanzhun Tuesday: Lennar Thursday: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0800 – Switzerland Weekly Sight Deposits 0800 – UK BoE’s Haskel to speak 1300 – ECB President Lagarde to speak 1500 – ECB President Lagarde to speak 1645 – US Fed’s Bullard to speak 1930 – ECB Chief Economist Lane to speak 0000 – Australia RBA Governor Lowe to speak 0130 – Australia RBA Meeting Minutes Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 20, 2022 | Saxo Group (home.saxo)
The Oil Market Opened Today With A Gap, What Happen Next?

Oil moves higher, gold range-trades | Oanda

Jeffrey Halley Jeffrey Halley 21.06.2022 12:17
Oil prices start reversing the Friday slump As I outlined above, oil futures have started reversing the Friday price slump as speculative capitulation collides with the reality of tight energy markets in the real world. Brent crude held USD 112.00 overnight, finishing 0.92% higher at USD 114.05 a barrel. It has added another 0.85% to USD 115.15 a barrel in Asian trading today. WTI held USD 108.50 overnight, finishing 0.20% higher at USD 110.05 a barrel. It has jumped 1.20% higher to USD 111.50 a barrel in Asian trading.   Friday’s falls have bought my six-month support lines back into focus. On Brent crude, that is at USD 107.00 a barrel today, just below its 100-day moving average (DMA) at USD 107.95. Ahead of this, it has support at USD 112.00, with resistance at USD 116.00 a barrel. WTI’s six-month support line is at USD 106.25 a barrel, just ahead of its 100-DMA at 105.25. It has interim support at USD 108.50, and resistance at USD 112.50 a barrel.   Of the two, WTI looks the more vulnerable, having fallen further and closed closer to its multi-month support zone. If the US cuts federal fuel taxes this week, or US housing data is very soft, that could be enough to tip the scales lower. It is hard to see either contract moving lower than USD 100.00 a barrel given the state of the physical market. From a technical perspective, I would like to see one of either contract tracing out a couple of daily closes below the longer-term support lines and the 100-DMAs, before reassessing my longer-term bullish outlook.   Gold range continues It was another wax-on, wax-off day for gold overnight thanks to US markets being closed. It edged 0.11% lower to USD 1839.00 an ounce. In Asia, it has gained slightly by 0.12% to USD 1840.60 an ounce as comatose trading conditions continue.   Despite the noise of the past week, it remains anchored in the middle of its one-month range. The overnight price action shows that the inverse correlation to the US dollar is as strong as ever.   Gold has resistance at USD 1860.00 and USD 1880.00, the latter appearing an insurmountable obstacle for now. Support is at USD 1805.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, while I would need to see a couple of daily closes above USD 1900.00 to get excited about the upside. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil moves higher, gold range-trades - MarketPulseMarketPulse
Investing In Gold? XAUUSD - Can Gold Price Reach $1700!? | FxPro

Investing In Gold? XAUUSD - Can Gold Price Reach $1700!? | FxPro

Alex Kuptsikevich Alex Kuptsikevich 21.06.2022 11:45
Despite attempts at rebounding equity markets, moderate pressure on gold has persisted for the third consecutive trading session. This pressure is directly linked to rising long-term bond yields on US debt and several other developed countries. Bonds and gold work like communicating vessels: rising real long-term yields draw capital to the debt markets away from gold. Over the last two years, the inverse correlation between gold and US 10-year Treasury yields has been very strong: gold prices peaked in August 2020, while yields rose from 0.5%. Last week, when the 10-year Treasury yield was rising temporarily to 3.5%, it tested the $1800 area. However, there are several essential points to understand in this correlation. First, the 10-year Treasury yields touched 11-year highs last week, while gold has retreated only to the levels last seen at the start of the year. In other words, an active capital outflow from gold only occurs when yields decline sharply, whereas the long-term trend favours the shiny metal. This correlation can easily be explained by inflation, which eats into the purchasing power of money in the long term. Secondly, 10-year yields are not so much influenced by short-term Fed interest rates as economic growth forecasts. Increased chances of a recession in the foreseeable future have dampened long-term yields. In addition, there are signs that the upward movement in UST yields was too fast, setting up a corrective pullback in the near term. In our opinion, the potential danger for gold is a further tightening of the Fed’s tone, i.e. hints of new steps of a 75-point rate hike and a willingness to keep rates above inflation. But so far, we have seen a significant outperformance of inflation over key rates, and comments from FOMC members indicate a willingness to stop with a tightening in the 3.5-4.0% area, with no attempt to ride out inflation and a reversal to a rate cut as early as 2024. Such outlooks are keeping long-term bond yields in check and, at the same time fuelling interest in a strategy of buying gold during intense downturns. Locally, creeping upward bond yields are working for sellers of gold. This also has a bearish signal in the form of consolidation below the 200-day moving average. However, gold’s resilience drew attention when markets overestimated expectations of a rate hike from 50 to 75 points and multiple buying gains on dips under the 200-day moving average since December last year.
The Oil Market Opened Today With A Gap, What Happen Next?

Crude Oil prices recover, gold price stuck in range | Oanda

Craig Erlam Craig Erlam 21.06.2022 16:21
Oil risks remain tilted to the upside Oil prices are around 1% higher, continuing to recover from Friday’s sharp sell-off. The oil market remains extremely tight but it seems the rising threat of recession created a compelling argument for it to correct lower last week. There’s no doubt that a recession could help rebalance the market and pull prices lower but for many, that is not the base case. So any corrections are still likely to quickly see a flurry of buyers, as we’re now seeing. In the same way that Chinese lockdowns slowed rallies in recent months, the increasing threat of recession could do similar over the summer. That said, the risks remain tilted to the upside as supply simply can’t keep up with demand. Gold could be rangebound for a while We’re still seeing plenty of indecision and choppiness in gold. It struggled to build on the momentum of last week’s surge and is now on course for a third day in the red. That’s not a particularly bearish signal, more a reflection of how the week has started in the markets. The absence of the US makes it hard to read too much into the moves until now. The key level to the downside remains USD 1,800, with USD 1,870 the big test above. It wouldn’t be a surprise to see the yellow metal fluctuate between these two levels for a while longer yet.   For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil prices recover, gold stuck in range - MarketPulseMarketPulse
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Crude Oil Rebounds, Gold Price Struggles | Oanda

Ed Moya Ed Moya 21.06.2022 22:34
Oil rallies on tight supplies Oil prices are rallying as last week’s selloff was overdone given how the short-term crude demand outlook remains for the US and China. ​ The oil market remains too tight over the short-term and rising expectations over tougher sanctions with Russian crude should keep demand especially strong here. Energy traders saw oil prices slide almost 15% in just a week, despite a very tight market. ​ The paid-for crude prices wasn’t justified and more of a reflection of the risk aversion mood that sank global equities. WTI crude should easily be supported above the USD 100 level throughout the summer, which means any dips will be bought into. Gold Gold prices are anchored as investors await to see how aggressive central banks will be with their tightening cycles and if the bond market will sway them into larger-than-expected hikes. ​ Gold is struggling today as Wall Street buys up beaten-down stocks and cryptos. ​ Demand for safe-havens is not the vibe on Wall Street and that could have bullion remaining vulnerable here to the lower boundaries of its new USD 1800 to USD 1880 trading range. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil rebounds, gold struggles - MarketPulseMarketPulse
A Look At S&P 500, Crude Oil And Copper | Monica Kingsley

A Look At S&P 500, Crude Oil And Copper | Monica Kingsley

Monica Kingsley Monica Kingsley 23.06.2022 15:48
Deterioration, that is – be it in S&P 500 market breadth or the jobs data. More to come, obviously, the disappearing liquidity is making itself felt broadly, and the real economy weakness hasn‘t yet arrived in earnest. This is still the environment of relatively fine but perceptibly slowing growth where technical recession can be declared as in, literally any moment (thanks to monetary tightening). Notably, we never escaped manufacturing recession in similar circumstances, and I had been clear on the hard landing realities recognition to spread like wildfire in the mainstream over the months to come. So far, no signs of systemic risk – but real estate and commodities are feeling the pinch seriously already. VIX is also trending higher rather continuously – the 25 level was indeed vigorously defended by the bears. That has all facilitated yesterday‘s sharp turn in my calls, namely in putting the spread trades to rest. Gold is treading patiently while cryptos can‘t obviously take off. Forces of short-term gravity are taking over.... Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Promising upper knot, very promising. Maybe the 3,830s zone wouldn‘t be even tested – all that‘s needed, is for bonds to cooperate. And given the dollar showing today, it‘s perfectly imaginable. Credit Markets The much awaited turn in long-dated Treasuries higher, is here. That‘s where the engine of further recognition of darkening skies in stocks, would come from. HYG is slowly getting the message, and it would be great if it led to the downside now. Crude Oil Crude oil is pausing, making up its mind – the backdrop is richly described in the caption. Energy certainly holds better very short-term prospects than base metals or even some agrifoods. Copper Economically sensitive commodities are losing altitude, a bit too readily. That‘s a sign of more downside to come, and copper is arguably the best example thereof. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Waiting game ahead of Jackson Hole, King Dollar, bitcoin edges higher

Can Bitcoin And Crypto Bounce Back!? Black Gold (Crude Oil) Markets Recovery!? What About BTC/USD?

Jeffrey Halley Jeffrey Halley 27.06.2022 10:55
Disconnect or Rebound? Jonny Hart speaks to APAC Senior Market Analyst Jeffrey Halley about news impacting the market and the week ahead. It’s another blockbuster episode today, and we are covering a LOT of ground. Firstly, the stock markets are rallying impressively despite recession expectations rising. Is this a dead cat bounce? A bear market rally? Or is the worst over? Jeff discusses the reasons behind the stock market rally and what’s happening in Asia, then ponders its sustainability. Then it’s over to oil markets which have recovered after the sell-off early last week. Jeff takes us through the nuances of oil futures curves and why backwardation matters! We discuss oil’s recovery in the context of the global economy and what lies ahead for black gold. As an add-on, the discussion moves to the G-7 meeting and the commodities space, where base metals have fallen heavily in June. Then it’s Jeff’s old favourite, Bitcoin. We discuss the crypto space and Bitcoins recovery. Jeff then delves into the Bitcoin chart and what it’s suggesting could happen this week. (hint: for once, Jeff isn’t a mega-bear) Finally, it’s back to planet earth and the main data points for the week ahead for markets, led by the global PMI releases at the end of the week.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 346) - MarketPulseMarketPulse
Russia's Crude Oil Still Flows To Japan, Negative Trade Balance In Japan

Crude Oil Recovers, Gold Price (XAUUSD) Inches Higher. Has US Dollar (USD) Slowed Down? | Oanda

Jeffrey Halley Jeffrey Halley 27.06.2022 11:39
Oil prices bounce Oil prices rose on Friday and Brent crude and WTI has unwound most of early last week’s losses. The futures curves remain in very firm backwardation and in the real world, supplies are as tight as ever with increasing risks around Russia and European natural gas exports. As I said last week, we are unlikely to see Brent crude below USD 100.00 in this environment, whatever noise we are hearing from other asset classes. OPEC should be a non-event this week, having increased production slightly last month. A potential full loss of Ecuadorian production is having no impact on markets today.   Brent crude rose by 2.55% to USD 112.40 on Friday, gaining 0.75% to USD 113.30 a barrel in Asia. WTI rose by 3.45% to USD 107.50 on Friday, edging 0.15% higher to USD 107.70 a barrel in Asia.   Notably, Brent crude tested and held its rising longer-term support line, today at USD 107.70, in the early part of last week. It did not reach the 100-day moving average DMA either. That is a technical development that should be respected and talk emerging from the G-7 about a cap on Russian oil prices, is likely to be more supportive of Brent crude over WTI.   WTI’s technical picture continues to look the more vulnerable. Having closed below its rising 2022 support line and its 100-DMA last week, the rally on Friday has only lifted it back to this region today. The support line is at USD 107.10, with the 100-DMA at 105.85 a barrel. Although the worst may be over for the WTI sell-off as well, we can’t rule out more corrections lower this week. It has resistance at USD 110.00 a barrel.   Gold rises on Russian gold ban Gold rose with general investor sentiment on Friday, as the US dollar eased. It ground out a modest 0.25% gain to USD 1827.50 an ounce, adding another 0.45% to USD 1835.50 an ounce in Asia today. The gains today have been driven by a G-7 announcement of a formal ban on Russian gold imports. In reality, this is a mere rubber-stamping exercise of unofficial policies already in place and is unlikely to meaningfully change the outlook for gold. ​ It remains adrift in the month-long USD 1800.00 to USD 1880.00 range.   Gold has resistance at USD 1860.00 and USD 1880.00, the latter appearing an insurmountable obstacle for now. Support is at  USD 1805.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, potentially reaching USD 1700.00 an ounce. On the topside, I would need to see a couple of daily closes above USD 1900.00 to get excited about a reinvigorated rally. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil recovers, gold inches higher - MarketPulseMarketPulse
In The Oil Market  Prices Are Rising Again And Gold Is Also Gaining

Commodities: Crude Oil Price Rallies, Gold Price (XAUUSD) Steady | Oanda

Ed Moya Ed Moya 28.06.2022 16:26
Oil rises as China eases Covid rules Crude prices rallied after China reduced the quarantine time for inbound visitors and as Beijing and Shanghai declared zero COVID cases for the first time in months. ​ China is showing they realize they can’t keep their strict COVID controls. Earlier, Chinese authorities triggered some alarm after noting that the zero-COVID policy could be in place for the next five years. ​ The crude demand outlook is getting a major boost after China cut the mandatory isolation time in half to seven days. ​ The easing of China’s quarantine times could support the idea that Beijing might be getting closer to pivoting away from its zero-COVID policy, but that shift probably can’t happen till closer to the end of the year. Earlier oil edged higher over expectations Libya would not be able reliably export crude as protests spread and as risk appetite returned to Wall Street. The supply side of the oil equation should remain supportive for prices even if OPEC+ sees the Saudis deliver a little more crude to help cover the shortfall from Nigeria and Angola. ​ President Biden’s July trip to Saudi Arabia is mostly for political theater and won’t really lead to a meaningful increase beyond the planned OPEC+ boost of 648K b/d of supply in July and August. ​Gold Gold is struggling for direction today as risk appetite returns to Wall Street as global bond yields rise. ​ Fixed income has been under pressure after ECB’s Lagarde affirmed they are poised to raise rates by 25 bps in July while they can kick off their new bond-purchasing operation. The G7 actions against Russia aren’t hard hitting as they won’t see involvement from China. Gold seems like it will struggle until the peak inflation question is answered. If Treasury yields can retest the earlier highs seen this month, gold might be vulnerable to one last test sub-USD 1800 before the bullish bets return. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil rallies, gold steady - MarketPulseMarketPulse
Oil extends decline, gold edges lower

Crude Oil's Reaction To The US Inflation, Gold Demand Assumption

Craig Erlam Craig Erlam 13.07.2022 21:34
Crude slides as recession risks build The US inflation data caused shockwaves throughout financial markets, with oil also sliding on the back of the release. A recession is now the primary bear case for crude given the tightness in the market and it’s clear here as much as anywhere how serious the economic risk is being taken. Both Brent and WTI are now back below USD 100, down around 20% over the last month, and they may well remain below there which would have been inconceivable in mid-June. Central banks are in panic-tightening mode and the inflation data isn’t easing up. Throw in more Chinese Covid restrictions and the market will start to look far more balanced, just not in the way anyone wanted. Will gold demand soon return? Gold has recovered the post-CPI release losses after threatening at one stage to break below USD 1,700. While this may come as a relief to some, it may not last considering the moves we’ve seen in interest rate expectations, yields and the dollar. The yellow metal is looking pretty vulnerable at the minute but if a recession becomes the base case, that may change. It is a safe haven after all and there may come a point where the economy buckles under the weight of inflation and interest rates and gold will increasingly find itself in demand. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Crude slumps on inflation, gold recovers - MarketPulseMarketPulse
Crude Oil Supply Problems Are Reflected In JP Morgan's Forecasts

Crude Oil And Gold: Let's Have A Look At Jeffrey Halley's Commentary - 05/08/22

Jeffrey Halley Jeffrey Halley 05.08.2022 13:58
Oil prices slump overnight Although OPEC+ was a damp squib, rising recession fears saw oil prices slump once again overnight after a negative global outlook from the Bank of England policy meeting. Both Brent crude and WTI have now comprehensively broken lower through their 200 DMA’s, a negative technical development. Although Saudi Arabia continues raising prices for their crude grades to Asian and US customers in the real world, futures markets suggest this may be a last hurrah. Brent crude slumped by 3.55% to USD 93.55 a barrel overnight. WTI fell by 3.10% to USD 88.00 a barrel. In Asia, the overnight dip in prices has been irresistible to local buyers, sending Brent crude 0.75% higher to USD 94.25 and WTI 1.00% higher to USD 88.90 a barrel. Brent crude broke below its 2022 uptrend at USD 109.00 in early July, and it seems unlikely we will see USD 110.00 Brent again this year, barring Eastern European shocks. The 200-DMA at USD 98.35 is the initial resistance, followed by USD 102.50 a barrel. Support is at USD 93.55, and failure clears the road to USD 90.00 a barrel. Failure of USD 90.00 could trigger another wave of capitulation selling. WTI’s 2022 trendline failed at USD 108.35 in early July, never to be seen again. US recession fears continue to weigh on WTI prices. Resistance lies at USD 95.20 barrel, the 200-DMA, followed by USD 102.00. Support is at USD 87.50 and then USD 82.00 a barrel. As noted in earlier newsletters, the avalanche of USD 200.00 a barrel, end of the world Brent crude forecasts, proved an uncannily accurate indicator of the impending peak in oil prices. Gold rallies, did I just say that? My four days away in Bali have seen gold’s impressive recovery rally continue. Overnight gold rose an impressive 1.45% to USD 1791.50 an ounce, edging to USD 1792.00 an ounce in Asian trading. It continues to benefit from a weaker US dollar, in turn, driven by falling US bond yields, as markets continue to price in peak inflation and a US recession. Notably, gold prices based, mid-July, at critical long-term support at USD 1680.00 an ounce. The ensuing rally remains a powerful bullish technical pattern which seems to be now attracting plenty of interest. Gold should remain well supported on dips to USD 1775.00 now, with a test of USD 1800.00 imminent. ​ Gold’s technical picture suggests it will continue grinding towards the USD 1900.00 region in the coming weeks. Until such a time as bond markets decide that inflation will be stickier than anticipated and yields start to rise again. The first test of that will come in the form of the US Non-Farm Payrolls this evening. A soft US payroll number, though, will likely support gold’s upward momentum, as it is likely to result in another bout of US dollar weakness as yields fall. My last commentary closes with a bullish outlook on gold; who would have thought? And with that, dear readers, all I can say is thank you very much; you’ve been a wonderful audience. Jeff has left the building……. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil slides, gold rally continues - MarketPulseMarketPulse
The Oil Market Opened Today With A Gap, What Happen Next?

Oil is tired of falling

InstaForex Analysis InstaForex Analysis 09.08.2022 15:05
Relevance up to 10:00 2022-08-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Strong statistics on American employment crossed out the hopes of pessimists for an early recession. Stock markets are growing by leaps and bounds, safe-haven assets are being sold, but the fall in oil suggests that not everything is so simple. Black gold still does not rule out a recession in the global economy. The 24% collapse of Brent from the levels of June highs is associated with fears about a slowdown in global demand. Fears that supply could increase due to Iran pushed the North Sea grade below $100 a barrel. According to Goldman Sachs, normalizing supply chains and eliminating other one-time factors will reduce US inflation to 4%, but after that, there will be a lot of excess heat in the economy, which will be very difficult to eliminate. The Fed will be forced to raise the federal funds rate above 4% and hold it there longer than currently expected. This will trigger a recession, but later. Probably in 2023. The oil market remains in an unsustainable deficit at current prices. They are too low to significantly reduce demand. The bank is forecasting Brent to rally to $110 in the third quarter. Dynamics of the stock market and oil     Fears that consumption will not be as strong as expected really dropped the futures quotes very much. The black gold market is on the verge of transition from a "bullish" conjuncture, backwardation, to a "bearish" contango. Spreads between nearby contracts narrowed over the week from $1.9 to $1.54 per barrel. In my opinion, a significant share of the negative about global demand has already been priced in, and factors such as a strong labor market, falling gasoline prices in the US, which will increase interest in buying cars and oil products, as well as the growth of Chinese oil imports to 8.79 million b/d, more than June's 4-year low, gives hope to Brent bulls. Another thing is that the supply may increase. Investors are actively discussing the possibility of a deal between the West and Iran, which is ready to throw an additional 1.5 million b/d of exports on the market, equivalent to 1.5% of world supply. This factor has so far been ignored by the market, so the signing of the agreement will be a real blow to fans of the North Sea variety.     As for ousting Russia, investors seem to have gotten used to the idea that this is unrealistic. Moscow is reorienting the flow of black gold from West to East. China and India accounted for 41.4% of Russian exports in July 2022 compared to 21.7% of the same month last year. At the same time, the appetites of Beijing and Delhi are beginning to fall—in the second month of summer, China purchased 843,000 b/d of oil from the Russian Federation, while in June and May, this figure reached 1.33 million b/d. Technically, a Wolfe Wave pattern was formed on the Brent daily chart. We take profits on the shorts formed on the rebound from $102.4 and use the rebound from the $89–91 convergence zone or break through the resistance at $97.2 per barrel for purchases.   Read more: https://www.instaforex.eu/forex_analysis/318434
What Did Support GDP? | Should Eurozone Worry!? Energy Prices May Weaken Production

What Did Support GDP? | Should Eurozone Worry!? Energy Prices May Weaken Production

ING Economics ING Economics 12.08.2022 11:37
Fading supply chain problems have led businesses to increase production in recent months. But with backlogs of work shrinking and new orders falling, there is not much reason for optimism in the months ahead  A factory in the Netherlands   The June data for industry looks rather upbeat at face value with growth for a third month in a row and production at the highest level since December 2017. This means that industrial production contributed positively to GDP in the second quarter. The improvement in the supply of inputs is causing supply to catch up with previous demand, which has been significant over the course of the pandemic. Still, in June, growth in production was mainly driven by a continued surge in capital goods production while consumer- and intermediate goods production shrank month-on-month. This shows that the base on which production was growing in June was more feeble than the headline figure leads us to believe. The outlook for eurozone manufacturers remains worrying. Weakening demand seems to be ongoing as purchasing power issues continue and while supply chain problems are easing they have by no means been solved. On top of that, soaring energy prices are set to hinder production and margins for manufacturers from here on. This means that while June looked decent in terms of production, the months ahead are likely to see further weakening. That fits our view of a contacting eurozone economy in the second half of this year. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
American Drivers Fuel Less! Crude Oil: What Do We Learn From OPEC's Forecast?

American Drivers Fuel Less! Crude Oil: What Do We Learn From OPEC's Forecast?

Jing Ren Jing Ren 12.08.2022 10:06
Yesterday, OPEC and the IEA provided their monthly reports on the oil industry. What got quite a bit of headlines was OPEC's forecast that crude demand would decrease during the remainder of the year. With both Brent and WTI below the $100/bbl mark, does this mean triple digit crude prices are a thing of the past? Not necessarily, because the IEA and OPEC are somewhat contradicting themselves in their reports. While OPEC cut its outlook for demand, the IEA raised its outlook. So, who's right? Well, it could have more to do with the initial assessment and converging on a realistic number. And that's rather important, because it appears to coincide with expected supply, even with OPEC raising production. Where this is going The IEA had a more pessimistic outlook for crude demand this year, setting it at 99M bpd, while OPEC had a more optimistic assessment of over 101M bpd. Since then, however, both have been converging on the 100M bpd mark, with the IEA raising demand forecasts and OPEC lowering. But both agree in their forecast that production will be around 100.1M bpd. Why the disagreement on one and agreement on the other? Because tracking production capacity is a lot easier. It's just a matter of counting all the wells and how much they produce. But how much people will decide to spend in a changing environment is a much harder thing to do. Furthermore, as the IEA noted in their report, there can be surprises. For example, Russian production has remained much higher than anticipated despite sanctions. Re-balancing shipments to take into account the sanctions appears to have been easier than anticipated, and happened quicker. Figuring out the price direction This has two implications for prices. One, the expectation for the price to fall once the infrastructure is set up for Russia to export around the sanctions might not pan out. Simply because is already managing to do that. And secondly, as Europe slowly weans itself off Russian supply, the potential for increasing price pressures might not materialize. This is because there appears to be more elasticity in global supply that allows for shifting demand. Speaking of which, high prices are pushing down consumer demand. A study by the AAA in the US, for example, showed that most Americans are cutting back on their driving. So much, in fact, that demand for gasoline has slipped below to the levels it was in 2020 during the pandemic. American drivers are the largest group of crude products consumers in the world. And it's not just fuel prices that are keeping them from driving, a majority said they were shopping less, as well. Suggesting that higher inflation overall, and not just strictly higher fuel prices, is contributing to slowing demand. So recession? With the BOE warning of a recession, and the US having two quarters of negative growth by the White House insisting it isn't a recession, that could be the key to potentially crude continuing its downward trajectory. Daimler Trucks, for example, is already setting up for lowering energy consumption ahead of potential supply shortages in Europe during the winter. Meaning that supply interruptions might not necessarily lead to higher demand, but simply less consumption. While demand might be waning, it still doesn't eliminate the possibility of a surprise on the supply side. Such as a rise in geopolitical tensions, or a natural event. So far, hurricanes in the Gulf of Mexico have been relatively scarce this year, but the season lasts for another four months.
Bank Of England Is Expected To Choose Between 50 and 75bp, Ethereum Arouses More And More Discussions As Merge Is Around The Bend

Higher Crude Oil Demand Is Expected! Some Countries Swaps Gas For Oil

Craig Erlam Craig Erlam 12.08.2022 13:55
Brent eyes $100 after mixed headline week The oil market has bounced back this week, with Brent once more flirting with triple-figures. There’s been a lot to digest this week, with Iran nuclear talks ongoing, US inventories rising, US output also rising, the Druzhba pipeline saga and the various forecasts. Even the forecasts themselves offered contrasting views, with OPEC downgrading demand growth and expecting the oil market to tip into surplus this quarter. The IEA, meanwhile, anticipates stronger demand growth due in part to the gas to oil switch as some countries react to sky-high prices. All things considered, the price moves highlight just how tight the market remains and how sensitive it therefore still is to spikes. A deal between the US and Iran could go some way to changing that but I think it’s clear traders are not banking on that given how the talks have gone until this point. A compelling bullish case for gold Gold is holding onto gains despite struggling to capture $1,800. The yellow metal briefly traded above here after the inflation data but it seems traders quickly changed their minds, with risk assets instead being favoured. The fact that it continues to hold onto the bulk of the gains without any significant correction may suggest there’s still an appetite for it, with slower tightening seen as a favourable outcome. This will be an interesting test for gold as $1,800 could represent an interesting rotation point from a technical perspective if there is no desire to see it above here but ultimately the case for bullish gold remains quite compelling. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil rebounds, gold consolidates - MarketPulseMarketPulse
Commodities: Prices Are Rising, Heatwaves In US And China Affects The Production Of Cotton

Commodities: Prices Are Rising, Heatwaves In US And China Affect The Production Of Cotton

Ole Hansen Ole Hansen 12.08.2022 16:00
Summary:  The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing, driven by recent economic data strength, dollar weakness and signs inflation may have peaked. With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support, especially across the sectors of energy and key agriculture commodities. The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing. According to the Bloomberg commodity sector indices, the correction period triggered peak to bottom moves of 41% in industrial metals, 31% in grains and 27% in energy. The main reason for the dramatic correction following a record run of strong gains was the change in focus from tight supply to worries about demand. Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver has been the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing but recent economic data strength, dollar weakness and signs inflation may have peaked have all helped support markets that have gone through weeks and in some cases months of sharp price declines, and with that an aggressive amount of long liquidation from financial traders as well as selling from macro-focused funds looking for a hedge against an economic downturn.With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support and problems for those who have been selling markets looking for even lower prices in anticipation of recession and lower demand. Backwardation remains elevated despite growth worries The behaviour of spot commodity prices, as seen through first month futures contracts, rarely gives us the full fundamental picture with the price action often being dictated by technical price-driven speculators and funds focusing on macroeconomic developments, as opposed to the individual fundamental situation. The result of this has been a period of aggressive selling on a combination of bullish bets being scaled back but also increased selling from funds looking to hedge an economic slowdown.An economic slowdown, or in a worst-case scenario a recession, would normally trigger a surplus of raw materials as demand falters and production is slow to respond to a downturn in demand. However, during the past three months of selling, the cost of commodities for immediate delivery has maintained a healthy premium above prices for later deliveries. The chart below shows the spread measured in percent between the first futures and the 12-month forward futures contract, and while the tightness has eased a bit, we are still seeing tightness across a majority, especially within energy and agriculture. A sign that the market has sold off on expectations more than reality, and it raises the prospect of a strong recovery once the growth outlook stabilises. Crude oil The downward trending price action in WTI and Brent for the past couple of months is showing signs of reversing on a combination of the market reassessing the demand outlook amid continued worries about supply and who will and can meet demand going forward. The recovery from below $95 in Brent and $90 in WTI this week was supported by signs of softer US inflation reducing the potential peak in the Fed fund rates, thereby improving the growth outlook. In addition, the weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March.In addition, the International Energy Agency (IEA) lifted its global consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel-based products. Meanwhile, OPEC may struggle to raise output in the coming months due to limited spare capacity. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold (XAUUSD) The recently under siege yellow metal was heading for a fourth weekly gain, supported by a weaker dollar after the lower-than-expected US CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. We believe the markets newfound optimism about the extent to which inflation can successfully be brought under control remains too optimistic and together with several geopolitical worries, we see no reason to exit our long-held bullish view on gold as a hedge and diversifier. Gold has found some support at the 50-day moving average line at $1783, and needs to hold $1760 in order to avoid a fresh round of long liquidation the short-term. While some resistance is located just above $1800 gold needs a decisive break above $1829 in order to trigger the momentum needed to attract fresh buying in ETFs and managed money accounts in futures. Source: Saxo Group Industrial metals (Copper)   Copper has rebounded around 18% since hitting a 20-month low last month, thereby supporting a general recovery across industrial metals, the hardest hit sector during the recent correction. Supported by a softer dollar, data showing the US economy remains robust, easing concerns about the demand outlook in China and not least disruptions to producers in Asia, Europe as well as South America potentially curtailing supply at a time when exchange-monitored inventories remain at a decade low. All developments that have forced speculators to cut back recently established short positions.The potential for an improved demand outlook in China and BHP's recent announcement that it has made an offer for OZ Minerals and its nickel and copper-focused assets, is the latest in a series of global acquisitions aimed at shoring up supplies of essential metals for the energy transition. With its high electrical conductivity, copper supports all the electronics we use, from smartphones to medical equipment. It already underpins our existing electricity systems, and it is crucial to the electrification process needed over the coming years in order to reduce demand for energy derived from fossil fuels.Following a temporary recovery in the price of copper around the beginning of June when China began easing lockdown restrictions, the rally quickly ran out of steam and copper went on to tumble below key support before eventually stabilizing after finding support at $3.14/lb., the 61.8% retracement of the 2020 to 2022 rally. Since then, the price has recovered strongly but may temporarily pause after reaching finding resistance in the $3.70/lb area. We maintain a long-term bullish view on copper and prefer buying weakness instead of selling into strength. Source: Saxo Group The grains sector traded at a five-week high ahead of Friday’s supply and demand report from the US Department of Agriculture. The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat and corn in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon-to-be-harvested crop has given the World Agricultural Supply and Demand Estimates report some additional attention with surveys pointing to price support with the prospect of lower yields lowering expectations for the level of available stocks ahead of the coming winter. Cotton, up 8% this month has seen the focus switch from growth and demand worries, especially in China, to deepening global supply concerns as heatwaves in the US and China hurt production prospects. Friday’s monthly supply and demand report (WASDE) from the US Department of Agriculture was expected to show lower US production driving down ending stocks by around 10% to 2.2 m bales, an 11-year low. Arabica coffee, in a downtrend since February, has also seen a steady rise since bouncing from key support below $2/lb last month. A persistent and underlying support from South American production worries has reasserted itself during the past few weeks as the current on-season crop potentially being the lowest since 2014. Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer. In addition, Columbia another top producer, has seen its crop being reduced by too much rainfall. Source: WCU: Commodity correction may have exhausted itself
The Commodity Sector Has Dropped Significantly

People Are Buying Gold. SIlver And Copper Stopped? Crude Oil Weakness

Ole Hansen Ole Hansen 16.08.2022 09:23
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 9. A relatively quiet week where a continued improvement in risk appetite drove stocks higher while softening the dollar. Some commodity positions, with crude oil the major exceptions, showed signs of having reached a trough following weeks of heavy selling Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 9. A relatively quiet summer holiday impacted week where stocks traded higher ahead of last week’s CPI and PPI print after better than expected economic data helped reduce US recession fears while the market was looking for inflation to roll over. The dollar traded a tad softer, bond yields firmed up while commodities showed signs of having reached a trough following weeks of heavy selling.    Commodities Hedge funds were net buyers for a second week with demand concentrated in metals and agriculture while the energy sector saw continued selling. Overall the net long across 24 major commodity futures rose for a second week after recently hitting a two-year low. Buying was concentrated in gold, platinum, corn and livestock with crude oil and wheat being to most notable contracts seeing net selling. Energy: Speculators responded to continued crude oil weakness by cutting bullish bets in WTI and Brent crude by a combined 14% to a pre-Covid low at 304.5k lots. The reductions were primarily driven by long liquidation in both contracts following a demand fear driven breakdown in prices. Gas oil and gasoline longs were also reduced. Metals: Buying of metals extended to a second week led by gold which saw a 90% jump in the net long to 58.2k lots. Overall, net short positions were maintained in silver, platinum and copper with the latter seing a small amount of fresh selling due to profit taking on recently established longs. Agriculture: Grains were mixed with corn and soybeans seeing continued buying ahead of Friday's WASDE  report while the CBOT corn net short jumped 36% to 20k lotsand the Kansas net long was cut to a two-year low. The total grain long rose for second week having stabilised around 300k lots having collapse from a near record 800k lot on April 22.Soft commodities saw elevated short positions in sugar and cocoa being maintained with price gains in coffee and not least cotton supporting a small increase in their respective net longs. This before Friday's surge in cotton which left it up 13% on the week after the US Department of Agriculture slashed the US crop forecast by 19% to a 12-year low. Driven by a high level of abandonment of fields in the drought-stricken Southwest.      Forex In the week to August 9 when the dollar traded close to unchanged against a basket of major currencies, speculators increased to three the number of weeks of continued dollar selling. The pace of selling even accelerated to the highest since January after the gross long against ten IMM futures and the Dollar Index was slashed by 20% to $17.4 billion, a nine week low. Most notable selling of the greenback was seen against GBP and JPY followed by EUR and CHF. The Japanese yen, under pressure for months as yield differentials to the dollar widened saw its net short being cut by 22% to a 17-month low.     What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming  Source: COT: Speculators cut oil long to pre-covid low
The World’s Top Oil Exporter Expects Demand To Recover

Energy: What Could Make Crude Oil Price Reach Low Levels?

Craig Erlam Craig Erlam 16.08.2022 13:26
Two-way risk for oil as a decision on JCPOA nears? Oil prices are sliding once more after tumbling on Monday following some woeful Chinese data. The unexpected MLF rate cut from the PBOC may have further spooked traders as it’s unlikely to have any positive impact and just looked a little desperate. Throw in the country’s disappointing refinery data – with output falling to 12.53 million barrels per day – and things aren’t looking particularly good in the world’s second-largest economy. ​ It’s hard to say how much of a factor the Iran nuclear talks are as a deal looks both close and unlikely depending on who’s talking. It’s possible that with an agreement or not imminent, the potential for a deal is being priced in which creates two-way risk for the oil price if a final announcement does come this week. But the primary driver of the weakness, which could keep prices around $90 or lower is the threat of recession around the world and the Chinese lockdowns. Positive signs for gold? There’s been a lot of pushback in gold early this week, with the yellow metal trading in the red for a second day. This comes amid another day of gains for the US dollar even as yields remain relatively flat. The fact that gold isn’t shedding too much of its recent gains could be a positive sign over the medium term, although it would have to overcome what has become a strong barrier of resistance this past week. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil extends decline, gold edges lower - MarketPulseMarketPulse
USA: People Are Not Interested In Buying New Houses! Equities Are Still Trading High As The Hopes For Iran Nuclear Deal Are Still Alive

USA: People Are Not Interested In Buying New Houses! Equities Are Still Trading High As The Hopes For Iran Nuclear Deal Are Still Alive

Saxo Strategy Team Saxo Strategy Team 16.08.2022 14:00
Summary:  Equities traded higher still yesterday as treasury yields fell further back into the recent range and on hopes that an Iran nuclear deal will cement yesterday’s steep drop in oil prices. The latest data out of the US was certainly nothing to celebrate as the July US Homebuilder survey showed a further sharp drop in new housing interest and a collapse in the first regional US manufacturing survey for August, the New York Fed’s Empire Manufacturing.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their gains yesterday getting closer to the 200-day moving average sitting around the 4,322 level. The US 10-year yield seems well anchored below 3% and financial conditions indicate that S&P 500 futures could in theory trade around 4,350. The news flow is light but earnings from Walmart later today could impact US equities should the largest US retailer lower their outlook for the US consumer. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities were mixed. CSI300 was flat, with electric equipment, wind power, solar and auto names gained. Hang Seng Index declined 0.5%. Energy stocks fell on lower oil price. Technology names were weak overall, Hang Seng TECH Index (HSTECH.I) declined 0.9%. Sunny Optical (02382:xhkg) reported worse than expected 1H22 results, revenues -14.4% YoY, net profits -49.5%, citing weakening component demand from the smartphone industry globally. The company’s gross margin plunged to 20.8% from 24.9%. Li Auto’s (02015:xhkg/LI:xnas) Q2 results were in line with expectations but Q3 guidance disappointed. The launch L9 seems cannibalizing Li ONE sales. USD: strength despite weak US data and falling treasury yields and strong risk sentiment Yesterday, the JPY tried to make hay on China cutting rates and as global yields eased back lower, with crude oil marked several dollars lower on hopes for an Iran nuclear deal. But the move didn’t stick well in USDJPY, which shrugged off these developments as the USD firmed further across the board, despite treasury yields easing lower, weak data and still strong risk sentiment/easy financial conditions. A strong US dollar is in and of itself is a tightening of financial conditions, however, and yesterday’s action has cemented a bullish reversal in some pairs, especially EURUSD and GBPUSD, where the next important levels pointing to a test of the cycle lows are 1.0100 and 1.2000, respectively. Elsewhere, USDJPY remains in limbo (strong surge above 135.00 needed to suggest upside threat), USDCAD has posted a bullish reversal but needs 1.3000 for confirmation, and AUDUSD is teetering, but needs a close back below 0.7000 to suggest a resurgent US dollar and perhaps widening concerns that a Chinese recession will temper interest in the Aussie. Crude oil Crude oil (CLU2 & LCOV2) trades lower following Monday’s sharp drop that was driven by a combination softer economic data from China and the US, the world’s top consumers of oil, and after Iran signaled a nuclear deal could be reached soon, raising the prospect of more Iranian crude reaching the market. The latest developments potentially reducing demand while adding supply forced recently established longs to bail and short sellers are once again in control. Brent needs to hold support at $93 in order to avoid further weakness towards $90. Focus on Iran news. Copper Copper (COPPERUSSEP22) led the metals pack lower, without breaking any key technical levels to the downside, after China’s domestic activity weakened in July. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. HG copper jumped 19% during the past month and yesterday’s setback did not challenge any key support level with the first being around $3.50/lb. BHP, the world’s top miner meanwhile hit record profits while saying that China is likely to offer a “tail wind” to global growth (see below). EU power prices hit record high on continued surge in gas prices ... threatening a deeper plunge into recession. The latest surge being driven by low water levels on Europe’s rivers obstructing the normal passage for diesel, coal, and other fuel products, thereby forcing utilities to use more gas European Dutch TTF benchmark gas futures (TTFMU2) has opened 5% higher at €231/MWh, around 15 times higher than the long-term average, suggesting more pain ahead for European utility companies. Next-year electricity rates in Germany (DEBYF3) closed 3.7% higher to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That is almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. US Treasuries (IEF, TLT) see long-end yields surging. Yields dipped back lower on weak US economic data, including a very weak Empire Manufacturing Survey (more below) and another sharp plunge in the NAHB survey of US home builders, suggesting a rapid slowdown in the housing market. The survey has historically proven a leading indicator on prices as well. The 10-year benchmark dipped back further into the range after threatening to break up higher last week. The choppy range extends down to 2.50% before a drop in yields becomes a more notable development, but tomorrow’s US Retail Sales and FOMC minutes offer the next test of sentiment. What is going on? Weak Empire State manufacturing survey and NAHB Index Although a niche and volatile measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. China's CATL plans to build its second battery factory in Europe CATL unveiled plans to build a renewable energy-powered factory for car battery cells and modules in Hungary. It will invest EUR 7.34 billion (USD 7.5bn) on the 100-GWh facility, which will be its second one in Europe. To power the facility CATL will use electricity from renewable energy source, such as solar power. At present, CATL is in the process of commissioning its German battery production plant, which is expected to roll out its first cells and modules by the end of 2022. Disney (DIS) shares rise on activist investor interest Daniel Loeb of Third Point announced a significant new stake in Disney yesterday, helping to send the shares some 2.2% higher in yesterday’s session. The activist investor recommended that the company spin off its ESPN business to reduce debt and take full ownership of the Hulu streaming service, among other moves. Elliott exits SoftBank Group The US activist fund sold its stake in SoftBank earlier this year in a sign that large investors are scaling back on their investments in technology growth companies with long time to break-even. In a recent comment, SoftBank’s founder Masayoshi Son used more cautious words regarding the investment company’s future investments in growth companies. BHP reports its highest ever profit, bolstered by coal BHP posted a record profit of $21.3bn supported by considerable gains in coal, nickel and copper prices during the fiscal year ending 30 June 2022. Profits jumped 26% compared to last year’s result. The biggest driver was a 271% jump in the thermal coal price, and a 43% spike in the nickel price. The world’s biggest miner sees commodity demand improving in 2023, while it also sees China emerging as a source of stable commodity demand in the year ahead. BHP sees supply covering demand in the near-term for copper and nickel. According to the company iron ore will likely remain in surplus through 2023. In an interview Chief Executive Officer Mike Henry said: Long-term outlook for copper, nickel and potash is really strong because of “unstoppable global trends: decarbonization, electrification, population growth, increasing standards of living,” What are we watching next? Australia Q2 Wage Index tonight to determine future RBA rate hike size? The RBA Minutes out overnight showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, tonight sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35 bps move. RBNZ set to decelerate its guidance after another 50 basis point move tonight? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 44 bps for the October meeting after tonight’s 50 bps hike and another 36 bps for the November meeting. US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.   Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report 7% revenue growth y/y and 8% decline y/y in EPS as the US retailer is facing difficulties passing on rising input costs. Home Depot is expected to report 6% growth y/y in revenue and 10% growth y/y in EPS as the US housing market is still robust driving demand for home improvement products. Sea Ltd, the fast-growing e-commerce and gaming company, is expected to report revenue growth of 30% y/y in Q2 but worsening EBITDA margin at -16.2%. The previous winning company is facing headwinds in its gaming division and cash flow from operations have gone from positive $318mn in Q1 2021 to negative $724mn in Q1 2022. Today: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Germany Aug. ZEW Survey 0900 – Eurozone Jun. Trade Balance 1200 – Poland Jul. Core CPI 1215 – Canada Jul. Housing Starts 1230 – US Jul. Housing Starts and Building Permits 1230 – Canada Jul. CPI 2030 – API Weekly Report on US Oil Inventories 2350 – Japan Jul. Trade Balance 0130 – Australia Q2 Wage Index 0200 – New Zealand RBNZ Official Cash Rate announcement 0300 – New Zealand RBNZ Governor Orr Press Conference  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 16, 2022
Brent Crude Oil Stayed Quite Strong Yesterday Rising 0.7%, But In The Near Future Commodites May Be Endangered By (USD) US Dollar's Dominance And More

Oh My! Commodities Prices Are Affected By Stronger USD (US Dollar) And Chinese Data

ING Economics ING Economics 16.08.2022 15:43
Commodities have come under pressure. Poor macro data from China and a rebound in the USD have weighed heavily on the complex. Specifically for oil, the prospect of an Iranian nuclear deal is certainly not helping   Energy - edging closer to a nuclear deal Oil is under further pressure. ICE Brent settled more than 3% lower yesterday, whilst WTI broke below US$90/bbl. This weakness has carried through into early morning trading today. Weaker than expected Chinese data has raised demand concerns once again, not just for oil, but for the broader commodities complex. As mentioned in yesterday’s note, refinery activity in July fell to its lowest levels since March 2020, whilst apparent demand was down around 10% YoY. These demand concerns have coincided with a recovery in the USD, which surged yesterday. Prospects of an Iranian nuclear deal have only weighed further on the market. Iran has reportedly responded to the EU’s proposal for a resumption of the Iranian nuclear deal. And the Iranians expect to receive a response in the next couple of days. The Iranian foreign minister is of the view that a deal could be reached in the next few days, although it will require some ‘flexibility’ from the US. As for the US’ stance, they will reportedly relay their views directly to EU negotiators. A revival of the deal and lifting of oil sanctions could potentially see Iran increasing oil supply in the region of 1.3MMbbls/d over time, which would help to ease some of the expected tightness in the oil market over 2H23. While the short term outlook appears more negative, the longer term outlook is still somewhat constructive. US drilling activity is increasing, although the pace has been slower than we have seen in previous upcycles. US producers still seem to be relying on drilled but uncompleted wells (DUCs). The latest drilling productivity report released by the EIA yesterday shows that DUC inventory fell by 20 over July, to leave the total number of DUCs at 4,277- the lowest since at least December 2013. We have seen 25 consecutive months of declines in the DUC inventory, falling by 4,530 over that period. US producers have relied on DUCs to sustain production post Covid, however, given the low inventory, producers will be unable to rely on DUCs moving forward, instead we will need to see a further increase in drilling activity.   Hot weather in Europe has provided a boost to European natural gas prices. TTF settled almost 6.8% higher yesterday, whilst prices hit EUR230/MWh at one stage yesterday- levels we have not seen since early March. However, European gas storage continues to edge higher, reaching almost 75%, which is in-line with the 5-year average and well above the 62% seen at this stage last year. Assuming we do not see any further reductions in Russian gas flows, the EU should hit its target of having storage 80% full by 1 November. However, that is a big assumption to make in the current environment. Metals - power shortages in Sichuan province The announcement of an interest-rate cut from the People's Bank of China (PBoC) failed to stop a slide in the metals complex yesterday. Instead market participants continue to be concerned about the demand outlook, following the latest poor economic data from China, as well as the domestic Covid situation. A stronger USD only applied further pressure to metal markets. Whilst there are clear demand concerns, supply risks are growing. Sichuan province in China has ordered some industrial plants to halt activities from 15 August until 20 August, as heat waves have led to power shortages. The region has been struggling with high temperatures and dry weather since July, and relies heavily on hydro for power generation. According to the Shanghai Metals Market, around 390ktpa of capacity in Sichuan province has been affected by the power shortages. Turning to ferrous metals, the SGX’s most active iron ore contract fell close to 4% yesterday, given the weaker macro data from China. The latest data from the National Bureau of Statistics shows that crude steel output fell 6.4% YoY to 81.43mt in July, as demand from the property sector continues to worsen. Cumulatively, output fell 6.4% YoY to 609.3mt over the first seven months of the year. Shandong province (the third largest steel producing hub) in East China, plans to cap steel output at around 76mt in 2022, slightly lower than the 76.5mt produced last year. Agriculture - Russian grain exports off to a slow start The latest numbers from the Russian Grain Union shows that Russia exported 4.67mt of wheat in the season that began on 1 July, down 13% compared to a year earlier. It is also estimated that the number of nations buying Russian wheat has reduced from 43 a year ago to just 23. Total grain exports declined 12% YoY to 5.6mt over the same period. The USDA’s latest weekly crop progress report for the US shows that 90% of the winter wheat crop was harvested as of 14 August, compared to 86% a week ago and 97% at the same stage last season. For corn, the USDA rated 57% of the crop in good-to-excellent condition, down from 58% a week ago and 62% last year. 58% of the soybean crop was rated good-to-excellent, marginally down from 57% last year. Read this article on THINK TagsRussia Power shortages Oil Iran nuclear deal Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Biggest Two-week Drawdown In A Year As US Oil Inventories Lost 10 mln barrels!

The Cheapest Oil In Six Months!!! How Will It Affect The Global Economics?

Conotoxia Comments Conotoxia Comments 16.08.2022 11:55
The price of WTI crude oil remained below $90 per barrel at the beginning of the week, the level before Russia's attack on Ukraine. Oil today is the cheapest in six months. It seems that the topic of a global economic slowdown or recession and how long it may last may be important for the oil market. Chinese and U.S. economic data seem to show a weaker condition in both economies and thus could affect the decline in oil demand. This, in turn, could put downward pressure on prices. According to published data, factory activity in China declined enough in July to force the central bank to cut lending rates to keep demand from collapsing. In the United States, on the other hand, the market may have been taken by surprise by the second-largest drop in the history of the New York Empire State Manufacturing Index. The above indicators may affect the market from the demand side, but this is only one part of the puzzle. On the supply side, long-awaited changes may be brewing. Once the embargo is lifted, oil from Iran may start flowing into the market again. Iran has responded to the European Union's proposal. It may seek to re-implement the 2015 nuclear agreement. The EU is also calling on the US to show more flexibility in implementing the agreement. Saudi Arabia may also be preparing to increase its oil supply. The chairman of Saudi Aramco, the state-owned oil giant, stated over the weekend that his company is ready to increase production to 12 million barrels per day, the company's current production capacity limit. Only a decision by the Saudi Arabian government is needed to increase production. According to the EIA agency's forecast, the United States can also increase its production. US oil production in the August forecast averages 11.9 million barrels per day (b/d) in 2022. It could rise to 12.7 million b/d in 2023. If this forecast comes true, the US could set a production record next year. The current one is 12.3 million b/d and was set in 2019.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Oil near six-month lows
Walmart And Home Depot Did Better Than Expected. S&P 500 Reaches The 4,3k Level

Walmart And Home Depot Did Better Than Expected. S&P 500 Reaches The 4,3k Level

Saxo Strategy Team Saxo Strategy Team 17.08.2022 08:35
Summary:  S&P500 index broke above the key 4,300 resistance level while the NASDAQ pushed lower amid mixed economic data and better-than-feared earnings from Walmart and Home Depot. US housing data continues to worsen, but the focus now turns to FOMC minutes due later today, as well as the US retail sales which will be next test of the strength of the US consumer. Asia session may have trouble finding a clear direction, but Australia’s wage price index and RBNZ’s rate hike may help to provide some bounce. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities were mixed. Tech names had an initial pullback, followed by short-coverings that narrowed the loss of the Nasdaq 100 to 0.23% at the close. S&P500 edged up 0.19% to 4,305 on better-than-feared results from retailers, moving towards its 200-day moving average (4,326). Walmart (WMT:xnys) and Home Depot (HD:xnys) reported Q2 results beating analyst estimates. Walmart gained 5% on strong same-store sales growth and a deceleration in inventory growth. Home Depot climbed 4% after reporting better than expected EPS and same-store sales but with an acceleration in inventory buildup. The declines in housing starts and building permits released on Monday and the downbeat comments about the U.S. housing market from the management of Compass (COMP:xnys), an online real estate brokerage, highlighted the challenges faced in the housing sector.  Short-end U.S. treasury yields rose as the long-end little changed The bigger than expected increases in July industrial production (+0.6% MoM), manufacturing production (+0.7% MoM), and business equipment production (+0.6%) triggered some selling in the short-end of U.S. treasury curve, pushing the 2-year yield 8 bps higher to 3.25% as 10-year yield edged up 1bp.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) China internet stocks were sold off on Tuesday afternoon after Reuters ran a story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan (03690:xhkg).  The shares of Meituan collapsed 9% while Tencent gained 0.9%.  After the close of the Hong Kong market, Chinese media, citing sources “close to the matter” suggested that the divesture story is not true. However, the ADRs of Meituan managed to recover only 1.7% in New York trading. The newswire story also triggered selling on Kuaishou (01024:xhkg), -4.4%, which has Tencent as a major investor. The decline in internet stocks dragged the Hang Seng Index 1% lower. On the other hand, Chinese developers soared on another newswire report that state-owned China Bond Insurance is going to provide guarantees to new onshore debts issued by several “high quality” developers, including Country Garden (02007:xhkg) +9%, Longfor (00960:xhkg) +12%, CIFI (00884:xhkg) +12.9%, and Seazen (01030:xhkg) +7.6%.  Shares of Chinese property management services also surged higher.  GBPUSD bounced off the 1.2000 support, NZD eyeing RBNZ A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than what was expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable got lower to remain in close sight of the 1.2000 big figure, but rose above 1.2100 subsequently. UK CPI report due today may confirm the need for further BOE action after labor data showed wage pressures. NZDUSD remains near lows of 0.6320 but may see a knee-jerk higher if RBNZ surprises on the hawkish side. Crude oil prices (CLU2 & LCOV2) Crude oil prices remain under pressure due to the prospect of Iran nuclear deal, and printed fresh lows since the Ukraine invasion. Some respite was seen in early Asian session, and WTI futures were last seen at $87/barrel and Brent is below $93. The EU submitted a final proposal to salvage the Iran nuclear deal, and prospects of more energy supply are dampening the price momentum. It has been reported that Iran’s response was constructive, and they are now consulting with the US on a way ahead for the protracted talks. The API reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels. Government data is due later Wednesday. European Dutch TTF benchmark gas futures (TTFMU2) touched €250/MWh, but has cooled off slightly recently, but still signals the heavy price that Europe is paying for the dependence on Russian gas. Copper holding up well despite China slowdown concerns Despite reports of weaker financing and activity data from China earlier this week, Copper remains well supported and registered only modest declines. BHP’s results provided some offset, as did the supply side issues in Europe. Only a break below the key 350 support will turn the focus lower. Meanwhile, zinc rallied amid concerns of smelter closures in Europe. What to consider? US housing scare broadens, industrial production upbeat Housing starts fell 9.6% in July to 1.446 mn, well beneath the prior 1.599 mn and the expected 1.537 mn. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1.674 mn from 1.696 mn, but printed above the expected 1.65 mn. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. US retailer earnings come in better than feared Walmart (WMT:xnys) and Home Depot (HD:xnys) reported better-than-feared results on Tuesday. Walmart’s Q2 revenues came in at USD152.9 billion (+8.4% YoY, consensus USD150.5bn). Same-store sales increased 8.4% YoY (vs consensus +6.0% YoY).  EPS of USD1.77, down 0.8% from a year ago quarter but better than the consensus estimate of USD1.63. While inventories increased 25.5% in Q2, the rate of increase has moderated from the prior quarter’s +32.0%. The company cited falls in gas prices, market share gain in grocery, and back-to-school shopping key reasons behind the strength in sales.  Home Depot reported Q2 revenues of USD43.9 billion (vs consensus USD43.4bn), +6.5% YoY.  Same-store sales grew 5.8%, beating analyst estimates (+4.9%).  EPS rose 11.5% to $5.05, ahead of analyst estimates (USD4.95). However, inventories grew 38% YoY in Q2, which was an acceleration from the prior quarter. The management cited inflation and pulling forward inventory purchases given supply chain challenges as reasons for the larger inventory build-up. Target (TGT:xnys) is scheduled to report on Wednesday. Eyes on US retail sales US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. A cooling labor market in the UK UK labor market showed signs of cooling as job vacancies fell for the first time since August 2020 and real wages dropped at the fastest pace in history. Unemployment rate was steady at 3.8%, and the number of people in employment grew by 160,000 in the April-June period as against 256,000 expected. There was also a sprinkle of good news, with the number of employees on payrolls rising 73,000 in July, almost triple the pace expected. Also, wage growth was strong at 4.7% in the June quarter from 4.4% in the three months to May, which may be key for the BOE amid persistent wage pressures. Australia Q2 Wage Index to determine future RBA rate hike size? The RBA Minutes out on Tuesday showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, today sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35bps move. RBNZ set to decelerate its guidance after another 50 basis point move today? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 45bps for the October meeting after today’s 50bps hike and another 37bps for the November meeting. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps to bring the Fed Funds rate at the level that they consider is neutral at the July meeting, but stayed away from providing any forward guidance. Meeting minutes will be out today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot jobs report and the cooling inflation number has further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts at least in ‘early’ 2023. We only have Kansas City Fed President Esther George (voter in 2022) and Minneapolis Fed President Kashkari (non-voter in 2022) speaking this week at separate events on Thursday, so the bigger focus will remain on Jackson Hole next week for any updated Fed views.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 17, 2022
Crude Oil Inventories Decreased, What Make The Prices Go Up! Iranian Nuclear Deal Talks

Crude Oil Prices Decrease Because Of Nuclear Deal! Gazprom Produced Over 10% Less Gas!

ING Economics ING Economics 17.08.2022 10:03
European natural gas prices continue to strengthen, which is having an impact on industrial output in the region. Yesterday, yet another metal smelter in Europe announced that it would halt production due to "external factors" Zinc ingots at a warehouse Energy - expectations for a nuclear deal grow Downward pressure on the oil market continued yesterday, with expectations of a positive outcome in Iranian nuclear talks growing. The market is positioning itself as though a deal is on the cards, but the risk is that if parties fail to come to a deal, we would likely see a reversal in the recent price action. While Iran appears fairly positive on a deal, it is still unknown where the US stands with the proposal. Given the more recent weakness that we have seen in oil and gasoline prices, the US may be less willing to make big concessions. API numbers released overnight have provided some support to the market this morning. US crude oil inventories are reported to have declined by 448Mbbls - the drawdown in gasoline stocks was more significant, falling by 4.48MMbbls over the week. It is the gasoline number which is providing some support to the market this morning.  The more widely followed EIA numbers will be released later today and the market is expecting a crude build of around 800Mbbls and a gasoline draw of around 1MMbbls. Similar numbers to the API could provide some further immediate support to prices. European gas prices have continued to strengthen. TTF briefly traded above EUR250/MWh yesterday, as the ever present supply concerns are coupled with stronger demand due to the ongoing heatwave in the region. While EU members last month agreed on the Commission’s proposal for a voluntary demand cut of 15% vs. the 5 year average between 1 August 2022 and 31 March 2023, countries will likely not need to enforce this. This is due to the fact that the current high price environment will likely ensure that we see the necessary demand destruction.  Meanwhile, reduced Russian gas flows are unsurprisingly having an impact on Russian gas output. Gazprom reported yesterday that its YTD gas production (until 15 August) declined by 13.2% YoY, whilst exports over the period were down 36.2% YoY. Metals - high EU power prices lead to further smelter closures LME zinc 3M prices jumped to an intra-day high of US$3,819/t yesterday and settled more than 3% up on the day. This is after Nyrstar announced that it would halt operations at its Budel smelter in the Netherlands. The smelter will be placed on care and maintenance starting from 1 September and for an indefinite period. The smelter, which has a nameplate capacity of 315ktpa and accounts for around 2% of global supply, was already operating at reduced rates due to the ongoing power crisis in Europe. LME exchange inventories are already tight, having fallen by more than 124kt since the start of the year, leaving them at just 75kt. Therefore, the market has a very thin buffer to sustain any further supply shocks. It appears as though it will be a challenging environment for metal producers in Europe (from a cost perspective) for the foreseeable future, given that energy prices are likely to remain elevated. The London Metal Exchange yesterday banned the delivery of Russian nickel brands (including Nornickel) into its approved UK warehouses. The ban is imposed on any nickel exported after 20 July. The move shouldn’t come as too much of a surprise, given that we had previously seen the same action taken for a number of other LME metals. Given that there is no nickel in approved LME UK warehouses affected by the suspension, this move should have no impact on nickel prices.        Agriculture - Ukraine grain exports remain weak in 1H August The latest data from Ukraine’s agricultural ministry shows that Ukraine exported 948kt in the first half of August, down from 1.88mt in the same period last year. Cumulative exports have fallen 46% YoY to 2.65mt in the 2022/23 season, despite unblocked ports.  Bloomberg reports that Ukraine shipped 563kt of crops in 1H August under the Black Sea export corridor from Odesa, Chornomorsk and Pivdennyi. Corn made up the bulk of these volumes, with 451kt exported, whilst just 42kt of wheat was shipped. Turkey, Iran and South Korea were the top destinations for these shipments. Ukraine’s deputy infrastructure minister believes that 3mt of grains could be exported from ports in September. Read this article on THINK TagsZinc Russia-Ukraine Power shortages Nickel Natural gas Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Podcast: The European Gas Market, Comments On Events At Central Banks

Natural Gas Is More Valuable Than Crude Oil!? Carbon Emission Is Almost The Highest In History!!!

Kim Cramer Larsson Kim Cramer Larsson 17.08.2022 16:02
Dutch TTF Gas is resuming uptrend taking out July peak testing the 0.618 Fibonacci retracement at around €242.75.RSI has broken its falling trend and is likely to trade out/cancel the divergence since mid-July. If Dutch gas closes above the 0.618 retracement the 0.764 retracement at around 281.82 is next level likely to be reached. The upper rising trend line is likely to be reached and possibly broken in a gas price that seems to accelerate.To reverse the uptrend a close below 187.50 is needed.However, a correction over the next couple of days is not unlikely given the Spinning Top Candle formed yesterday. IT is often a top and reversal indicator but needs to be confirmed by a bearish candle the following day. IF Dutch Gas closes above its peak the potential top and reversal is demolished. Source: Saxo Group Henry Hub Gas has taken out resistance at the 0.618 retracement at around $8.90 and now also 0.764 retracement indicating previous highs at $9.66-9.75 are likely to be tested. If Henry Hub Gas closes above previous highs new price targets Source: Saxo Group Brent Crude oil continue its downtrend closing in on support at around $90. RSI is testing previous lows. There is divergence indicating a weakening of the downtrend but if RSI makes a new low the $90 support could be broken. Next support would be at around the 0.764 retracement at 85.76To set the downtrend on pause a close above 100.38. That will most likely not reverse the trend but merely just put it on pause. Source: Saxo Group WTI Crude oil was rejected at the short-term falling trendline and is now back below the 0.618 retracement. Next support at 81.90. There is divergence on RSI indication the downtrend is weakening. However, if RSI closes below If WTI closes back above the 200 SMA i.e. above $95 thereby also breaking above the short-term falling trendline, a larger correction to around 105-110 is likely. Source: Saxo Group Carbon Emissions broke its falling trendline last week and has now also broken above resistance at 92.75 closing in on its all-time high just below €100. RSI is entering over-bought territory but there is no divergence indicating higher levels (above 100) is likely. However, do expect a correction from just below previous highs.            Source: Saxo Group   Source: Technical Update - Natural Gas powers higher. Oil downtrend weakening, close to and end? Carbon Emission close to all-time highs
The Elasticity On Supply Of Fossil Fuels Is Low And The Green Transformation Is Accelerating Electrification

We Need To Build Our Green Energy Future. Here Is Why

Peter Garnry Peter Garnry 17.08.2022 16:26
Summary:  We are used to not think about the energy sector, but the galloping global energy crisis has illuminated our deficits in primary energy due to years of underinvestment in fossil fuels and renewable energy sources inability to scale fast enough with the green transformation and electrification of our economy. It seems more likely now that the non-renewable and the renewable energy sector will both provide attractive returns as we will need both to overcome our short-term energy crisis and long-term aspirations of a greener energy future. The energy crisis keeps getting worse Electricity prices in Europe are nine times higher than the historical average since 2007 as lack of investments and cutting the ties to Russia’s energy supplies are severely constraining available energy in society. Since before the pandemic we have written many equity notes on the green transformation which involves building out renewable energy sources and electrifying everything in the economy to reduce the carbon emissions involved with our current living standard. Switching a large part of the transportation sector to electricity or green fuels, switching the heating source from natural gas to renewable energy through electrification (air-to-water heat pumps) etc. is very difficult as our rising wealth (measured by GDP) is finely mapped to carbon emissions over the past 300 years. We described this in our note The inconvenient truth on energy and GDP. Decoupling our wealth generating function from that of carbon emissions is probably the greatest task humans has ever set out to do. German baseload electricity 1 year forward | Source: Bloomberg There is not ‘one solution’ that fixes our energy crisis As BP’s 2022 Statistical Review of World Energy pictures primary energy demand in 2021 eclipsed 2019 suggesting the world’s demand for energy is now higher than before the pandemic and the usage of fossil fuels (82%) is only slightly down compared to five years ago (85%). We very much still live in a fossil fuel based economy. Things will change over time and the share of fossil fuels will likely decline, but the idea that the world can do the green transformation by electrifying everything based on renewable energy sources is naïve. Investors should also remember that the change in primary energy demand is mostly driven by the non-OECD countries. Renewable energy does not scale fast enough for a complete transition due to the speed on electrification and recently the CEOs of Orsted and Vestas complained about bureaucracy related to get new offshore wind power projects approved. The recent Climate & Tax Bill is acknowledging that we will need oil and gas for longer than expected just three years ago and thus our current energy crisis will allow both renewable energy and fossil fuel energy to be good investments in parallel. Renewable energy is the third best theme basket this year while the commodities basket (which includes oil & gas and mining companies) is the best performer. Our view of the future of energy is that there is no ‘one solution’ to our energy problem. We must move to a mindset of energy diversification. We will need many different sources of energy and never rely too much on one source. Germany’s reliance on natural gas for its economic model has proved fragile. Even France’s concentrated bet on nuclear power has proved to be fragile due to corrosion and now too hot rivers. The world must invest in all types of energy and thus our view is that investors mut get broad exposure to energy going forward. The non-renewable energy sector at a glance In this equity note we will focus on the non-renewable energy because this is the part of the energy sector which has changed the most relative to market pricing and expectations and where there is more room for valuations changing. Despite high oil and gas prices the energy sector is still relatively cheap as we described already back in May in our note Global energy stocks are the cheapest in 27 years where we measured valuation on the free cash flow yield. The high oil and gas prices have also led to record profits for refiners and recently the highest quarterly profit ever recorded in the global energy sector which we described in our note Earnings hit new all-time high as inflation lifts all boats. The global energy sector (defined by GICS and being the non-renewable energy sector) is still cheap relative to the global equity market with the 12-month EV/EBITDA being two standard deviations below the average valuation spread since 2005. In terms of total return the global energy sector has delivered a higher return than the global equity market since 1995 (see chart). It is also worth noting that measured on the 12-month forward EV/EBITDA the renewable energy sector has twice the valuation level compared to the non-renewable energy sector reflecting the different in expectations for the future priced in the market. As we described in our Q1 Outlook the current dividend yield and expected dividend growth suggest that the global energy sector has an expected long-term return of 10% annualised subject of course to a large degree of uncertainty related to equity valuation compression in the industry or lower dividend growth in the future than expected today. Global energy vs global equities | Source: Bloomberg The easiest way to invest in the energy sector is through ETFs tracking the sector and most investors should do that. A different approach is investing in specific parts of the non-renewable energy sector. The tables below show the top five company on market value in each of the GICS industries in the GICS energy sector. As the five-year total returns in USD column show, the industries related only to drilling and providing equipment for drilling activities have done the worst because the decline in capital expenditures since 2015 has dried up activity for this industry. The integrated oil and gas majors have done better due to refining and trading businesses. Over the past five years, the best performing industries in the energy sector have been refining and marketing due to the crack spreads (the difference between crude oil and refined products) have expanded during the pandemic. The global coal industry has also done very well which in terms of climate change and reducing carbon emissions is a sad observation but we should be aware of that the primary fuel source for power generation globally is still coal. GICS industries in the energy sector | Source: Bloomberg and Saxo Group Source: How to invest in energy and the unfolding energy crisis?
A Pick Up In Yields May Come, The Question Is Open As US Treasury Yields Remain Rangebound

A Pick Up In Yields May Come, The Question Is Open As US Treasury Yields Remain Rangebound

Saxo Bank Saxo Bank 18.08.2022 11:38
Summary:  Today we note a further softening in sentiment, in part on a pick up in yields, but that story has yet to really trigger as long US treasury yields remain rangebound, if teasing important levels. We note important supports for the crude oil outlook, the crack spread picture in the energy complex, the still very low valuation of energy stocks relative to the broader market, stocks and earnings on our radar, FX developments as we keep the USDCNH chart front and center as a potential aggravator of weakening risk sentiment and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: As risk sentiment rolls over, is crude oil set to rally?
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

Energy: US Crude Oil Inventories Released By EIA Showed A Significant Fall!

ING Economics ING Economics 18.08.2022 15:06
The US saw large oil inventory declines over the last week. However, commodities are still struggling to find direction. A number of markets are trying to balance weaker demand with growing supply risks. This is particularly the case for metals, where yesterday another European smelter announced it would suspend operations due to high energy prices Source: Shutterstock Energy- large US crude inventory draw Yesterday’s EIA numbers provided some support to the oil market. However, sentiment remains largely negative, with lingering demand concerns and a potential Iranian nuclear deal casting a shadow over the market. The EIA reported larger than expected draws in crude and product. Over the last week, commercial crude oil inventories declined by 7.06MMbbls, which is the largest drawdown since mid-April. However, when SPR releases are taken into account, total US crude oil inventories fell by a significant 10.46MMbbls. The large decline in inventories was due to a substantial increase in crude oil exports over the week. Exports grew by 2.89MMbbls/d to hit a record 5MMbbls/d. This makes up for the weak export number last week, while the wider discount that we have seen in WTI/Brent for several weeks now should be supportive for US export volumes. On the products side, while a build of 766Mbbls was reported for distillate fuel oil, gasoline inventories fell by 4.64MMbbls. This fall was driven by stronger implied demand, which grew by 225Mbbls/d over the week. The more recent weakness that we have seen in pump prices appears to have provided some support to demand. Metals- more closures for European smelters Base metals came under further pressure yesterday, with the exception of LME aluminium, which managed to settle marginally higher on the day. This is after Norsk Hydro announced that it would suspend primary aluminium production at the Slovalco smelter in Slovakia due to surging power prices. The smelter had already reduced output late last year and early this year, which left it operating at 60% of its 175ktpa capacity. Separately, Hydro has also said that production will be affected at its Sunndal smelter in Norway due to strike action which is set to start on 22 August. The planned strike is estimated to idle around 20% of primary production capacity for four weeks starting from Monday. Hydro Sunndal has a capacity of 450ktpa. While supply risks continue to grow in the aluminium market (both in Europe and China), the market still seems more focused on the poorer demand story. Agriculture - Chinese imports off to a weak start in 2H22 The latest trade data from China’s Customs shows that corn imports fell 46% year-on-year to 1.5mt in July, while year-to-date imports are down 16.7% YoY to 15.1mt. Similarly, wheat imports also came under pressure, falling 11.7% YoY to 780kt over the month. Cumulative wheat imports declined 8.4% YoY to 5.7mt over the first seven months of the year. Weaker Chinese import demand has provided some relief to grain markets, which have had to deal with Ukrainian supply disruptions.  Read this article on THINK TagsPower shortages Oil EIA China demand Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Crude Oil Price Probably Not Reach 100$(USD) Shortly

Crude Oil Price Probably Not Reach 100$(USD) Shortly

Swissquote Bank Swissquote Bank 18.08.2022 15:56
The equity rally in the US didn’t pick up momentum after the Federal Reserve (Fed) released its latest meeting minutes, which sounded more hawkish-than-expected, or more hawkish-than-what-was-needed-to-give-another-boost to the US stock markets. The biggest take was that the Fed will continue tightening its policy until it sees that inflation is ‘firmly on path back to 2%’. The S&P500 fell 0.72% as Nasdaq gave back 1.20%, although the jump in the US 2-year yield was relatively soft, and the Fed funds futures scaled back the expectation of a 75 bp hike in the next meeting. Crude price completed an ABCD pattern, and it is more likely than not we see the price rebound to the $100 level in the medium run. In China, Tencent announced its first ever revenue drop as government crackdown continued taking a toll on its sales, and the pound couldn’t gain even after the above 10% inflation data boosted the Bank of England (BoE) hawks and the call fall steeper rate hikes to tame inflation in the UK. Watch the full episode to find out more! 0:00 Intro 0:28 As expected, Fed minutes were more hawkish-than-expected 3:39 Crude oil has more chance to rebound than to fall 6:02 Tencent posts first-ever revenue drop 7:14 Apple extends gains, but technicals warn of correction 8:38 Pound unable to extend gains despite rising Fed hawks’ voices Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #GBP #inflation #Tencent #Alibaba #earnings #crude #oil #natural #gas #coal #futures #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Oil Is An Indicator Of The Health Of The Global Economy

Crude Oil Has A Selling Weariness? Europe Prefers Oil Over Gas!?

Ole Hansen Ole Hansen 18.08.2022 16:14
Summary:  Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being an increased gas-to-fuel switching supporting the demand outlook for crude oil. Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driving by China’s troubled handling of Covid outbreaks, and its property sector problems as well as rapidly rising interest rates, were the main drivers behind the selling seen across commodities in recent months. Crude oil with its strong underlying fundamentals, with tight supply driven by Russia sanctions and OPEC struggling to lift production, was the last shoe to drop and since the mid-June peak, speculators and macroeconomic focused funds have been net sellers of both WTI and Brent crude oil futures. With most of these market participants using the front of the futures curve, the selling has seen the forward curve flatten, a development that is normally viewed as price negative as it signals reduced tightness in the market. However, for that to ring true we should see inventory levels of crude oil and fuel products rise while refinery margins should ease. None of these developments have occurred and it strengthens our belief that the weakness sign has more to do with position adjustments and short positions being implemented by traders focusing on macro instead of micro.  In the week to August 9, the combined net long in Brent and WTI slumped to 304k lots a level last seen in April 2020, and 209k lots below the mid-June peak.  While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being surging gas prices as utilities are forced to buy more gas to keep the turbines running. This week the cost of Dutch TTF benchmark gas reached $400 per barrel of crude oil equivalent. Such a wide gap between oil and gas has and will continue to attract increased demand for fuel-based product at the expense of gas and this switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published the incentive to switch has increased even more, adding more upward pressure on refinery margins, so called crack spreads (EU diesel crack shown below as an example) As mentioned, the recent selling pressure together with a deteriorating macro-economic backdrop have been the main drivers behind crude oils near 40-dollar slump since mid-June. The WTI chart below points to support at $85.50, a level almost reached on Tuesday. The price action is currently confined within a declining wedge and a break to the upside could trigger a strong buying response. For that to happen the price first needs to go back above $92 and the 21-day simple moving average, currently at $92.85. Source: Saxo Bank   How to invest in energy and the unfolding energy crisis? By Peter Garnry, Head of Equity StrategySummary:  We are used to not think about the energy sector, but the galloping global energy crisis has illuminated our deficits in primary energy due to years of underinvestment in fossil fuels and renewable energy sources inability to scale fast enough with the green transformation and electrification of our economy. It seems more likely now that the non-renewable and the renewable energy sector will both provide attractive returns as we will need both to overcome our short-term energy crisis and long-term aspirations of a greener energy future.   Source: Refinery margin jump lends fresh support to crude
In The Morning US Dollar (USD) Was Up, British Pound And Euro Down | US Stocks: S&P 500 Gained Almost 2% Yesterday, Dow Jones Added 1.88%, Nasdaq Increased By 2%

Fed's Plan Is To Push For More Rate Hikes To Boost Dollar (USD)!?

Saxo Strategy Team Saxo Strategy Team 19.08.2022 10:37
Summary:  Better than expected economic data continued to support sentiment in US in contrast to Europe, where ECB’s Schnabel's warning on the growth/inflation picture aggravated concerns. Fed speakers meanwhile continued to push for more rate hikes this year, aiding dollar strength despite lack of a clear direction in long end yields. EUR and GBP broke below key support levels, but oil prices climbed higher amid improving demand outlook but sustained supply issues. Focus now on Jackson Hole next week. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  In its second lightest volume session of the year, U.S. equities edged modestly higher, S&P 500 +0.23%, Nasdaq 100 +0.26%. As WTI crude climbed 2.7%, rebounding back above $90, the energy space was a top gainer aside from technology. Exxon Mobil (XOM:xnys) gained 2.4%.  Cisco (CSCO:xnas) surged 5.8% after reporting better-than-expected revenues. Nvidia (NVDA:xnas), +2.4% was another top contributor to the gain of the S&P 500 on Wednesday.  95% of S&P 500 companies have reported Q2 results, with about three-quarters of them managing to beat analyst estimates. On Friday there is a large number of options set to expire.  The U.S. treasury yield curve bull steepened on goldilocks hope The U.S. 2-10-year curve steepened 7bps to -32bps, driven by a 9bp decline in the 2-year yield.  In spite of hawkish Fed official comments and the August Philadelphia Fed Index bouncing back to positive territory, the market took note of the falls in the prices paid diffusion index and the prices received index from the survey and sent the short-end yields lower.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Both Hang Seng Index and CSI300 declined about 0.8%.  Tencent (00700:xhkg) rose 3.1% after reporting results that beat estimates as a result of better cost control and adverting revenues. Other China internet stocks traded lower, Bilibili (09626:xhkg) -4.2%, Baidu (09888:xhkg) -4.5%, Alibaba (09988:xhkg) -2.1%, JD.COM (09618:xhkg) -2.5%. The surge of Covid cases in China to a three-month high and the Hainan outbreak unabated after a 2-week lockdown, pressured consumer stocks.  Great Wall Motor (02333:xhkg) led the charge lower in autos, plunging near 6%.  Other automakers fell 2% to 4%.  Geely (00175:xhkg) fell 3.1% after reporting 1H earnings missing estimates.  A share Chinese liquor names declined, Kweichow Moutai (600519:xssc) -1.2%, Wuliangye Yibin (000858:xsec) -1.6%. Chinese brewers were outliner gainers in the consumer space, China Resources Beer (00291:xhkg) +4.8%, Tsingtao Brewery (00168:xhkg) +1.9%. Chinese property developers traded lower with Country Garden (02007:xhkg) losing the most, -5.2% , after warning that 1H earnings may have been down as much as 70%. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios at some financial institutions.  EURUSD and GBPUSD break through key support levels Dollar strength prevailed into the end of the week with upbeat US economic data and a continued hawkish Fedspeak which continued to suggest more Fed rate hikes remain in the pipeline compared to what the market is currently pricing in. EUR and GBP were the biggest loser, with both of them breaking below key support levels. EURUSD slid below 1.0100 handle while GBPUSD broke below 1.2000 despite a selling in EGBs and Gilts. USDJPY also broke above 136 in early Asian trading hours despite lack of a clear direction in US 10-year yields and a slide in 2-year yields. AUDUSD testing a break below 0.6900 as NZDUSD drops below 0.6240. Crude oil prices (CLU2 & LCOV2) Oil prices reversed their drop with WTI futures back above $90/barrel and Brent futures above $96. Upbeat US economic data has supported the demand side sentiment in recent days. Moreover, President Xi’s comment that China will continue to open up the domestic economy also aided the demand equation. Supply concerns, meanwhile, were aggravated by geopolitical tension around a potential incident at the Zaporizhzhia nuclear plant in Ukraine. Meanwhile, Shell hinted at reducing the capacity of Rhineland oil refinery due to the lower water level on the Rhine river and said the situation regarding supply is challenging but carefully managed. Gold (XAUUSD) still facing mixed signals The fate of gold has been turned lower again this week with the yellow metal facing decline of 2.5% so far in the week and breaking below the $1759 support, the 38.2% retracement of the July to August bounce. Stronger dollar, along with Fed’s continued hawkish rhetoric, weighed. Silver (XAGUSD) is also below the key support at $19.50, retracing half of its recent gains. The short-term direction has been driven by speculators reducing bullish bets, but with inflation remaining higher-for-longer, the precious metals can continue to see upside in the long run. What to consider? Existing home sales flags another red for the US housing market US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. US economic data continues to be upbeat The Philly Fed survey outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). new orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously. While this may be a good signal, survey data tends to be volatile and a long-term trend is key to make any reasonable conclusions. Jobless claims also slid to 250k still suggesting that the labor market remains tight. Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard flagged another 75 basis point rate hike at the September meeting and hinted at 3.75-4% Fed funds rate by the end of the year with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kahskari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 25. Japan’s inflation came in as-expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside. Cisco’s revenues came in flat, beating a previously feared decline Cisco Systems reports July 2022 quarter revenues of USD13.1 billion, down 0.2% YoY but better than the consensus of a 3% decline.  Net income came in at USD3.4 billion, -3.2% YoY but more than 1 percentage point above consensus.  The fall in product order was also smaller than feared.  The company guided the fiscal year 2023 revenue growth of +4% to +6%, ahead of the 3% expected and FY23 EPS of USD3.49 to USD3.56, in line with expectations as gross margin pressures are expected to offset the impact of higher sales.  NetEase’s Q2 results beat NetEase (09999:xhkg/NTES:xnas) reported above-consensus Q2 revenues, +13% YoY, and net profit from continuing operations, +28%.  PC online game revenues were above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version.  Mobile game segment performance was in line.  Geely Automobile 1H earnings missed estimates on higher costs Chinese automaker Geely reported higher-than-expected revenue growth of 29%YoY in 1H22 but a 35% YoY decline in net profit which was worse than analyst estimates.  The weakness in profit was mainly a result of a 2.6 percentage point compression of gross margin to 14.6% due to higher material costs and production disruption, higher research and development costs, and the initial ramping-up of production of the Zeekr model.  The company maintains its sales volume target of 1.65 million units, an growth of 24% YoY, for the full year of 2022.    For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 19, 2022
Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Saxo Strategy Team Saxo Strategy Team 19.08.2022 11:33
Summary:  Equity markets managed a quiet session yesterday, a day when the focus is elsewhere, especially on the surging US dollar as EURUSD is on its way to threatening parity once again, GBPUSD plunged well below 1.2000 and the Chinese renminbi is perched at its weakest levels against the US dollar for the cycle. Also in play are the range highs in longer US treasury yields, with any significant pull to the upside in yields likely to spell the end to the recent extended bout of market complacency.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back a bit yesterday potentially impacted by the July US retail sales showing that the consumer is holding up in nominal terms. The key market to watch for equity investors is the US Treasury market as the US 10-year yield seems to be on a trajectory to hit 3%. In this case we would expect a drop in S&P 500 futures to test the 4,200 level and if we get pushed higher in VIX above the 20 level then US equities could accelerate to the downside. Fed’s Bullard comments that he is leaning towards a 75 basis point rate hike at the September meeting should also negatively equities here relative to the expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index edged up by 0.4% and CSI300 was little changed. As WTI Crude bounced back above $90/brl, energy stocks outperformed, rising 2-4%. Technology names in Hong Kong gained with Hang Seng Tech Index (HSTECH.I) up 0.6%. Investors are expecting Chinese banks to cut loan prime rates on Monday, following the central bank’s rate cut earlier this week. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios and reviewing lending practices at some Chinese banks. The shares of NetEase (09999:xhkg/NTES:xnas) dropped more than 3% despite reporting above-consensus Q2 revenue up 13% y/y, and net profit from continuing operations up 28%.  PC online game revenue was above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version. Mobile game segment performance was in line. USD pairs as the USD rally intensifies The US dollar rally is finding its legs after follow up action yesterday that took EURUSD below the key range low of 1.0100, setting up a run at the psychologically pivotal parity, while GBPUSD slipped well south of the key 1.2000 and USDJPY ripped up through 135.50 resistance. An accelerator of that move may be applied if US long treasury yields pull come further unmoored from the recent range and pull toward 3.00%+. A complete sweep of USD strength would arrive with a significant USDCNH move as discussed below, and the US dollar “wrecking ball” will likely become a key focus and driver of risk sentiment as it is the premiere measure of global liquidity. The next key event risk for the US dollar arrives with next Friday’s Jackson Hole symposium speech from Fed Chair Powell. USDCNH The exchange rate is trading at the highs of the cycle this morning, and all traders should keep an eye out here for whether China allows a significant move in the exchange rate toward 7.00, and particularly whether CNH weakness more than mirrors USD strength (in other words, if CNH is trading lower versus a basket of currencies), which would point to a more determined devaluation move that could spook risk sentiment globally, something we have seen in the past when China shows signs of shifting its exchange rate regime from passive management versus the USD. Crude oil Crude oil (CLU2 & LCOV2) remains on track for a weekly loss with talks of an Iran nuclear deal and global demand concerns being partly offset by signs of robust demand for fuel products. Not least diesel which is seeing increasing demand from energy consumers switching from punitively expensive gas. Earlier in the week Dutch TTF benchmark gas at one point traded above $400 per barrel crude oil equivalent. So far this month the EU diesel crack spread, the margin refineries achieve when turning crude into diesel, has jumped by more than 40% while stateside, the equivalent spread is up around 25%, both pointing to a crude-supportive strength in demand. US natural gas US natural gas (NGU2) ended a touch lower on Thursday after trading within a 7% range. It almost reached a fresh multi-year high at $9.66/MMBtu after spiking on a lower-than-expected stock build before attention turned to production which is currently up 4.8% y/y and cooler temperatures across the country lowering what until recently had driven very strong demand from utilities. LNG shipments out of Freeport, the stricken export plant may suffer further delays, thereby keeping more gas at home. Stockpiles trail the 5-yr avg. by 13%. US Treasuries (TLT, IEF) The focus on US Treasury yields may be set to intensify if the 10-year treasury benchmark yield, trading near 2.90% this morning, comes unmoored from its recent range and trades toward 3.00%, possibly on the Fed’s increase in the pace of its quantitative tightening and/or on US economic data in the coming week(s). Yesterday’s US jobless claims data was better than expected and the August Philadelphia Fed’s business survey was far more positive than expected, suggesting expansion after the volatile Empire Fed survey a few days earlier posted a negative reading.   What is going on?   Global wheat prices continue to tumble ... with a record Russian crop, continued flows of Ukrainian grain and the stronger dollar pushing down prices. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat (ZWZ2) futures contract touch a January on Thursday after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. Existing home sales flags another red for the US housing market while other US economic data continues to be upbeat US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. The Philly Fed survey meanwhile outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). New orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard 2.6% with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kashkari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 26, next Friday.  Japan’s inflation came in as expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside.   What are we watching next?   Strong US dollar to unsettle markets – and Jackson Hole Fed conference next week? The US dollar continues to pull higher here, threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher.  The focus on the strong US dollar will intensify should the USDCNH exchange rate, which has pulled to the highs of the cycle above 6.80, lurch toward 7.00 in coming sessions as it would indicate that China is unwilling to allow its currency to track USD direction. As well, the Fed seems bent on pushing back against market expectations for Fed rate cuts next year and may have to spell this out a bit more forcefully at next week’s Jackson Hole conference starting on Thursday (Fed Chair Powell to speak Friday). Earnings to watch The two earnings releases to watch today are from Xiaomi and Deere. The Chinese consumer is challenged over falling real estate prices and input cost pressures on food and energy, and as a result consumer stocks have been doing bad this year. Xiaomi is one the biggest sellers of smartphones in China and is expected to report a 20% drop in revenue compared to last year. Deere sits in the booming agricultural sector, being one of the biggest manufacturers of farming equipment, and analysts expect a 12% gain in revenue in FY22 Q3 (ending 31 July).   Today: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 19, 2022
Crude Oil Price:  A Crucial Event Takes Place In The Week Ahead

Hello Drivers! Brent Crude Oil Prices Are Expected To Decrease, So Fuel May Be Cheaper!

ING Economics ING Economics 19.08.2022 11:42
Russian crude oil output has held up better than expected which has meant that the oil market is not as tight as originally thought. In addition, weaker demand means the oil balance is looking more comfortable for the remainder of the year. We have revised our forecasts lower The likes of China and India have been able to absorb larger volumes of Russian oil as European demand has fallen Oil price forecast revisions Stubborn Russian oil output and weaker than expected demand growth mean the oil market is likely to remain in surplus for the remainder of this year and into early next year, which should limit the upside in oil prices. Time spreads also point towards a looser market, with the backwardation in the prompt spreads narrowing significantly in recent weeks. As a result, we have revised lower our oil price forecast for the remainder of this year. Although, given that inventories are at historically low levels, we still believe that prices will remain elevated, whilst limited OPEC spare capacity and uncertainty over how Russian flows will evolve once the EU ban comes into full force should also limit downside in the medium term. We have lowered our 3Q22 and 4Q22 Brent forecasts from US$118/bbl and US$125/bbl to US$100/bbl and US$97/bbl respectively. Our full year 2023 Brent forecast has been revised down from US$99/bl to US$97/bbl.   ING oil price forecasts Source: ING Research Stubborn Russian output Since Russia’s invasion of Ukraine, it has become more difficult to get transparency on Russian oil output with the government no longer publishing monthly data. However, the IEA estimates that Russian oil production was around 310Mbbls/d below pre-war levels in July. The decline in output has been much more modest than many in the market were expecting, despite sanctions. IEA numbers suggest that Russian oil exports came in at 7.4MMbbls/d in July, which is only slightly below the 7.5MMbbls/d exported over 2021. The likes of China and India have been able to absorb larger volumes of Russian oil as European demand has fallen. China imported a record 1.99MMbbls/d of Russian crude oil in May, whilst in June Russian oil made up 20% of total Chinese oil imports, making it China’s largest supplier. These stronger Russian flows to China come despite overall weaker domestic oil demand due to Covid-related lockdowns. Whether China has the appetite to increase Russian oil purchases even further will depend on how quickly we see a recovery in domestic demand. However, whilst Russian output has held up well until now, we would expect production to start coming under more meaningful pressure once the EU ban on Russian seaborne crude oil and refined products is fully implemented in February 2023. For now, we are assuming that Russian output declines by a little more than 2MMbbls/d once the ban comes into full force. In addition, if for any reason India and China are unable to sustain the volumes of Russian oil they have imported, there is the risk that Russian oil output will eventually fall more aggressively, which would lead to a tighter market. Similarly, the US has been pushing for a price cap on Russian oil, and if enforced (which will be difficult), there is always the risk that Russia reduces its output in response. Russian oil flows are holding up well for now Source: IEA, NBS, ING Research Weaker demand offers a helping hand The higher price environment that we have seen for much of the year has done its job in terms of ensuring demand destruction to try to balance the oil market. Demand growth forecasts have been downgraded consistently as we have moved through the year. And EIA data provides clear evidence of demand destruction. US implied gasoline demand has underperformed since early June. Generally, we would expect demand to trend higher over the summer driving season, but higher prices have led to US gasoline demand trending quite some distance below the 5-year average (and this average includes 2020 data – a period of weaker demand due to Covid). EIA data shows that from early June through to early August, implied gasoline demand (4-week rolling average) in the US has lagged the 5-year average by almost 450Mbbls/d. In addition, Chinese demand has clearly disappointed this year, which has led to significant revisions in global demand estimates. There had been expectations that demand would come back strong following the easing of lockdown measures in Beijing and Shanghai in the second quarter. However, demand continues to suffer due to further Covid outbreaks and China’s insistence on following its Zero-Covid policy. Cumulative Chinese oil imports are down 4% over the first seven months of the year, whilst apparent domestic demand over the same period is down almost 11% YoY. In 2022, global oil demand is expected to grow by a little over 2MMbbls/d, whilst a similar growth number is expected for 2023. This would mean that in 2023, global oil demand will exceed pre-Covid levels. However, growth next year will depend largely on a recovery in China, and also on how severe any potential recession in the US and Europe is. An upside risk for oil demand comes from the gas market. European natural gas and Asian spot liquefied natural gas (LNG) prices are trading at elevated levels. In fact, the Dutch gas, TTF, is trading at an oil equivalent in excess of US$400/bbl, whilst spot Asian LNG is trading at an equivalent of close to US$330/bbl. Therefore, where there is capacity, we will likely be seeing gas-to-oil switching from the power sector. This will include the Middle East, Asia, and even Europe, where there have been reports of increased oil-fired power generation. Higher oil prices have weighed on demand Note: US implied gasoline demand numbers are 4-week rolling average Source: EIA, IEA, ING Research OPEC has limited room to pump more OPEC+ has been reluctant to deviate away from its planned monthly production increases, although the group finally agreed on larger supply increases for July and August, whilst also allowing for a 100Mbbls/d supply increase over September. And with hindsight, it seems as though OPEC+ made the right decision not to give in to pressure to increase output more aggressively, given the market is expected to be in a more comfortable state for the rest of the year. However, regardless of the state of the market, OPEC members have very limited capacity to increase output significantly more. The group has failed for almost the last 12 months to hit its production target, with a number of producers having faced disruptions or simply not having the capacity to increase output further. Spare capacity within the OPEC-10 (excludes Iran, Libya and Venezuela) stands at around 2.7MMbls/d and is in the hands of a few. Saudi Arabia and the UAE hold more than 80% of this spare capacity. Shrinking spare capacity leaves the market more vulnerable to supply disruptions OPEC struggles to hit output targets Source: OPEC, IEA, ING Research SPR releases coming to an end The SPR releases that we have seen from the US this year have helped the oil market. With 1MMbbls/d of crude being released, it has limited the drawdown in commercial crude oil inventories in the US. Had we not seen these SPR releases, commercial inventories would have been significantly tighter. However, the releases are set to continue only until the end of October. Therefore, there is the potential that from November we start to see some sizeable drawdowns in US commercial inventories. And given that US inventories are more visible to the market, this could provide some support to prices. US draws down strategic petroleum reserves Source: EIA, ING Research Iran a key downside risk to the market Iranian nuclear talks have been on and off for the last 18 months. However, the potential for a deal is looking more promising. The EU has provided its proposal for a nuclear deal with the US and Iran, and up until now there has not been a rejection by either party – although the Iranians have said that the US will need to show some ‘flexibility’. If we were to see a deal and the eventual lifting of sanctions, there is the potential for a significant increase in supply from Iran. Over time Iran would be able to increase production by around 1.3MMbbls/d, which would help ease the tightness that is expected over the second half of 2023. While in the short term, it will be able to boost exports from crude held in storage, and so could put some pressure on prices in the short term. Despite the more positive tone around a deal, we are still assuming in our balance sheet that we do not see an increase in Iranian supply. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Mexican Gold - Peso Is Climbing Up. Russia Is Building Nuclear Plant In Turkey!?

Mexican Gold - Peso Is Climbing High. Russia Is Building Nuclear Plant In Turkey!?

Marc Chandler Marc Chandler 19.08.2022 14:26
Overview:  The dollar is on fire. It is rising against all the major currencies and cutting through key technical levels like a hot knife in butter. The Canadian dollar is the strongest of the majors this week, which often outperforms on the crosses in a strong US dollar environment. It is off 1.5% this week. The New Zealand dollar, where the RBNZ hiked rates this week by 50 bp, is off the most with a 3.5% drop. Emerging market currencies are mostly lower on the day and week as well. The JP Morgan Emerging Market Currency Index is off for the fifth consecutive session, and ahead of the Latam open, it is off 2.1% this week. Asia Pacific equities were mostly lower, and Europe’s is off around 0.4%. It was flat for the week coming into today. US futures are lower, and the S&P and NASDAQ look poised to snap its four-week advance. Gold, which began the week near $1800 is testing support near $1750 now. Next support is seen around $1744.50. October WTI is consolidating in the upper end of yesterday’s range, which briefly poked above $91. Initial support is pegged near $88. US natgas is softer for the third successive session, but near $9.04 is up about 3.2% for the week. Europe’s benchmark is up 1.7% and brings this week’s gain to almost 20%. Demand concerns weigh on iron ore. It was off marginally today, its fifth loss in six sessions. It tumbled 8.8% this week after a 1.15% gain last week. Copper is up fractionally after rising 1.3% yesterday. September wheat is trying to stabilize. It fell more than 4% yesterday, its fifth loss in a row. It is off around 8.5% this week. Asia Pacific Japan's July CPI continued to rise  Th headline now stands at 2.6%, up from 2.4% in June, up from 0.8% at the start of the year and -0.3% a year ago. The core measure that excludes fresh food accelerated from 2.2% to 2.4%. It is the fourth consecutive month above the 2% target. Excluding both fresh food and energy, Japan's inflation is less than half the headline rate at 1.2%. It was at -0.7% at the end of last year and did not turn positive until April. The BOJ's next meeting is September 22, and despite the uptick in inflation, Governor Kuroda is unlikely to be impressed. Without wage growth, he argues, inflation will prove transitory. With global bond yields rising again, the 10-year, the market may be gearing up to re-challenge the BOJ's 0.25% cap. The yield is finishing the week near 0.20%, its highest since late July. Separately, we note that after divesting foreign bonds in recent months, Japanese investors have returned to the buy side. They have bought foreign bonds for the past four weeks, according to Ministry of Finance data. Last week's JPY1.15 trillion purchases (~$8.5 bln) were the most since last September.  China surprised the markets to begin the week with a 10 bp reduction in the benchmark 1-year medium-term lending facility rate  It now stands at 2.75%. It was the first cut since January, which itself was the first reduction since April 2020. Before markets open Monday, China is expected to announce a 10 bp decline in the 1- and 5-year loan prime rates. That would bring them to 3.60% and 4.35%, respectively. These rates are seen closer to market rates, but the large banks that contribute the quotes are state-owned. There is some speculation that a larger cut in the 5-year rate. The one-year rate was cut in January, but the 5-year rate was cut by 15 bp in May. The dollar is rising against the yen for the fourth consecutive session  It has now surpassed the JPY137.00 area that marks the (61.8%) retracement of the decline from the 24-year high set-in mid-July near JPY139.40. There may be some resistance in the JPY137.00-25 area, but a retest on the previous high looks likely in the period ahead. The Australian dollar is off for the fifth consecutive session and this week's loss of 3% offset last week's gain of as similar magnitude and, if sustained, would be the largest weekly decline since September 2020. The Aussie began the week near $0.7125 and recorded a low today slightly below $0.6890. The $0.6855-70 area is seen as the next that may offer technical support. The PBOC set the dollar's reference rate at CNY6.8065 (median in Bloomberg's survey was CNY6.9856). The fix was the lowest for the yuan (strongest for the dollar) since September 2020. Yesterday's high was almost CNY6.7960 and today's low was a little above CNY6.8030. To put the price action in perspective, note that the dollar is approaching the (61.8%) retracement of the yuan's rise from mid-2020 (~CNY7.1780) to this year's low set in March (~CNY6.3065). The retracement is found around CNY6.8250. Europe UK retail sales surprised to the upside but are offering sterling little support  Retail sales including gasoline rose by 0.3% in July. It is the second gain of the year and the most since last October. Excluding auto fuel, retail sales rose by 0.4%, following a 0.2% gain in June. It is the first back-to-back gain since March and April 2021. Sales online surged 4.8% as discounts and promotions drew demand, and internet retailers accounted for 26.3% of all retail sales. Separately, consumer confidence, measured by GfK, slipped lower (-44 from -41), a new record low. Sterling is lower for the third consecutive session and six of the past seven sessions. The swaps market continues to price in a 50 bp rate hike next month and about a 1-in-5 chance of a 75 bp move. Nearly every press report discussing next month's Italian elections cited the fascist roots of the Brothers of Italy, which looks likely to lead the next government  Meloni, who heads up the Brothers of Italy and has outmaneuvered many of her rivals, and may be Italy's next prime minister, plays the roots down. She compares the Brothers of Italy to the Tory Party in the UK, the Likud in Israel, and the Republican Party in the US. The party has evolved, and the center-right alliance she leads no longer wants to leave the EU, it is pro-NATO, and condemns Russia's invasion of Ukraine. The center-right alliance may come close to having a sufficient majority in both chambers to make possible constitutional reform. High on that agenda appears to transform the presidency into a directly elected office. The Italian presidency has limited power under the current configuration, but it has been an important stabilizing factor in crisis. Ironically, the president, picked by parliament, stepped in during the European debt crisis and gave Monti the opportunity to form a technocrat government after Berlusconi was forced to resign in 2011. Fast-forward a decade, a government led by the Conte and the Five Star Movement collapsed and a different Italian president gave Draghi a chance to put together a government. It almost last a year-and-half. Its collapse set the stage for next month's election. The center-left is in disarray and its inability to forge a broad coalition greases the path for Meloni and Co. Italy's 10-year premium over German is at 2.25%, a new high for the month. Last month, it peaked near 2.40%. The two-year premium is wider for the sixth consecutive session. It is near 0.93%, more than twice what it was before the Draghi government collapsed. Some critics argue against the social sciences being science because of the difficulty in conducting experiments  Still an experiment is unfolding front of us. What happens when a central bank completely loses its independence and follows dubious economic logic?  With inflation at more than two decades highs and the currency near record lows, Turkey's central bank surprised everyone by cutting its benchmark rate 100 bp to 13% yesterday. Governor Kavcioglu hinted this was a one-off as it was preempting a possible slowdown in manufacturing. Even though President Erdogan promised in June rates would fall, some observers link the rate cut to the increase in reserves (~$15 bln) recently from Russia, who is building a nuclear plant in Turkey. The decline in oil prices may also help ease pressure on Turkey's inflation and trade deficit. The lira fell to new record-lows against the dollar. The lira is off about 7.5% this quarter and about 26.4% year-to-date. Significant technical damage has been inflicted on the euro and sterling  The euro was sold through the (61.8%) retracement objective of the runup since the mid-July two-decade low near $0.9950. That retracement area (~$1.0110) now offers resistance, and the single currency has not been above $1.01 today. We had suspected the upside correction was over, but the pace of the euro's retreat surprises. There is little from a technical perspective preventing a test on the previous lows. Yesterday, sterling took out the neckline of a potential double top we have been monitoring at $1.20. It is being sold in the European morning and has clipped the $1.1870 area. The low set-in mid-July was near $1.1760, and this is the next obvious target and roughly corresponds to the measuring objective of the double top.  America With no dissents at the Fed to last month's 75 bp hike, one might be forgiven for thinking that there are no more doves  Yet, as we argued even before Minneapolis Fed President Kashkari, once regarded as a leading dove, admitted that his dot in June was the most aggressive at 3.90% for year-end, hawk and dove are more meaningful within a context. Kashkari may be more an activist that either a hawk or dove. Daly, the San Francisco Fed President does not vote this year, suggested that a Fed funds target "a little" over 3% this year would be appropriate. She said she favored a 50 bp or a 75 bp move. The current target range is 2.25%-2.50%. and the median dot in June saw a 3.25%-3.50% year-end target. St. Louis Fed President Bullard says he favors another 75 bp hike next month. No surprise there. George, the Kansas, Fed President, dissented against the 75 bp hike in June seemingly because of the messaging around it, but it's tough to call her vote for a 50 bp hike dovish. She voted for the 75 bp move in July. She recognizes the need for additional hikes, and the issue is about the pace. George did not rule out a 75 bp hike while cautioning that policy operates on a lag. Barkin, the Richmond Fed President, also does not vote this year. He is the only scheduled Fed speaker today.  The odds of a 75 bp in September is virtually unchanged from the end of last week around a 50/50 proposition.  The October Fed funds implies a 2.945% average effective Fed funds rate. The actual effective rate has been rocksteady this month at 2.33%. So, the October contract is pricing in 61 bp, which is the 50 bp (done deal) and 11 of the next 25 bp or 44% chance of a 75 hike instead of a half-point move. Next week's Jackson Hole conference will give Fed officials, and especially Chair Powell an opportunity to push back against the premature easing of financial conditions  The better-than-expected Philadelphia Fed survey helps neutralize the dismal Empire State manufacturing survey. The median from Bloomberg's survey looked for improvement to -5 from -12.3. Instead, it was reported at 6.2. Orders jumped almost 20 points to -5.1 and the improvement in delivery times points to the continued normalization of supply chains. Disappointingly, however, the measure of six-month expectations remained negative for the third consecutive month. Still, the plans for hiring and capex improved and the news on prices were encouraging. Prices paid fell to their lowest since the end of 2020 (energy?) and prices received were the lowest since February 2021. The Fed also asked about the CPI outlook. The median sees it at 6% next year down from 6.5% in May. The projected rate over the next 10-years slipped to 3%. Canada and Mexico report June retail sales today  Lift by rising prices, Canada's retail sales have posted an average monthly gain this year of 1.5%. However, after a dramatic 2.2% increase in May, Canadian retail sales are expected (median in Bloomberg' survey) to rise by a modest 0.4%. Excluding autos, retail sales may have held up better. Economists look for a 0.9% increase after a 1.9% rise in May. Through the first five months of the year, Mexico's retail sales have risen by a little more than 0.5% a month. They have risen by a 5.2% year-over-year. Economists expected retail sales to have slowed to a crawl in June and see the year-over-year pace easing to 5.0%. The greenback rose the CAD1.2935 area that had capped it in the first half of the week. It settled near CAD1.2950 yesterday and is pushing closer to CAD 1.2980 now. Above here, immediate potential extends toward CAD1.3035. The US dollar is gaining for the third consecutive session against the Canadian dollar, the longest advancing streak in a couple of months. Support is seen in the CAD1.2940-50 area. The Mexican peso is on its backfoot, and is falling for the fourth session, which ended a six-day rally. The dollar has met out first target near MXN20.20 and is approaching the 20-day moving average (~MXN20.2375). Above there, the next technical target is MXN20.32. The broader dollar gains suggest it may rise above the 200-day moving average against the Brazilian real (~BRL5.2040) and the (38.2%) of the slide since the late July high (~BRL5.5140) that is found near BRL5.2185.    Disclaimer   Source: The Dollar is on Fire
Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Ole Hansen Ole Hansen 19.08.2022 15:50
Summary:  Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. Overall, however, we do not alter our long-term views about commodities and their ability to move higher over time, with some of the main reasons being underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. The dollar found renewed strength and bond yields rose while the month-long bear-market bounce across US stocks showed signs of running out of steam.The trigger being comments from Federal Reserve officials reiterating their resolve to continue hiking rates until inflation eases back to their yet-to-be revised higher long-term target of around 2%. Those comments put to rest expectations that a string of recent weak economic data would encourage the Fed to reduce the projected pace of future rate hikes.The result of these developments being an elevated risk of a global economic slowdown gathering pace as the battle against inflation remains far from won, not least considering the risk of persistent high energy prices, from gasoline and diesel to coal and especially gas. A clear sign that the battle between macro and micro developments continues, the result of which is likely to be a prolonged period of uncertainty with regards to the short- and medium-term outlook.Overall, however, these developments do not alter our long-term views about commodities and their ability to move higher over time. In my quarterly webinar, held earlier this week, I highlighted some of the reasons why we see the so-called old economy, or tangible assets, performing well over the coming years, driven by underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Returning to this past week’s performance, we find the 2.3% drop in the Bloomberg Commodity Index, seen above, being in line with the rise in the dollar where gains were recorded against all the ten currencies, including the Chinese renminbi, represented in the index. It is worth noting that EU TTF gas and power prices, which jumped around 23% and 20% respectively, and Paris Milling wheat, which slumped, are not members of the mentioned commodity index.Overall gains in energy led by the refined products of diesel and US natural gas were more than offset by losses across the other sectors, most notably grains led by the slump in global wheat prices and precious metals which took a hit from the mentioned dollar and yield rise. Combating inflation and its impact on growth remains top of mind Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver for commodities recently has been the macro-economic outlook currently being dictated by the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing and the longer the process takes to succeed, the bigger the risk of an economic fallout. US inflation expectations in a year have already seen a dramatic slump but despite this the medium- and long-term expectations remain anchored around 3%, still well above the Fed’s 2% target.Even reaching the 3% level at this point looks challenging, not least considering elevated input costs from energy. Failure to achieve the target remains the biggest short-term risk to commodity prices with higher rates killing growth, while eroding risk appetite as stock markets resume their decline. These developments, however, remain one of the reasons why we find gold and eventually also silver attractive as hedges against a so-called policy mistake. Global wheat prices tumble The prospect for a record Russian crop and continued flows of Ukrainian grain together with the stronger dollar helped push prices lower in Paris and Chicago. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace, it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat futures contract touched a January low after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. With most of the uncertainties driving panic buying back in March now removed, calmer conditions should return with the biggest unknown still the war in Ukraine and with that the country’s ability to produce and export key food commodities from corn and wheat to sunflower oil. EU gas reaches $73/MMBtu or $415 per barrel of oil equivalent Natural gas in Europe headed for the longest run of weekly gains this year, intensifying the pain for industries and households, while at the same time increasingly threatening to push economies across the region into recession. The recent jump on top of already elevated prices of gas and power, due to low supplies from Russia, has been driven by an August heatwave raising demand while lowering water levels on the river Rhine. This development has increasingly prevented the safe passage of barges transporting coal, diesel and other essentials, while refineries such as Shell’s Rhineland oil refinery in Germany have been forced to cut production. In addition, half of Europe’s zinc and aluminum smelting capacity has been shut, thereby adding support to these metals at a time the market is worried about the demand outlook.An abundance of rain and lower temperatures may in the short term remove some of the recent price strength but overall, the coming winter months remain a major worry from a supply perspective. Not least considering the risk of increased competition from Asia for LNG shipments. Refinery margin jump lends fresh support to crude oil Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driven by China’s troubled handling of Covid outbreaks and its property sector problems as well as rapidly rising interest rates were the main drivers behind the selling since March across other commodity sectors before eventually also catching up with crude oil around the middle of June. Since then, the price of Brent has gone through a $28 dollar top to bottom correction. While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The mentioned energy crisis in Europe continues to strengthen, the result being surging gas prices making fuel-based products increasingly attractive. This gas-to-fuel switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published, the incentive to switch has increased even more, adding more upward pressure on refinery margins. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. In addition, the previously mentioned increased demand for fuel-based products to replace expensive gas. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold and silver struggle amid rising dollar and yields Both metals, especially silver, were heading for a weekly loss after hawkish sounding comments from several FOMC members helped boost the dollar while sending US ten-year bond yields higher towards 3%. It was the lull in both that helped trigger the recovery in recent weeks, and with stock markets having rallied as well during the same time, the demand for gold has mostly been driven by momentum following speculators in the futures market. The turnaround this past week has, as a result of speculators' positioning, been driven by the need to reduce bullish bets following a two-week buying spree which lifted the net futures long by 63k lots or 6.3 million ounces, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication that investors, for now, trust the FOMC’s ability to bring down inflation within a relatively short timeframe. An investor having doubts about this should maintain a long position as a hedge against a policy mistake. Some investors may feel hard done by gold’s negative year-to-date performance in dollars, but taking into account it had to deal with the biggest jump in real yields since 2013 and a surging dollar, its performance, especially for non-dollar investors relative to the losses in bonds and stocks, remains acceptable. In other words, a hedge in gold against a policy mistake or other unforeseen geopolitical events has so far been almost cost free.   Source: WCU: Bearish macro, bullish micro regime persists
There Is An Opportunity To Sell Gold After Its Prices Dropped

Commodities Amid Turbulent Times | Gold, Silver And Crude Oil In Eyes Of Jason Sen (DayTradeIdeas) - 22/08/22

Jason Sen Jason Sen 22.08.2022 08:37
Gold Spot broke 1765 for a sell signal targeting 1740/35 this week. Silver breaks back below support at 2030/10 to turn the outlook negative again. WTI Crude crawls higher, but difficult to hold longs. We could reach strong resistance at 9460/9500. Shorts need stops above 9550. Remember when support is broken it usually acts as resistance & vice-versa. Update daily by 05:00 GMT Today's Analysis. Gold outlook negative so we are looking to sell at resistance on any bounce. First resistance at 1755/60. Unlikely but if we continue higher look for strong resistance at 1770/75. Shorts need stops above 1780. Prices are expected continue lower this week initially targeting 1740/35 then 1729/27 & perhaps as far as 1715/10. Silver collapsed from resistance at 2020/30 as expected hitting my targets of 1980, 1960/55 & 1920/15. Further losses are expected to 1880/70 & eventually a retest of the July low at 1820/10. A break below 1795 is the next sell signal. Gains are likely to be limited with first resistance at 1940/50. Shorts need stops above 1965. Se 2000/20. Shorts need stops above 2040. WTI Crude September minor resistance at 9150/9200 but above here we could reach strong resistance at 9460/9500. Shorts need stops above 9550. Holding minor resistance at 9150/9200 (in what is probably a bull flag pattern) targets 9070/50 then 8900. On further losses look for 8850/8800.
China Rolled Out A Special Loan Program! Fed's News

China Rolled Out A Special Loan Program! Fed's News

Saxo Strategy Team Saxo Strategy Team 22.08.2022 12:33
Summary:  Equities closed last week on the defensive as a rising US dollar and especially US treasuries weighed. The US 10-year yield is threatening the 3.00% level for the first time in a month ahead of the important US July PCE inflation data and Fed Chair Powell’s speech on Friday. How forcefully will Powell push back against the virtual melt-up in financial conditions after the market felt the Fed pivoted to less tightening at the July meeting?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are still rolling over as the US 10-year yield zoomed to 3% on Friday with the index futures trading just above the 4,200 level this morning. The next levels on the downside sit around the 4,100 to 4,170 range, but in the longer term the 4,000 level is the big level to watch. Energy markets are still sending inflationary signals which is key to watch for sentiment this week. In terms of earnings, Palo Alto Networks and Zoom Video will report earnings. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index and CSI300 were moderately higher, +0.2% and +0.8% respectively. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and last Friday’s report that the PBoC, jointly with the Housing Ministry and the Ministry of Finance to roll out a program to make special loans through policy banks to support the delivery of stalled residential housing projects. Great Wall Motor (02333:xhkg) soared 11%. In A-shares, auto names were among stocks that outperformed. Xiaomi (01810:xhkg) dropped 3% after reporting Q2 revenues -20% YoY and net profit -67% YoY, largely in line with expectations.  US dollar dominates focus in forex this week The US dollar rally picked up speed last week, with key levels falling in a number of USD pairs last week that now serve as resistance, including 1.0100 in EURUSD and 1.2000 in GBPUSD, both of which now serve as resistance/USD support. A significant break of EURUSD parity will likely add further psychological impact, and more practically, an upside break in yields at the longer end of the US yield curve is playing a supportive roll, one that will intensify its driving roll if the benchmark 10-year US Treasury yield follows through higher above the 3.00% level it touched in trading overnight. A complete sweep of USD strength also threatens on any significant follow through higher in USDCNH as it threatens an upside break here (more below). The next key event risk for the US dollar arrives with this Friday’s Jackson Hole symposium speech from Fed Chair Powell (preview below). USDCNH Broad USD strength is helping to drive a move to new cycle highs above 6.84 as the week gets underway, but CNH is not weak in other pairings with G10 currencies, quite the contrary. Still, a move in this critical exchange rate will remain a focus, and the contrast between an easing PBOC (moving once again overnight) and tightening central banks nearly everywhere else is stark. The USDCNH moving higher will receive considerable additional focus if the 7.00 level. Crude oil prices (CLU2 & LCOV2) Crude oil turned lower in the Asian overnight after modest gains last week as the focus continues to alter between demand destruction fears and persistent supply shortages. Fears of an economic slowdown reducing demand remains invisible in the physical market but it has nevertheless seen crude oil give up all the post Russia invasion gains while speculators or hedge funds have cut bullish bets on WTI and Brent to the lowest since April 2020. WTI futures trades back below $90/barrel while Brent futures dipped below $96. Still, the gas-to-fuel switch led by record gas prices in Europe has seen refinery margins strengthen again lately and it now adds to the fundamental price-supportive factors. Focus may turn back to Iranian supply early in the week though, with reports that a deal is ‘imminent’. Cryptocurrencies The crypto market took a major hit on Friday with the total crypto market cap diving by more than 9 %, but prices have stabilized over the weekend. The total market cap is now close to the psychological $1 trillion level. US Treasuries (TLT, IEF) Rising US Treasury yields are pushing back against the strong improvement in financial conditions of recent weeks after the US 10-year Treasury yield benchmark jumped to new highs on Friday, well clear of the prior range after a few teases higher earlier in the week and bumping up against the psychologically key 3.00% level. Any follow through higher toward the 3.50% area highs of the cycle would likely add further pressure to financial conditions and risk sentiment more broadly. What is going on? German PPI shocks on the upside Germany’s July PPI smashed expectations to come in at 5.3% MoM, the biggest single gain since the Federal Republic started compiling its data in 1949 and above the consensus estimate of 0.7%. The data suggests potentially a lot more room on the upside to Eurozone inflation, and a lot more pain for German industries. European PMIs due this week will gather attention, as will Germany’s IFO numbers. Berkshire Hathaway wins approval to acquire Occidental Petroleum Warren Buffett’s industrial conglomerate that recently increased its stake in Occidental Petroleum to over 20% following the US Climate & Tax bill which adds more runway for oil and gas companies has now won regulatory approval for acquiring more than 50% the oil and gas company. This means that Berkshire Hathaway is warming up to its biggest acquisition since its Burlington acquisition. The power shortage in China China is currently being hit by a heatwave with a large part of the country experiencing -degree Celsius temperatures since the beginning of August. The surge in air conditioning caused electricity consumption to soar. To make things worse, drought has reduced hydropower output.  Some provinces and municipalities, especially Sichuan, are curbing electricity supply to industrial users in order to ensure electricity supply for residential use. This has caused disruptions to manufacturing production and added to the headwinds faced by the Chinese economy. China cut its 5-year loan prime rate loan prime more than expected China’s National Interbank Fund Center, based on quotes from banks and under the supervision of the PBoC, fixed the 1-year loan prime rate (“LPR”) 5 bps lower at 3.60% and the 5-year loan prime rates (“LPR”) 15 basis points lower at 4.30%. The larger-than-expected reduction in the 5-year LPR, which is the benchmark against which mortgage loan rates in China are set at a spread, may signal stronger support from the PBoC to the housing market.  The Chinese authorities are coming to the developers’ aid in delivering pre-sold homes Last Friday the Housing Ministry, the Ministry of Finance, and the PBoC, according to Xinhua News, jointly rolled out a program to make special loans through policy banks to support the delivery of presold residential housing projects which are facing difficulties in completion due to lack of funding.  Investors will monitor closely this week to gauge if there is additional information about the size of the program and if the PBoC will print money to fund it.  The resurgence of Covid cases in China Daily locally transmitted new cases of Covid-19 in China persistently stated above 2,000 since August 12, 2022, with Hainan, Tibet, and Xinjiang being the regions most impacted. The constituent companies of the Hang Seng Index will increase to 73 from 69 Hang Seng Indexes Company announced last Friday to add China Shenhua Energy (01088:xhkg), Chow Tai Fook Jewellery (01929:xhkg), Hansoh Pharmaceutical (03693:xhkg), and Baidu (09888:xhkg) to the Hang Seng Index, bringing the latter’s number of constituent companies to 73 from 69. The changes will take effect on September 5, 2022. In addition, SenseTime (00020:xhkg) will replace China Pacific Insurance (02601:xhkg) as a constituent company of the Hang Seng China Enterprises Index.  Australian share market at a pivotal point After rising for five straight weeks including last week's 1.2% lift, many market participants hold their breath this rally will continue. However, standing in the way are profit results from a quarter of the ASX200 companies to be released this week. For the final week of profit results, we hear from Qantas (Australia's largest airline), Whitehaven Coal (Australia's largest coal company), as well as other stocks that are typically held in Australian superannuation funds; including Coles, Woolworths, Wesfarmers, Endeavour. And lastly about 20 companies trade ex-dividend this week, however they are not expected to move the market's needle. Money managers increased their commodity exposure for a third week to August 16 The Commitment of Traders (COT) Report covering positions and changes made by money managers in commodities to the week ending August 16 showed a third week of net buying with funds adding 123k lots to 988k lots, a seven-week high. The buying was broad led by natural gas, sugar, cattle and grains with most of the selling concentrated in crude oil and gold. More in our weekly update out later. Prior to the latest recovery in price and positions hedge funds had been net sellers for months after holding 2.6 million lots at the start of the year. What are we watching next? USD and US Treasury yields as Jackson Hole Fed conference is the macro event risk of the week Friday The US dollar strengthened sharply, with EURUSD challenging near parity, USDCNH breaking higher today after another PBOC rate cut, and USDJPY not far from cycle highs. US Treasury yields have supported the move with the entire curve lifting over the last couple of weeks and longer yields pulling to new local highs last week. The Fed has pushed back consistently against the market’s pricing of a Fed turnaround to easing rates next year with partial success, as expectations for rate cuts have shifted farther out the curve and from higher levels. This week, the key test for markets is up on Friday as the US reports the Fed’s preferred measure of inflation, the July PCE inflation data, while Fed Chair Powell will also speak on Friday, offering the most important guidance on how the Fed feels about how it feels the market understands its intentions.   Earnings to watch Plenty of important earnings releases this week with the largest ones listed below. Today’s key focus is Palo Alto Networks, Zoom Video, and XPeng. Cyber security stocks have done reasonably well over the past year despite valuations coming down as demand is still red hot, Analysts expect Palo Alto Networks to report revenue growth of 27% y/y. Zoom Video, which was the pandemic superstar, is also reporting today with estimates looking for 9% revenue growth, down considerably from 54% y/y growth just a year ago. Monday: Palo Alto Networks, Zoom Video, XPeng Tuesday: CATL, Intuit, Medtronic, JD.com Wednesday: LONGi Green Energy, Royal Bank of Canada, PetroChina, Ping An Insurance Group, Nongfu Spring, Mowi, Nvidia, Salesforce, Pinduoduo, Snowflake, Autodesk Thursday: South32, Toronto-Dominion Bank, Fortum, Delivery Hero, AIA Group, China Life Insurance, CNOOC, CRH, Dollar General, Vmware, Marvell Technology, Workday, Dollar Tree, Dell Technologies, NIO Friday: Meituan, China Shenhua Energy, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0800 – Switzerland SNB weekly sight deposits 1230 – US Jul. Chicago Fed National Activity Index 2300 – Australia Aug. Flash Manufacturing/Services PMI 0030 – Japan Aug. Flash Manufacturing/Services PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 22, 2022
Price Of Gold Is Right On Top Of The Lower Boundary

Gold Is At Risk Of Being Liquidated!? Ukraine Shipment Accelerates

Ole Hansen Ole Hansen 22.08.2022 13:47
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 16. A week that potentially saw a cycle peak in US stocks and where the dollar and treasury yields both traded calmly before pushing higher. Commodities meanwhile continued their recent recovery with funds being net buyers of most contracts, the major exceptions being gold and crude oil Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 16. A week that potentially saw a cycle peak in US stocks with the S&P 500 reversing lower after reaching a four-month high, and where the dollar and treasury yields both traded calm before pushing higher. Commodities meanwhile continued their recent recovery with all sectors, except precious metals and grains recording gains. Commodities Hedge funds were net buyers for a third week with the total net long across the 24 major commodity futures tracked in this update rising by 14% to reach a seven week high at 988k lots. Some 56% below the recent peak reached in late February before Russia’s attack on Ukraine drove an across-the-board volatility spike which forced funds to reduce their exposure. Since then and up until early July, worries about a global economic slowdown, caused by a succession of rapid rate hikes in order to kill inflation, was one of the key reasons for the slump in speculative length.Returning to last week, the 123k lot increase was split equally between new longs being added and short positions being scaled back, and overall the net increase was broad led by natural gas, sugar, cattle and grains with most of the selling being concentrated in crude oil and gold. Energy: Weeks of crude oil selling continued with the combined net long in WTI and Brent falling by 26k lots to 278k lots, the lowest belief in rising prices since April 2020. Back then the market had only just began recovering the Covid related energy shock which briefly sent prices spiraling lower. While funds continued to sell crude oil in anticipation of an economic slowdown the refined product market was sending another signal with refinery margins on the rise again, partly due surging gas prices making refined alternatives, such as diesel, look cheap. As a result, the net long in ICE gas oil was lifted by 24% to 62k lots while RBOB gasoline and to a lesser extent ULSD also saw net buying. The net short in Henry Hub natural gas futures was cut by 55% as the price jumped by 19%. Metals: Renewed weakness across investment metals triggered a mixed response from traders with gold seeing a small reduction in recently established longs while continued short covering reduced bearish bets in silver, platinum and palladium. With gold resuming its down move after failing to find support above $1800, the metal has been left exposed to long liquidation from funds which in the previous two weeks had bought 63.3k lots. Copper’s small 1% gain on the week supported some additional short covering, but overall the net short has stayed relatively stable around 16k lots for the past six weeks. Agriculture: Speculators were net buyers of grains despite continued price weakness following the latest supply and demand report from the US Department of Agriculture on August 12, and after shipments of grains from Ukraine continued to pick up speed. From a near record high above 800k lots on April 19, the net long across six major crop futures went on to slump by 64% before buyers began dipping their toes back in to the market some three weeks ago. Buying was concentrated in bean oil and corn while the wheat sector remained challenged with the net long in Kansas wheat falling to a 2-year low. The four major softs contract saw strong buying led by sugar after funds flipped their position back to a 13.4k lots net long. The cocoa short was reduced by 10% while the coffee long received a 25% boost. Cotton’s 18% surge during the week helped lift the long by 35% to 44.7k lots.     Forex A mixed week in forex left the speculative dollar long close to unchanged against ten IMM futures and the DXY. Selling of euro saw the net short reach a fresh 2-1/2-year high at 42.8k lots or €5.3 billion equivalent while renewed selling of JPY, despite trading higher during the reporting week, made up most of the increase in dollar length. Against these we saw short covering reduce CHF, GBP and MXN short while CAD net long reached a 14-month high.    What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: COT: Gold and oil left out as funds return to commodities
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

Reuters Found Out That Oil Prices Have Been Fluctuating Much More Significantly Than In The Previous Year!

InstaForex Analysis InstaForex Analysis 22.08.2022 14:03
Relevance up to 11:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.     Price volatility is a trader's bread and butter, but in the case of oil, volatility becomes excessive, alienating traders and making life difficult for many companies that routinely use oil price hedging to provide some price stability vital to their operations. According to Reuters analysis, oil prices have become so wild in their daily fluctuations that hedge funds are leaving the oil market en masse. And over the past seven years, their activity has fallen to the lowest level. So it turns out that volatility is only good up to a certain point, and that point seems to be a daily price range of five times the normal range. According to Reuters analysis, between February 24 and August 15 this year, the daily range of Brent crude averaged $5.64 per barrel. This is up from $1.99 a barrel last year.     The exit of speculators is only one of the problems with such high volatility in oil prices. The fact that food companies, for example, are hesitant to hedge against further price fluctuations affects their business. And it also affects the business of the oil industry itself. Oil companies fear capital expenditures due to excessive volatility in the oil markets. And as they exercise caution, these companies are postponing projects that could help rebalance the oil market. Speaking of the oil industry, it's not just the current volatility that's hindering potential production growth. There is also uncertainty about future demand as the transition momentum picks up. Predicting oil demand is becoming increasingly difficult amid events such as the famous Inflation Reduction Act that Congress passed earlier this month. With all these incentives to electrify transport and move towards renewable electricity generation, the future of oil demand is uncertain. One might argue that most major oil companies are actively involved in the energy transition, which could cloud the credibility of their forecasts for oil demand. However, the fact remains that many governments are determined to transition, no matter how much it costs, and this has a negative impact on oil demand. The recent push towards green energy in Europe and the US likely worsened the situation by clouding the demand outlook. However, it is clear to all that the oil demand right now is higher than many expected, especially as some utilities in Europe are switching from gas to oil due to prices. It turned out to be too much not only for speculators, but also for industry players in the oil market. What will happen in the future, as always, is impossible to say, but it is unlikely that the price situation will change soon. This means that the negative effect that this price volatility has on businesses across industries will continue, fueling the aforementioned fluctuations in oil prices. Businesses will continue to need energy, which is limited, but high energy prices will continue to threaten their growth prospects and that of their respective economies. In the meantime, governments will continue to invest money and create laws for a green energy transition, further discouraging the oil industry from doing something about the supply.   Read more: https://www.instaforex.eu/forex_analysis/319540
China's Plan For Dying Property Markets. Nasdaq 100 And S&P 500

China's Plan For Dying Property Markets. Nasdaq 100 And S&P 500

Saxo Strategy Team Saxo Strategy Team 23.08.2022 08:37
Summary:  Equities were sold off on Monday, continuing a slide from their summer rally high, in the midst of position adjustments ahead of the Jackson Hole central banker event later this week. U.S. 10-year yields returned to above 3%. China cut its 5-year loan prime rates and plans to extend special loans to boost the ailing property markets. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities lost ground and continued to retrace from the high of the latest rally since mid-June.  The market sentiment has become more cautious ahead of Fed Chair Powell’s speech this Friday at the Jackson Hole symposium and a heavy economic data calendar, S&P 500 – 2.1%, Nasdaq 100 -2.7%.  The rise of U.S. 10-year bond yield back to above 3% added to the selling pressures in equities.  Zoom Video (ZM:xnas) fell 8% in after-hours trading as the company reported Q2 revenues and earnings missing estimates and cut its full year revenues guidance. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Bonds were sold off as traders adjusted positions ahead of the Jackson Hole.  The treasury yield curve bear flattened with 2-year yields surging 8bps to 3.30% and 10-year yields climbing 4bps to 3.01%, above the closely watched 3% handle.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Seng fell 0.6% while CSI300 climbed 0.7% on Monday. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and the Chinese authorities plan to provide special loans through policy banks to support the delivery of stalled residential housing projects, CIFI (00883:xhkg) +11.5%, Country Garden (02007:xhkg) +3.2%.  China extended EV waivers from vehicle purchase tax and other fees to the end of 2023, but the share price reactions of Chinese EV makers traded in Hong Kong were mixed.  Great Wall Motor (02333:xhkg) soared 11%, benefiting from launching a new model that has a 1,000km per charge battery while Nio (09866:xhkg) and Li Auto(02015:xhkg) fell 4.2% and 1.4% respectively. Xiaomi (01810:xhkg) dropped 3.3% after Q2 revenues -20% YoY and net profit -67% YoY, on lower smartphone shipments (-26% YoY).  Smartphone parts suppliers, AAC Technologies (02018:xhkg) and Sunny Optical (02382:xhkg) declined 5.6% and 4.2% respectively.  The share price performance of the four companies that will be added to the Hang Seng Index was mixed, Baidu (09888:xhkg) +0.9%, China Shenhua Energy (01088:xhkg) +2.1%, Hansoh Pharmaceutical (03692:xhkg) +3.2% but Chow Tai Fook Jewellery (01929:xhkg) -0.6%.  SenseTime (00020:xhkg) gained 4.2% as the company will replace China Pacific Insurance (02601:xhkg) -2.8% as a constituent company of the Hang Seng China Enterprises Index.  ENN Energy (02688:xhkg) plunged more than 14% after reporting H1 results below market expectations.  China retailer Gome (00493) collapsed 20% after resuming trading from suspension and a plan t buy from the controlling shareholder a stake in China property assets.  EURUSD falls below parity, eyes on 0.9500 The latest concerns on the European energy crisis weighed on the Euro which was seen sipping below parity to the US dollar. Higher US yields and gains in the US dollar also underpinned, taking EURUSD to lows of 0.9926. The European recession is coming hard and fast, and the PMIs today will likely signal increasing pressure on the region. Also on the radar will be Fed Chair Powell’s speech at the Jackson Hole later this week, with a fresh selloff in the pair likely to target 0.9500 next. USDCNH heading to further highs After PBOC’s easing measures on Monday, the scope for further yuan weakness has increased. USDCNH broke above 6.8600 overnight and potentially more US dollar strength this week on the back of a pushback from Fed officials on easing expectations for next year could mean a test of 7.00 for USDCNH. Still, the move in yuan is isolated, coming from China moving to prevent the yuan from tracking aggravated USD strength rather than showing signs of desiring a broader weakening. EURCNH has plunged to over 1-month lows of 6.8216 on the back of broader EUR weakness. Crude oil prices (CLU2 & LCOV2) Crude oil prices made a recovery overnight despite the strength in the US dollar. A global shift from gas to oil, from Europe to Asia, has taken a deeper hold amid gas shortage fears accelerating in the wake of another upcoming maintenance of the Nordstream pipeline. Diesel and refinery margins have also been supported as a result, with Asia diesel crack rising to its previous high of $63 amid low inventory levels. WTI futures reversed back to the $90/barrel levels and Brent were back above $96. Comments from Saudi Energy Minister threatening to dial back supply also lifted prices, but these were mis-read and in fact, focused more on the mismatch between the tightness in the futures and the physical market. Gold (XAUUSD) and Silver (XAGUSD) Gold broke below the key $1744 support and is now eying $1729, the 61.8% retracement of the July to August bounce. Dollar strength and a run higher in US yields weighed on the shine of the yellow metal, which has seen downside pressures since last week after touching the critical $1800-level. Hawkish Fed talk this week could further weigh on the short-term prospects for Gold. Silver also dipped below the key 19 handle, erasing most of the gains seen since late July.   What to consider?   German year-ahead power prices hit a fresh record high German year-ahead power prices surged to EUR 700/MWh with Dutch TTF gas prices close to EUR 300/MWh. The surge came on the back of another leg higher in natural gas prices which rose over 8% in Europe amid concerns around the next scheduled 3-day maintenance of the Nordstream pipeline. It appears that demand destruction remains the most obvious but painful cure right now, along with a longer-term focus on ensuring a broad-based supply of energy from coal, gas, nuclear, solar, hydrogen, and more.  Australia and Japan services PMIs plunged into contraction Australia saw its services PMI drop to 49.6 in August in a flash print, from 50.9 in July. Manufacturing PMI, however, held up at 54.5, just weakening slightly from last month’s 55.7. The spate of rate hikes seen from Reserve Bank of Australia is likely taking its toll on demand and manufacturing. Meanwhile, prices remain elevated amid the persistent supply chain issues, and more rate hikes are still on the cards. Japan’s flash manufacturing PMI for August came in lower at 51.0 from 52.1 previously, nut stayed in expansion territory. Services PMI however plunged into the contraction zone below 50, coming in at 49.2 for a flash August print from 50.3 in July. The fresh COVID wave in Japan, although comes without any broad-based new restrictions, is impeding the services demand and will likely weigh on Q3 GDP growth. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. China’s plan to provide loans to ensure delivery of presold residential projects is said to be of the size of RMB 200 billion Last Friday, Xinhua News reported that the PBoC, jointly with the Housing Ministry and the Ministry of Finance rolled out a program to make special loans through policy banks to support the delivery of stalled residential housing projects but the size of the program was not mentioned.   A Bloomberg report yesterday, citing “people familiar with the matter”, suggested the size of the support lending program could be as large as RMB 200 billion.  Beijing municipal government rolled out initiatives to promote hydrogen vehicles The municipal government of Beijing announced support for the construction of hydrogen vehicle refueling stations with RMB500 million for each station, aiming at building 37 new stations by 2023 and bringing the adoption of fuel-cell cars to over 10,000 units in the capital. Earlier in the month, the Guangdong province released a plan to build 200 hydrogen vehicle refueling stations by 2025. Since last year, there have been 13 provinces and municipalities rolling out policies to promote the development of the hydrogen vehicle industry.  Earnings on tap Reportedly there have been shorts being built up in Dollar Tree (DLTR:xnys) as traders are expecting that discount retailer missing when reporting this Thursday.   On the other hand, investors are expecting Dollar General (DG:xnys) results to come in more favourably, , which also reports this Thursday.  Key earnings scheduled to release today including Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618.xhkg/JD.xnas), JD Logistics (02615:xhkg), Kingsoft (02888:xhkg), and Kuishaou (01023:xhkg). Singapore reports July inflation figures today Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 23, 2022
Crude Oil Price:  A Crucial Event Takes Place In The Week Ahead

The Commodities Feed: Potential for OPEC+ supply cuts

ING Economics ING Economics 23.08.2022 09:25
Oil prices had a volatile day yesterday. Brent recouped almost all of its losses from earlier in the day after comments from the Saudi energy minister. Meanwhile, European natural gas prices continue to move higher Energy - possible OPEC+ action The Saudi energy minister has warned that the oil futures market is becoming increasingly disconnected from the physical market, which is not helped by the lack of liquidity and high volatility in the futures market.  The increased volatility has also meant that price discovery has become a lot more difficult for the market. The minister suggested that the divergence between the physical and paper market could force OPEC+ to take action by cutting oil production. It might be difficult to justify supply cuts when Brent is trading above US$90/bbl, but possibly the minister’s comments were an attempt to put a floor under the market. While the oil market is tight in the medium to long term, and there is limited spare capacity, our balance sheet shows that the oil market will be well supplied for the remainder of this year and into early next year. A return of Iranian supply would improve the supply/demand picture even further. European natural gas continues to strengthen. TTF rallied more than 13% yesterday, which saw it settle at almost EUR277/MWh, a record high settlement. Although on an intraday basis, the market traded higher back in March. The market continues to fret about supply following Gazprom’s announcement that it would stop flows along Nord Stream for 3 days to carry out maintenance at a compressor station. While EU gas storage continues to increase and is 77% full at the moment (not far from the EU target of 80% by 1 November), there are real concerns about how Russian gas flows will evolve as the region moves into winter. The uncertainty means that prices will likely remain elevated and volatile. Metals – European metal output declines Data from the International Lead and Zinc Study Group shows that the zinc market was in a surplus of 26kt in the first half of 2022, compared to a balanced market during the same period a year earlier. Total refined production fell 2.6%YoY to 6.8mt (largely due to declines from Europe), whilst consumption declined by 3%YoY to 6.7mt in the first six months of the year. Supply is likely to come under further pressure for the remainder of the year after more European smelter cuts were recently announced. The latest numbers from the International Aluminium Association (IAI) show that global daily primary aluminium output fell to 188.6kt in July, from 189.1kt a month earlier. Total monthly output stood at 5.85mt, up 2.1%YoY, while cumulative production remained largely flat at around 39.5mt over the first seven months of the year. Chinese output rose 3.3%MoM to 3.5mt last month, whilst Western and Central European output fell 10%YoY to 251kt in July. Global production is likely to come under further pressure in the months ahead due to the power issues in Sichuan province in China, along with further smelter cuts in Europe. Agriculture – Early feedback from crop tour suggests lower yields The USDA’s latest weekly crop progress report shows that 95% of the US winter wheat crop was harvested as of 21 August, up from 90% a week ago, but still down from year-ago levels of 99%. As for crop conditions for corn and soybeans, 55% of the corn crop was rated good-to-excellent, down from 57% a week ago and 60% last year, whilst 57% of the soybean crop was rated good-to-excellent, down from 58% a week ago. Early feedback from the Pro Farmer Midwest Crop Tour suggests that the US corn and soybean crop in parts of South Dakota is not in great condition due to dry weather, which is expected to weigh on yields.   Read this article on THINK TagsSaudi Arabia Russia-Ukraine OPEC+ Natural gas Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Do We Have To Prepare For Explosion Of Crude Oil Prices?

Energy: Crude Oil Supply Concerns Drive Prices Higher

Craig Erlam Craig Erlam 23.08.2022 16:09
Saudi Arabia has no appetite for lower oil prices Oil prices are rising again on Tuesday, building on the recovery at the start of the week following output warnings from Saudi Arabia. Considering what we’ve seen in oil markets this year, the repeated inability of producers to hit output targets and the record profits of oil companies, it’s quite staggering that the largest member of the OPEC+ alliance is even considering cutting production to address the falling price. It begs the question; even if a nuclear deal is reached between the US and Iran, how much of a positive impact will it actually have if OPEC+ will pare back production in order to prop up the price? It seems any hope of sub-$90 oil for a prolonged period of time is out of the window and producers won’t be happy unless it’s closer to, or above, $100. One eye on Jackson Hole Gold is marginally higher but still struggling to generate any upward momentum, after being crushed by a stronger dollar and higher US yields. The yellow metal flirted with $1,800 briefly earlier this month but it’s been one-way traffic since. It appears to have stabilised around $1,730, marking a 61.8% retracement of the July lows to August highs, which could now be an interesting test. It could be an interesting rotation point if it can get a helping hand from Powell later in the week while a break may suggest a run at $1,680 is more likely. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil moves higher, gold eyes Jackson Hole - MarketPulseMarketPulse
Do We Have To Prepare For Explosion Of Crude Oil Prices?

Brent Crude Oil Prices Soared, Supported By Frailer US Dollar (USD) And Supply Concerns

ING Economics ING Economics 24.08.2022 08:25
ICE Brent rallied yesterday. A weaker USD coupled with a number of supply concerns has helped to push the market higher. Meanwhile, European natural gas prices have fallen from their highs Energy: further Kazakh oil supply concerns While the oil market digests comments from the Saudi energy minister that OPEC+ may need to cut output, the market is faced with yet further potential supply disruptions. The CPC terminal on the Black Sea, which exports Kazakh oil, is facing some bottlenecks, with only one of the three moorings at the terminal operating. Damage on the other two moorings was detected and repair work is expected to take several months. The CPC terminal has experienced a number of disruptions so far this year, which has weighed on volumes. Numbers released by the API overnight were fairly supportive. The API reported that US crude oil inventories declined by 5.63MMbbls over the last week, although, small builds were reported elsewhere. Cushing crude oil inventories increased by 679Mbbls, whilst gasoline and distillate fuel oil stocks grew by 268Mbbls and 1.05MMbbls respectively. European gas prices eased somewhat yesterday. And this is despite Freeport LNG announcing that the partial restart of its LNG facility on the US Gulf Coast will be delayed from October to mid-November. This announcement provided some relief to US natural gas prices, given that more gas will stay in the domestic market. However, it is not good news for Europe, which has been relying increasingly on LNG to make up for the shortfall in Russian supply. Metals: potential for further supply cuts Soaring energy prices in Europe continue to put pressure on industry. In recent weeks, we have seen a number of metal smelters announcing that they would shut down operations due to high energy prices. According to Bloomberg, Aluminium producer, Speira, has now warned that it may have to cut production at its German smelter to just 50% of capacity due to power costs. Speira has a capacity of 160ktpa, although is currently producing below this level. A decision on cuts will be made in September. The latest data from the World Steel Association shows that global steel output fell 6.5%YoY to 149.3mt in July, due to lower production from China and Europe. Cumulative crude steel production declined 5.4%YoY to 1.1 billion tonnes over the first seven months of the year. The EU produced 11.7mt of crude steel in July, down 6.7%YoY given the ongoing power crisis. Chinese steel production declined 6.4%YoY to 81.4mt last month, as industrial activity slowed due to the resurgence of covid cases in multiple regions, along with the worsening property market. Among other Asian nations, India’s steel output rose 3.2%YoY to 10.1mt in July, leaving YTD output at 73.3mt, up 8%YoY. Read this article on THINK TagsSteel Power shortages Oil Natural gas Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
"Futures Market Is Disconnected From Underlying Fundamental Developments," Said The Saudi Energy Minister

"Futures Market Is Disconnected From Underlying Fundamental Developments," Said The Saudi Energy Minister

Saxo Strategy Team Saxo Strategy Team 24.08.2022 09:49
Summary:  US equities continued to push sharply lower yesterday as the strong US dollar is in focus as EURUSD dropped well below parity yesterday. US Treasury yields are playing their part in pressuring sentiment as the US 10-year yield benchmark rose above 3.00%. The next important event risk is this Friday’s Jackson Hole, Wyoming speech from Fed Chair Powell, as the Fed is expected to remind the market that it remains in full inflation-fighting mode, pushing back against the impression that it may be set to cut rates next year.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their losses yesterday as the US 10-year yield moved above the 3% level and the Fed Funds futures curve moved lower across the whole curve (meaning less rate cuts expected next year). Markets are beginning to second-guess their aggressive bets in July on inflation cooling fast enough to warrant rate cuts next year as the galloping energy crisis makes it difficult for inflation to cool. Tangibles-driven themes such as commodities, logistics, energy storage and financials were the relative winners in yesterday’s session. S&P 500 futures are now in the support zone from before the last leg up that started on 10 August; we see the 4,100 level as the next level to watch on the downside and then the 100-day moving average at 4,085. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index and CSI300 were both down about 0.6%. A Bloomberg report yesterday, citing “people familiar with the matter”, suggested the size of the central bank and other authorities’ support lending program to developers could be as large as RMB 200bn. The reaction of the share prices of Chinese Property developers were mixed, Country Garden (02007:hkg) +3.1%, Longfor (00960:xhkg) -1.4%. Postal Savings Bank of China (01658:xhkg) plunged 5.5% after the Chinese bank reported net profit miss with a 10 bps y/y fall in net interest margin to 2.27% in H1. Gross loans grew 13% y/y in H1 but at a more tepid growth of 3% q/q.  Non-performing loans ratio overall was steady at 0.8% but mortgage NPL ratio climbed by 8 bps to 0.52%. US dollar rally following through The US dollar rally continued apace yesterday, as EURUSD traded well below parity and closed at its lowest level in nearly twenty years yesterday. GBPUSD has teased below 1.1760, its lowest level since a one-off pandemic-outbreak spike in early 2020, while other USD pairs are not yet at extremes of the cycle, including AUDUSD, still well above the sub-0.6700 lows of July, and USDJPY, which has not yet challenged the cycle high north of 139.00. There is clearly a reflexive situation at the moment in the US dollar, risk sentiment and US treasury yields. USDCNH Broad USD strength remains behind the weaker CNH in the USDCNH exchange rate as the CNH continues to rise versus, for example, the EUR, while the CNHJPY exchange rate trades near the important 20.00 area. Any more significant move in this critical exchange rate could quickly steal some of the focus away from the US dollar. The contrast between an easing PBOC (moving once again earlier this week) and tightening central banks nearly everywhere else is stark. The next important level for the pair is 7.00, with the range high of the last decade near 7.20. Crude oil prices (CLU2 & LCOV2) Crude oil prices made a sharp U-turn higher on Monday after the Saudi Energy Minister talked about a potential production cut after saying the futures market has become increasingly disconnected from underlying fundamental developments, a view that we share. His comment supported the market on a day where risk appetite generally took a knock from the stronger dollar and falling equity markets. A global shift from gas to oil, from Europe to Asia, has taken a deeper hold amid gas shortage fears accelerating in the wake of another upcoming maintenance of the Nord Stream 1 pipeline and heatwaves in China. Diesel prices trades higher supported by refinery margins, the so-called crack spread hitting seasonal highs around the world. Gold (XAUUSD) and Silver (XAGUSD) Gold broke below the key $1744 support on Monday before finding support at $1729, the 61.8% retracement of the July to August bounce. Dollar strength and a run higher in US yields weighed on the shine of the yellow metal, which has seen downside pressures since last week after touching the critical $1800-level. Hawkish Fed talk this week could further weigh on the short-term prospects for Gold. Silver also dipped below the key 19 handle, erasing most of the gains seen since late July. German year-ahead power prices hit a fresh record high German year-ahead power prices surged to EUR 700/MWh with Dutch TTF gas prices close to EUR 300/MWh. The surge came on the back of another leg higher in natural gas prices which rose over 13% in Europe amid concerns around the next scheduled 3-day maintenance of the Nord Stream 1 pipeline. It appears that demand destruction remains the most obvious but painful cure right now, along with a longer-term focus on ensuring a broad-based supply of energy from coal, gas, nuclear, solar, hydrogen, and more. US Treasuries (TLT, IEF) US treasury yields rose yesterday, with the 10-year benchmark closing above 3.00% for the first time in over a month yesterday. Rising yields are likely an important driver of weaker risk sentiment after the melt-up in the wake of the late July FOMC meeting, but practically, a move toward the cycle highs from June near 3.50% (in the lead-up to the FOMC meeting on June 16) is needed to seize the spotlight. The behavior of the treasury market in the wake of the Jackson Hole conference speech from fed Chair Powell this Friday is an important next step, particularly if Powell provides strong guidance on the pace or importance of the Fed’s balance sheet tightening (QT). What is going on? EURUSD falls below parity, eyes on 0.9500 The latest concerns on the European energy crisis weighed on the Euro which was seen sipping below parity to the US dollar. Higher US yields and gains in the US dollar also underpinned, taking EURUSD to lows in the low 0.9900’s this morning. The European recession is coming hard and fast, and the PMIs today will likely signal increasing pressure on the region. The next step for the US dollar is the Fed Chair Powell speech this Friday as discussed below. Australia and Japan services PMIs plunged into contraction Australia saw its services PMI drop to 49.6 in August in a flash print, from 50.9 in July. Manufacturing PMI, however, held up at 54.5, just weakening slightly from last month’s 55.7. The spate of rate hikes seen from Reserve Bank of Australia is likely taking its toll on demand and manufacturing. Meanwhile, prices remain elevated amid the persistent supply chain issues, and more rate hikes are still on the cards. Japan’s flash manufacturing PMI for August came in lower at 51.0 from 52.1 previously, nut stayed in expansion territory. Services PMI however plunged into the contraction zone below 50, coming in at 49.2 for a flash August print from 50.3 in July. The fresh COVID wave in Japan, although comes without any broad-based new restrictions, is impeding the services demand and will likely weigh on Q3 GDP growth. Palo Alto outlook remains strong The cyber security company reported last night Q4 revenue and EPS above estimates and Q1 outlook is slightly above estimates while the FY outlook is well above consensus estimates. Q4 networks billing growth was 44% vs est. 25% suggesting demand is accelerating and bolstering our view that the cyber security industry is a high growth and counter-cyclical industry in the years to come. Shares were up 9% in extended trading. Zoom shares were down 8% in extended trading The popular video conferencing software that rose to prominence during the pandemic is lowering its FY outlook relative to previous announcements. The slowdown in their business is due to slower enterprise growth which could be a function of Microsoft and other major technology companies that have entered the enterprise business for video conference. What are we watching next? Europe and UK PMIs may spell further caution. The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. USD and US Treasury yields as Jackson Hole Fed conference is the macro event risk of the week Friday The US dollar and yields are setting risk sentiment on edge as EURUSD has plunged well through parity. US Treasury yields have supported the USD rally with the entire curve lifting over the last couple of weeks and longer yields closing at new one-month highs. The Fed has pushed back consistently against the market’s pricing of a Fed turnaround to easing rates next year with partial success, as expectations for rate cuts have shifted farther out the curve and from higher levels. The next focus is this Friday’s Jackson Hole symposium speech from Fed Chair Powell, who is expected to stay on message and maintain credibility on fighting inflation after the two large 75 basis point hikes at the last two meetings. The Fed’s attitude toward quantitative tightening may be a focus in the speech as well, with the pace of QT supposedly set to pick up in coming weeks to $95B/month. So far, the QT has been slow out of the gates, with the balance sheet currently only some $115B smaller than at its mid-April peak. Earnings to watch Today’s earnings focus is on CATL and JD.com, with especially CATL being important as the world’s largest battery manufacturer to the car industry and thus pivotal for the electrification of the transportation sector. CATL is expected to report revenue growth of 126% y/y in Q2 as EV adoption is accelerating, but key risks ahead are rising input costs across lithium and energy. JD.com is expected to report 3% revenue growth in Q2 as growth is grinding to a halt on very weak consumer confidence in China. Today: CATL, Intuit, Medtronic, JD.com Wednesday: LONGi Green Energy, Royal Bank of Canada, PetroChina, Ping An Insurance Group, Nongfu Spring, Mowi, Nvidia, Salesforce, Pinduoduo, Snowflake, Autodesk Thursday: South32, Toronto-Dominion Bank, Fortum, Delivery Hero, AIA Group, China Life Insurance, CNOOC, CRH, Dollar General, Vmware, Marvell Technology, Workday, Dollar Tree, Dell Technologies, NIO Friday: Meituan, China Shenhua Energy, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0715-0800 – Eurozone Aug. Flash Manufacturing and Services PMI 0830 – UK Aug. Flash Manufacturing and Services PMI 1000 – UK Aug. CBI Trends in Total Orders and Selling Prices 1100 – ECB's Panetta to speak 1345 – US Aug. Flash Manufacturing and Services PMI 1400 – US Aug. Richmond Fed Manufacturing 1400 – Eurozone Aug. Flash Consumer Confidence 1400 – US Jul. New Home Sales 2300 – US Fed’s Kashkari (non-voter) to speak  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 23, 2022
The Organization Of Petrolum Exporting Countries May Decide To Cut Oil Production!

The Organization Of Petrolum Exporting Countries May Decide To Cut Oil Production!

Conotoxia Comments Conotoxia Comments 24.08.2022 10:34
WTI crude oil futures rose above the $93 per barrel level today. The price increase may be supported by both macroeconomic data and statements from Saudi Arabia and OPEC. The Organization of Petroleum Exporting Countries may decide to cut oil production in the event of a global recession, representatives of several countries in the alliance told The Wall Street Journal on Tuesday. OPEC and its partners, led by Russia, have been closely coordinating oil production volumes, especially since the initial impact of the coronavirus pandemic in the first half of 2020. The alliance's members will meet again on September 5 to set an oil production rate, according to the BBN news service. Meanwhile, crude inventories in the United States fell by 5.6 million barrels last week, according to data released by the American Petroleum Institute (API). The market consensus was for a much lower decline of 0.9 million barrels. The EIA's official government data will be released today. It is expected to reduce reserves by 933,000 barrels. Probably by a combination of the above two factors, oil prices rose almost 4 percent on Tuesday. Counting from the June peak, however, oil has lost about 25 percent, probably due to growing concerns that a global economic slowdown could dampen consumption. Does the Fed need to be aggressive? The U.S. dollar index rebounded on Wednesday to near 108.7 and rose again toward its highest level in 20 years. USD appreciation may have been influenced by comments from US Federal Reserve officials. Minneapolis Fed Chairman Neel Kashkari said that his biggest concern is that the extent of price pressures has been underestimated and that the central bank will have to be more aggressive for a longer period if inflation persists. This could mean tightening monetary policy even as the specter of a stronger brake on the economy looms. Kashkari added that the central bank may ease interest rate hikes when it becomes clear that inflation is heading toward 2 percent. Further clues about the Federal Reserve's action plans may emerge later this week, when Jerome Powell, chairman of the Fed, addresses the annual symposium in Jackson Hole. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Oil rises in price, dollar rises in strength
Saudi's Are Threatening To Reduce To Reduce Oil Supply!?

Saudi's Are Threatening The World By Reducing Oil Supply!?

Marc Chandler Marc Chandler 24.08.2022 12:57
Overview:  A simply dreadful flash US PMI stopped the dollar's four-day rally in its tracks. It followed news that the eurozone, Japan, and Australia's composite PMIs are below 50 boom/bust level. However, the dollar recovered, even if not fully as the market seemed unconvinced that the data could change Fed Chair Powell's message at Jackson Hole on Friday. A consolidative tone is evident today. Asia Pacific equities were mixed. China and Hong Kong fell more than 1% while South Korea, Australia, and India posted gains. Europe’s Stoxx 600 is off for the fourth consecutive session, the longest spill in a couple of months. US futures are straddling unchanged levels. The US 10-year yield is around 3.04%, little changed, while European benchmark rates are 2-4 bp higher. Japan’s 10-eyar yield edged up near 0.22% is once again drawing close to the cap. Gold is firm near $1750, but unable to build much on yesterday’s nearly $12 rally. October WTI is extending its rally since the Saudi’s threatened to reduce supply and Israel is pushing back against the US-Iran deal. US natgas fell 5% yesterday and is about 1.75% firmer today. The European natgas benchmark has jumped almost 7% today to recoup fully yesterday’s 6.5% pullback, which snapped a four-day rally. Iron ore rose 0.5%. It was the third advancing session, the longest rally this month. September copper is giving back about half of yesterday’s 1.2% gain. September wheat is up 2% to bring the gain to 9% since last Thursday.   Asia Pacific In addition to the usual corporate analysis and credit, ESG ratings and investment orientation have become increasingly important. However, the meaning of ESG and ratings not uniform. Arguably, it is where "organic" was a couple of decades ago, and it is still evolving. Some of dismissive and suggest it is a "woke” fad. Japan's Government Pension Investment Fund (GPIF), the largest pension fund in the world, reports that seven of the eight ESG funds it invests in beat the benchmarks in the fiscal year that ended in March. Over the past five years, it said that all eight funds have outperformed. Since US Pelosi's visit to Taiwan, a few other US elected officials have visited Taiwan. UK officials and Japanese officials have either visited or planned to visit Taipei. China has continued its aerial harassment of the island. and repeatedly crossing the median line in the Taiwan Straits. In a recent report, the Atlantic Council argued that one of the lessons from Ukraine, is that the US "strategic ambiguity" is not an effective deterrence, and that the US should be unequivocal in its support. These developments, alongside reports that US military advisors have been in Taiwan since before the 2020 election and the number of "misstatements" by President Biden that were clear signs of support that were "walked back", all play into the hardliners in Beijing who think the US is trying to change the status quo. Congress is considering a bill that would codify some of it. The US strategic ambiguity is ostensibly not about one-China but on how the US would respond to Beijing's use of military power to unite the country. This was not meant to deter China as the military planners would have to game out the US response no matter its declaratory policy. The chief function is to deter Taiwan from declaring independence unilaterally and dragging the US into a war of its making. However, Taiwan, as it stands now, is not a member of organizations based on state sovereignty, like the UN and IMF. The bill that is likely to get more attention in Q4 proposes to recognize Taiwan as an important non-NATO ally and seek to promote Taiwan's membership in international forums. Both sides are giving the other reason to think that they are trying to change the status quo. The dollar is in a narrow range against the Japanese yen today of around a third of a yen on either side of yesterday's settlement, which was slightly above JPY136.75. US yields are slightly softer, and the dollar is closer to session lows (~JPY136.35) in the European morning. The greenback can spend the North American session on the JPY136-handle. The Australian dollar is also in a narrow range as the market awaits fresh news. It has spent most of the local session and the European morning below yesterday's $0.6930 settlement. Meanwhile, the greenback has edged higher against the Chinese yuan. It made a marginal two-year high almost at CNY6.8680. In the past two week, the yuan has fallen by a little more than 2% against the dollar, which has risen broadly. The setting of the PBOC's reference rate today could be the first sign that officials want the market to go slowly. The dollar fix was at CNY6.8388, a wider than usual gap and below the market (Bloomberg survey) estimate for CNY6.8511. Of note, the US dollar did not make a new high against the offshore yuan today. Yesterday's high of almost CNH6.8850 held. Europe On top of the energy crisis, and extreme weather, an economy seemingly slipping inexorably toward a recession, while inflation is still accelerating, Italy's national election is a month away. The three-party alliance on the right continues to dominate drawing about 47% support. The Brothers of Italy remains the largest, accounting for a little more than half that support. Many observers assume that the success of the right reflects a shift in the Italian politics. However, the simpler explanation is the disarray of the center-left. The Democratic Party draws second highest support, less than half a percentage point (within the margins of error) of the Brothers of Italy. The problem is that the center-left has been unable to form a pact like the right has done. The once populist power, the Five Star Movement, the largest party in the current parliament, appears to have lost its way, a partly the cause and effect of its fragmentation. There are several other small groupings that would be more at home with the center-left but have been able to coalesce into an alliance. Still, it is notable that Brothers of Italy leader Meloni argued for more Europe in her debate with the Democratic Party leader Letta. Letta sounded like the nationalist, advocating a temporary price control for gas. Meloni backed an EU-wide cap, which Draghi supported. As Benjamin Franklin told the thirteen colonies on the east coast of the North American continent they prepared to fight against the greatest empire at the time, "hang together or hang separately."  Italy's 10-year premium over Germany is near 2.35%. It reached a two-year high in mid-June slightly above 2.40%. In late July, it also tested 2.40%. Italy offers around 100 bp more than Germany for two-year borrowing. The peak since the Covid panic in March 2020, was set late last month near 1.30%. The extra that is demanded from Italy is not about inflation. Italy's two-year breakeven (difference between the conventional yield and inflation-protected security) is about 4.40% compared with Germany's two-year breakeven near 7.10%. Italy's 10-year breakeven is slightly below 2.25%. Germany's is near 2.45%. Both report August's EU harmonized CPI next week. In July, Italy's inflation stood at 8.4%, just below Germany's 8.5%. Not only is Italian inflation lower than Germany's and is expected to remain so, but it is also growing faster. On a workday adjusted basis, the Germany economy grow 1.4% year-over-year in Q2. Italy expanded by 4.6%. The UK's online paper, The Independent, reported that UK imports from Russia have plummeted by nearly 97% since the invasion. They totaled GBP33 mln in June, it noted, citing data from the Office of National Statistics. The collapse reflected government sanctions and actions of companies seeking alternatives to Russian goods beyond the official sanctions. Today' s is Ukraine's Independence Day and marks the sixth month since the Russian invasion. Reports suggest the US will announce a new $3 bln arms package for Kyiv. The euro was squeezed to almost $1.0020 yesterday after the disappointing US data, but it was short-lived, and it finished the North Americans session near $0.9970. The single currency is in about a third of a cent range today and has not been able to resurface above $1.0, where there are large options that expire there tomorrow (2 bln euros) and Friday (1 bln euros). An expiry today for 720 mln euros at $0.9950 has likely been neutralized. Sterling traded in a broad range yesterday (~$1.1720-$1.1880) and exceeded both sides of Monday's range. However, the close was neutral, well within Monday's range, which set the tone for today's quiet session. Sterling has been confined to less than half a cent range above $1.1800. It settled near $1.1835 and has spent most of the Asian session and the European morning below it. The next level of support is seen in the $1.1760-80 band. America There can no explaining away the weakest composite US PMI since May 2020 and drop in new home sales five-times more than the median forecast in Bloomberg's survey. Yet did not seem to be bipolar as conventional wisdom has it, swinging between recession and inflation anxiety. The implied yield of the October Fed funds contract rose two basis points to 2.95%, unchanged on the week. Another way to look at it, the odds of a 75 bp hike in September stands at almost 60% compared with 52% at the end of last week and slightly less than 50% the prior week (August 12). Nor did equities recover from Monday's gap lower opening. Indeed, while the S&P 500 and NASDAQ largely traded within Monday's range, the Dow Industrials continued to sell off. It is approaching the (38.2%) retracement of the rally off the mid-July low (~30144) found near 32700. A similar retracement in the S&P 500 is near 4095. The NASDAQ found support near its retracement around 12350. The US reports the preliminary estimate of July durable goods orders. The real sector data has held up better than the survey data. One element of durable goods orders that may not be appreciated by economists yet is what appears to be a surge in US arms sales abroad. There seems to be a synchronized arms build-up and demand for US-made weapons is clear. Separately, today's report will be flattered by the jump in Boeing orders. The company reported 130 orders last month, the most since June 2021 after 50 orders in June. Of those orders 27 came from foreign companies up from 20 in June, and the most since January. On the other hand, its deliveries fell to 26 from 51, the least since February. The focus is on the Fed's Jackson Hole symposium that begins tomorrow. Fed Chair Powell is set to speak Friday (10 am ET). Some observers expect him to play up the element in the minutes that recognized the risk that the central bank would tighten too much. However, in the minutes, it was set up in contrast to the bigger risk that inflation getting embedded into business and household expectations. We recognize the market's penchant for reading/hearing a dovish twist to Powell and the Fed even though they are tightening policy faster than most observers had imagined even a few months ago. The pace of the balance sheet adjustment is also set to double starting next month. Separate from the FOMC minutes, the minutes from the discount rate meeting were reported yesterday, and both the Minneapolis and St. Louis Feds called for 100 bp hike in the discount rate before the July 26-27 FOMC meeting but did not convince their colleagues. Nine favored a 75 bp increase, while the KC Fed called for a 50 bp increase. George, the President of the KC Fed supported a 75 bp increases in the Fed funds target at last month's meeting.   The US dollar posted a big outside down day yesterday against the Canadian dollar, trading on both sides of Monday's range and settling below Monday's low. However, there has been no follow-through today and a consolidative tone is evident. It settled near CAD1.2955 and has spent no time below it so far today. It has been capped around CAD1.2985. With softer equities, we ae inclined to see the greenback push back above CAD1.3000 and see resistance near CAD1.3020-30. The US dollar fell yesterday for the second day against the Mexican peso. Its 0.80% drop was the most in nearly two weeks. Selling today has extended its loss to around MXN19.9365, a four-day low. Mexico reports CPI for the first half of August. It is expected have accelerated, with the year-over-year rate rising to 8.55% form 8.14%. The core rate is seen slightly above 7.8% from 7.75%. The central bank meets late next month and another 75 bp hike seems most likely.      Disclaimer   Source: New Recession Worry Stalls Dollar Express but Doesn't Derail It
The most important economic events of the week 08/29/2022 – 09/04/2022

Brent - Gas Oil (Diesel) Crack Spread Jump 55% This Month!

Ole Hansen Ole Hansen 24.08.2022 14:12
Summary:  Crude oil’s bounce from a six-month low has so far seen Brent crude oil return above $100 per barrel while WTI following a brief dip to the mid-80’s has turned higher to trade around $95 per barrel. With oil fundamentals still very supportive, the market seems to be realizing the energy market is not the best hedge against an economic slowdown, and it has raised the risk of a response from specualators who recently cut bullish oil bets to an April 2020 low. Crude oil’s bounce from a six-month low has so far seen Brent crude oil return above $100 per barrel while WTI following a brief dip to the mid-80’s has turned higher to trade around $95 per barrel. In our previous update we mentioned the fact that crude oil, in a downtrend since June, had started to show signs of selling fatigue as the technical outlook had started to turnmore price friendly while fresh fundamental developments added some support as well. After finding support below $94 per barrel, the 61.8% retracement of the December to March surge, Brent crude oil now trades back above its 200-day simple moving average with the next key upside hurdle being an area below $102.50 per barrel. Source: Saxo Group While the macro-economic outlook remains challenging due to the lower growth outlook and renewed dollar strength, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The energy crisis in Europe continues to strengthen, with gas and power prices surging to levels that measured in dollars per barrel of crude oil equivalent equates to $470 and $1,050 per barrel respectively. The latest surge being driven by recent low-water level disruptions on the river Rhine and Gazprom announcing a three-day closure of the Nord Stream 1 pipeline due to maintenance, starting on August 31.  Should Gazprom (Putin) decide for geopolitical reasons to keep the pipeline shut after maintenance ends, the risk of further spikes remains, thereby extending the already wide price gap between gas and crude oil. A development that will further support an already very visible increase in demand for fuel-based product, especially diesel, at the expense of gas. This gas-to-fuel switch was specifically mentioned by the IEA in their August update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published the incentive to switch has increased even more, and the result being sharply higher refinery margins for diesel across the world, led by Europe which so far this month has seen the Brent – Gas Oil (diesel) crack spread jump 55%.  The trigger which eventually sent crude oil higher this week where comments from the Saudi Energy Minister flagging possible cuts to production amid an increased disconnect between falling futures markets and a physical market that has yet to show weakness. While his comment sent the ball rolling, yesterday’s API report gave it an extra spin, resulting in the rally back above $100 per barrel. A recovery at this point may force money managers to reassess their exposure in Brent and WTI with a potential short-squeeze brewing. During a three-week period to August 16 these speculative traders increased their gross short positions in Brent and WTI by 43k lots to 125k lots, while cutting gross longs by 61k lots to 403k lots, developments that has reduced the net long to 278k lots, the lowest since April 2020.          Later today the EIA publishes its weekly oil and fuel stock report and expectations for a bigger-than-expected draw in crude oil stocks has risen after the American Petroleum Institute reported a 5.6 million barrel drop together with small increases in gasoline and diesel stocks. Traders will also be watching implied gasoline demand which reached a high for the year in the previous week. Crude oil hungry refineries around the world, balking at buying Russian crude, helped drive US exports to a record 5 million barrels per day, and the market will be watching this pace as well as signs of a recovery in production which dipped 100k barrels per day during the previous reporting week.  The result of the EIA report will be published on my Twitter profile: @ole_s_hansen.    Source: Brent on watch for short squeeze above $100
Shell's Income In The First Half Of 2022 Is Bigger Than The Full Year 2021!

Shell's Income In The First Half Of 2022 Is Bigger Than The Full Year 2021!

Conotoxia Comments Conotoxia Comments 24.08.2022 15:58
Very high commodity prices caused by the war in Ukraine may have presented a major opportunity for the energy sector. Oil & gas companies were trying to meet the rapidly growing demand caused by the interruptions and halting of Russian gas and oil deliveries to Europe. How did energy companies perform? Shell Plc (SHELL) and BP Plc (BP) are Europe's largest petrochemical companies, extracting, processing and selling oil and natural gas. They control almost all stages of the extraction, processing and distribution process, which can be an advantage with high volatility in the fuel market. This way, companies are relatively well protected against the need for switching suppliers, partners' commissions and margin reduction. "With volatile energy markets and the continued need for action to combat climate change, 2022 continues to pose a huge challenge for consumers, governments and companies alike," - said CEO Ben van Beurden in a statement. However, despite "volatile energy markets," energy companies were able to make extraordinary gains. Shell reported a whopping $100.1 billion in Q2 revenue, up from $84.2 billion in Q1. To show magnitude, H1 2022 revenue is more than the revenue for the whole of 2021. BP, on the other hand, reported $67.9 billion in revenue against a forecast of $60.9 billion. The company's strong performance in oil refining and sales contributed to this spectacular beat in expectations, according to the company. Shell and BP's revenues rose 65.3% and 85.9% year-on-year, respectively. Other companies in the sector such as Chevron, Exxon and TotalEnergies also posted giant increases in revenues and profits. Earnings per share (EPS) were as high as $3.08 for Shell, almost 10% higher than the expected $2.80 EPS. BP surprised the market with $2.61 in earnings per share (EPS), significantly beating forecasts of $0.34 per share (a 658.5% surprise). Shell and BP increased their net profits by as much as 109.1 and 215.8% year on year. The extraordinary profits will be used for buybacks. Shell and BP announced that they spent $8.5 billion and $3.5 billion, respectively, on share buybacks in the first half of the year. Shell plans to spend another $6 billion and BP $3.5 billion for this purpose. BP additionally decided to raise its dividend by 10%. According to the Bloomberg news service, the buybacks are evidence that the war in Ukraine has brought significant profits to the sector. However, high fuel prices can pose the threat of a cost crisis and strangle the economy, as recent readings of energy prices and GDP changes in major economies have proven. The price of energy in Germany is now at record levels of more than 700 euros per MG of energy for next year, and according to the U.S. Bureau of Statistics, U.S. GDP in the second quarter once again recorded negative growth, this time at -0.9%. This could affect the future performance of the fuel giants.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Energy companies' earnings summary - record profits for the sector
Oil’s outlook, gold steadies

XAUUSD: Price Of Gold Amid Jackson Hole Meeting | Crude Oil Prices

Ed Moya Ed Moya 24.08.2022 23:42
Oil poised to rise Despite global recession fears, oil prices are poised to be supported as energy investments have been depressed. â€‹ The tug-of-war between crude demand destruction and a plethora of drivers on why the oil market will remain tight should still suggest prices won’t fall much lower. Oil’s outlook still looks positive here as shale is not taking off, ESG constraints remain, and strong demand for refined product exports. ​ US stockpiles will likely continue to decline over the coming weeks over strong export demand. â€‹ Oil prices could surge over the next few weeks if OPEC+ is forced to cut output and if Iran nuclear deal talks falter again. â€‹ The Saudis don’t want to see oil prices disconnected from market fundamentals and that should suggest this oil market will remain very tight. â€‹ Crude prices dipped after the EIA crude oil inventory report showed a dip with exports and as gasoline demand reversed. â€‹ Optimism for an Iran nuclear deal revival is growing and that is also weighing on prices today. The longer-term outlook for oil is still much higher as the writing is on the wall for energy costs to be very high this winter especially as the risk for further disruptions remains elevated. â€‹ Energy traders saw prices get a boost after cracks were found with the key route for exporting crude from Kazakhstan to international markets. â€‹ It will take a month to replace the broken parts and they still have to find a contractor. Gold Gold firmed up after the dollar softened in what is a very low volume trading session. ​ Gold’s slide might not be over, but no one wants to aggressively be short right now. ​ Gold is forming its pre-Jackson Hole range and it looks like it could be in the $1740 to $1780 zone. Post Jackson Hole, traders should know enough as to whether the rise in yields continues and that will dictate what happens with gold. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil's outlook, gold steadies - MarketPulseMarketPulse
New Light On The History Of Cryptocurrency, Bitcoin's Downward Trend Without The Possibility Of Indicating The End

Nvidia Stocks Dived 4,5 % In The Afterhours Trading! Swissquote

Swissquote Bank Swissquote Bank 25.08.2022 12:13
Nvidia earnings released after the market close were in line with the downside-adjusted market expectations, but the current quarter sales forecast fell $1 billion short of expectations. Nvidia stock dived 4.5% in the afterhours trading, and brought forward the pricing of the ‘end of the chip shortage’. But, it is still too early to call the end of the rare chips, as chips for industrial use, cars and machineries remain difficult to find. Here is, as promised, more on that subject: https://medium.com/swissquote-educati... Elsewhere, stocks were flat yesterday. Even though the US futures are up this morning, the direction remains unclear, and conviction low before the much-expected Jerome Powell speech at the Jackson Hole meeting in the coming hours. The dollar is off the early-week peak, gold and Bitcoin consolidate, while crude oil is preparing to test the 200-DMA to the upside. Hence, energy stocks extend gains along with nat gas and nuclear stocks! Watch the full episode to find out more! 0:00 Intro 0:27 Nvidia’s sales forecast falls $1 billion short of expectations! 1:40 Is the chip shortage over yet? 2:40 Market update 3:56 Crude up, oil, nat gas & nuclear stocks race to the top 6:46 USD softer, EUR firmer before ECB minutes 8:00 Gold & Bitcoin traders await Powell speech for direction Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Nvidia #chip #shortage #Fed #Jerome #Powell #JacksonHole #enegry #crisis #crude #oil #natural #gas #nuclear #stocks #USD #EUR #ECB #minutes #XAU #Gold #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH   Source: Nvidia upsets, again. But chip shortage is not over yet! | MarketTalk: What’s up today? | Swissquote
The Natural Gas Downside  Looks Supported By The 200-day SMA

US Herny Hub Natural Gas As The Biggest Component In The Bloomberg Commodity Index!

Ole Hansen Ole Hansen 25.08.2022 13:33
Summary:  US Henry Hub Natural gas has following a 160% year-to-date surge become the biggest component in the Bloomberg Commodity Index, and it highlights just how extreme market moves and developments have been during the past year across the commodity sector. In this we look at what it means and what investors in commodity tracking funds should be aware of US Henry Hub Natural gas (ticker: NG) has following a 160% year-to-date surge become the biggest component in the Bloomberg Commodity Index (BCOM), the first time this has occurred in the index’ +30 year history, and it highlights just how extreme market moves and developments have been during the past year across the commodity sector. The BCOM index which together with the S&P GSCI and DBIQ Optimum Yield Diversified Commodity Index belongs to the heavy weights within the global investment industry, tracks the performance of 23 major commodity futures targeting a one-third exposure in the main sectors of energy, metals and agriculture. The target weights are set once a year every January and if prices shift significantly during the year, a reweighting will not occur until the following January. The mentioned 160% year-to-date surge in US natural gas futures has more than doubled its weight to 17.2% from 8%, and in the process made it the biggest component in the BCOM index, more than double that of WTI and Brent combined. From a sector perspective, and given strong gains across the other energy components, especially fuel-based products, it has lifted the total energy exposure by 9.2% to 40.9%. All other sectors and sub-sectors share the reduction with the biggest seen in metals with industrial and precious down by a combined 7.5%. What it means?The BCOM index is likely to become more volatile with its performance increasingly dependent on developments within the energy sector, especially natural gas. Recently the price hit $10 per MMBtu before suffering a 10% setback due to a further delay of the restart of the Freeport LNG export plant which has been closed for months following an explosion. The expected restart will increase demand for US gas and with that slow the process of adding stockpiles before the winter extraction season starts in a couple of months’ time. The biggest threat to the energy sectors strong performance is the combination of a deep recession eroding demand and a peaceful solution to the war in Ukraine sending EU gas prices sharply lower in anticipation of flows from Russia normalizing. What should investors in commodity tracking ETF’s do?The short answer is nothing as the reasons for investing in tangible assets such as commodities has not changed. The other commodity tracking funds mentioned earlier, and which also include the CRB Index will all be affected depending on their individual exposure to natural gas. Overall, the BCOM has from the outset the largest exposure and is therefore the index impacted the most. From an investor perspective these types of futures tracking commodity funds remains a cheap solution to gain exposure to commodities. With natural gas being notoriously volatile some increased price swings on the index can be expected, and if the strong gains are being maintained we should expect a very active rebalancing next January where gainers will be sold, and losers bought in order to reset the target weights. Source: Bloomberg, Saxo Group   Source: NatGas surge weighs heavily in commodity indices
The Elasticity On Supply Of Fossil Fuels Is Low And The Green Transformation Is Accelerating Electrification

Green Transformation Being Inflationary In The Years To Come

Peter Garnry Peter Garnry 25.08.2022 13:44
Summary:  Central banks have been very late to the inflation game as the they have underestimated the effects from the stimulus during the pandemic. Supply chains and generally the supply side of the economy were expected to normalise much faster than what has been the case and our main thesis now is that if central banks focus too much on the core inflation a big mistake might be the outcome. Food and energy will be at the center of our crisis years with climate change and the green transformation being inflationary in the years to come. Investors should increasingly invest in the tangible world to offset these inflationary risks. The energy crisis will drive everything Around 30 central banks around the world have adopted inflation targeting using the headline inflation indices which in the US is the US Personal Consumption Expenditures Index and was officially announced in January 2012. The official targeting is the headline inflation indices, but many central banks and economist are often putting more weight on the core inflation indices. These indices remove energy and food from the price index. This practice is likely what made central banks react to slowly to current inflation impulse; remember, at Jackson Hole one year ago Jerome Powell said: “We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2% inflation on a sustainable basis”. At that point US CPI and core CPI stood at 5.4% y/y and 4.3% y/y respectively. Core inflation indices remove the energy and food items because they are seen as volatile and mainly not driven by the trend change in overall prices, and the key assumption is also that they have temporary factors behind that will reverse later on (see quote below from Federal Reserve Bank of San Francisco). This argument was the same for our disrupted supply chains although in reality it has taken much longer than expected. “However, although the prices of those goods may frequently increase or decrease at rapid rates, the price disturbances may not be related to a trend change in the economy’s overall price level. Instead, changes in food and energy prices often are more likely related to temporary factors that may reverse themselves later.” Food and energy will add to inflation going forward Our team has written a lot about the physical world and lately we introduced indices of tangibles- vs intangibles-driven industry groups. We have shown many times how the world underinvested in the global energy and mining industry, and why this will haunt the world for years. Food and energy are also intertwined and connected which we have seen today with Yara International reducing its ammonia production in Europe to just 35% of potential production due to elevated natural gas prices. Lower ammonia production will lead to less fertilizer for farmers and thus lower food production, which again can lead to higher food prices. It should be clear by now, that ignore food and energy could be a grave mistake by central banks. Climate change will make global food production more volatile and push up prices, and the green transformation will for years keep energy prices elevated. Our main thesis is that the coming decade will in many ways be a replay of the 1970s as politicians will intervene in the economy to mitigate the pain from higher prices, but these decisions will only keep the nominal economy growing fast and thus keeping inflation and the readjustments going for longer. The Fed’s core inflation measure is currently at 0.4% m/m measured over six months suggesting a core inflation rate annualized at around 5% which means that short-term interest rates must be set much higher to tame inflation. The headline inflation is currently twice as high as the core inflation. PCE core CPI m/m | Source: Bloomberg Nominal wages will underpin inflation for a lot longer In this ECB paper from August 2002, the authors conclude that central banks should give substantial weight to the growth in nominal wages when monitoring inflation. If we look at nominal wage growth in the US the chart below shows the three-staged acceleration we have observed in the US economy since 2009. The first phase during 2009-2015 saw only 2% annualized wage growth as the economy was suffering from low demand in the subsequent years after the Great Financial Crisis. The second phase was the period 2015 to early 2020 where years of loose monetary policy and slowly healing economies lifted US nominal wage growth to 2.9% annualized. The third phase is the period from early 2020 until today and is driven by the extraordinary monetary and fiscal stimulus that were put in place after the global Covid pandemic broke out. The combined stimulus was on par with the post-WWII years and were unleashed into a global economy that in hindsight was much closer to a hard physical supply limit than understood at the time. Subsequently demand has been running much stronger than trend growth and as a result nominal wages have accelerated to 5.2% annualized growth rate. Indeed, it seems we have a serious problem on our hands where inflation become unanchored from 2%. US hourly earnings index | Source: Bloomberg Invest in the tangible world In an inflationary environment the tangible world must increase dramatically, so investors should invest in the tangible world to offset the inflation risk in order to preserve wealth in real terms. In our note from yesterday about the Tangible world is fighting back we highlight the industry groups that are part of the tangible world, but our theme basket performance overview also show which tangible parts are doing well which this year has been commodities, defence, renewable energy, logistics, and energy storage. Saxo clients can find the companies in each of these theme baskets on our trading platforms. Source: Core inflation is unofficially dead
The Biggest Two-week Drawdown In A Year As US Oil Inventories Lost 10 mln barrels!

The Biggest Two-week Drawdown In A Year As US Oil Inventories Lost 10 mln barrels!

Marc Chandler Marc Chandler 25.08.2022 14:20
Overview: It seems that many market participants had the same thing in mind, cut dollar longs before the Jackson Hole gathering. The Antipodeans lead the majors move, encouraged perhaps by China’s new economic measures, with around a 1% gain. The euro and sterling are up about 0.35% and are the laggards. Emerging market currencies are higher as well, with the notable exception of India and Turkey, which are nursing small losses. Equities are having a good day. All the major bourses, but India, rose in the Asia Pacific area, led by the 3.6% surge in HK. South Korea’s 25 bp hike did not prevent the Kospi from rallying over 1% today. The Stoxx 600 is up by about 0.3%, and US futures are 0.5%-0.6% better. European 10-year benchmark yields are 4-7 bp lower and the periphery is doing better than the core. The 10-year US Treasury yield is off a couple basis points to 3.08%. Gold is rising for the third consecutive session. Near $1765, it has retraced half of its losses since the mid-month high above $1800. October WTI is little changed after rallying 5% in the past two sessions. US oil inventories have fallen by about 10 mln barrels in the past two weeks, the biggest two-week drawdown in a year. The market also appears to be getting more skeptical that Iranian oil is going to come back soon. US natgas is giving back half of yesterday’s 1.5% gain, while Europe’s benchmark is up 8.7% on top of yesterday’s 10.8% increase. It is up by more than a quarter this week. China’s infrastructure plans did nothing for iron ore, which snapped a three-day advance by pulling back 0.5%. On the other hand, September copper has fully recovered yesterday’s 1.4% fall. September wheat is off for the first time in four sessions.  Asia Pacific Japan's government wants to double down on nuclear power. Prime Minister Kishida wants a committee of government ministers and outside advisers to consider calling for building new nuclear plants in its report due later this year. Before the Fukushima nuclear accident in 2011, nuclear power provided almost 30% of Japan's electricity. In 2020, nuclear power accounted for less than 5% of Japan's electricity. Russia's invasion of Ukraine, the volatility of the global energy market, and the need to boost sustainable growth favors nuclear power, according to this line of thinking. Japan's Ministry of Economy, Trade, and Industry is a strong proponent of developing nuclear power. Still, it is not an immediate solution of any problem. New, large-scale plans would take a decade or more to construct. Smaller nuclear plans, using the newest technology might not be operational until early 2040s, according to some estimates. Japan currently has seven nuclear plants operating. The prime minister wants more existing plants to re-open. A poll earlier this year found that for the first time since that 2011 accident a slim majority (53%) in Japan favor re-opening nuclear plants. Responding to a string of data which suggests that the Chinese economy may struggle to grow by even 3% this year, the State Council announced 19 measures yesterday to support the economy. The measures included almost CNY1 trillion (~$146 bln) of new borrowing/spending for state policy banks and local governments for infrastructure projects, and some deferment of payments due to the government. These measures plus the small rate cuts that have been delivered in the past week or so are seen as modest palliatives to what is increasingly a stressed economy. The NASDAQ Golden Dragon China Index of PRC companies that trade in the US jumped 2.5% yesterday, anticipating today's surge in Hong Kong's Hang Seng (~3.6%) and CSI 300 (~0.8%) The Chinese yuan is off about 1.7% so far this month. This is almost as much as it depreciated in the May-July period. While Chinese officials seem to have accepted the decline, they seem to be wary of unintended consequences. The PBOC's dollar fix yesterday and today was weaker than expected and some saw this as a warning shot. Consistent with this was a Reuters report that China's foreign exchange regulator warned several banks against shorting the yuan. There are at least two reasons why Chinese officials want to move gradually. First is that price pressures may be mounting and second is to avoid a vicious cycle of weaker yuan spurring capital outflows, which weakens the yuan. Foreign holdings of Chinese bonds (sovereign and policy bank bonds) appear to have fallen by a little more than 1% last month to CNY3.6 trillion (~$525.5 bln). The dollar is inside yesterday's range against the Japanese yen (~JPY136.15-JPY137.25). It has drifted to the lower end of the range in Europe. Yesterday's range was within Tuesday's range (~JPY135.80-JPY137.70). The greenback appears nesting as the market awaits Fed Chair Powell's comments at Jackson Hole tomorrow. Note that the US two- and 10-year yields are around two-month highs ahead of it. This has helped lift the greenback to around JPY137.70. Follow-through yield gains may be needed for it to re-challenge high set last month near JPY139.40. The Australian dollar is up over 1% to a seven-day high a little below $0.7000, which corresponds roughly to the (50%) retracement objective of the slide since the month's high on August 11 around $0.7135. Like China's rate cut, so too with the new spending announcement, many trade the Aussie as if it were a proxy sometimes for China. The intraday momentum indicators are stretched. Initial support is seen around $0.6960. The PBOC set the dollar's reference rate at CNY6.8536. The market (Bloomberg survey median) expected CNY6.8656. The dollar has largely been confined to yesterday's range. While it eased a little more than 0.10% against the onshore yuan, it slipped more than twice as much against the offshore yuan. Lastly, as expected South Korea's central bank delivered the expected 25 bp hike (lifting the seven-day repo rate to 2.5%). Headline CPI is running north of 6% and additional hikes are likely. The won rose by 0.5%, its second consecutive gain, after falling for the previous six sessions. Europe While Japan is pushing nuclear, Germany is set to boost coal-fired power generation this year. Steag GmbH will add 2.3 gigawatts to its system within three months to replace about a quarter of the natural gas it uses to generate electricity. More broadly, the government is planing to re-open 6.9 gigawatts of coal and 1.9 gigawatts of lignite and push back planned for another 15 years. Uniper SE, is set to re-start an 875-megawatt coal plant in northern Germany next week. Yesterday, the German government announced it will give preference to transport fuels by rail to accelerate the access of power plants. Berlin also announced some conservation measures, including a ban on heating private swimming pools, and some areas in public buildings. The minimum office temperature will be reduced to 66 Fahrenheit (19 Celsius) and banning most outside lighting for monuments and buildings. Economic Minister Habeck says the measures announced will reduce natural gas use by 2% (saving 10.8 bln euros) over the next two years. German economic news was less poor than expected today. The initial estimate of no growth in Q2 was revised to show 0.1% growth. Consumption and government spending were stronger than expected, but capital investment was considerably weaker. The IFO investor survey seemed surprisingly resilient. The current assessment slipped to 88.5 from 88.7 and expectations were practically unchanged too (80.3 vs. 80.4). The overall business climate metric stands at 88.5 (from 88.7). Still to come is the record of last month's ECB meeting and the market will be looking for more color on the new Transmission Protection Instrument. The euro is firm. After holding below parity yesterday, it popped up in Asia to poke slightly above $1.0030. The week's high was set Monday closer to $1.0045. Yesterday's push lower, the new 20-year low set Tuesday near $0.9900 held and sparked what appeared to be a short-covering bounce into the European close. We suspect that some euro bears moved to the sideline ahead of Jackson Hole. There are options for 2.5 bln euros that expire today at $1.00. Some of the buying may be to neutralize the option. Initial support is seen around $0.9980. Sterling is trading firmer, and like the euro, it has held below the week's high (almost $1.1880). It may make another run for it, but the momentum indicators are getting stretched. Yesterday, the Office of National Statistics showed that for the first time, the UK did not import fuel from Russia in June. Prior to Russia's invasion of Ukraine this year, Russia accounted for almost a quarter of UK's refined oil imports, 6% of crude imports, and almost 5% of its gas imports. America Despite the US five-year yield rising to its best level in nearly two months (~3.25%), the concession did little to induce participation in yesterday's $45 bln five-year note auction. It generated a full basis point tail, stopping at 3.23% and a poor bid-cover (2.3), Earlier yesterday, the re-opening of the two-year floating rate note with a $22 bln offering, also saw a weak bid-cover (2.57 vs. 3.13 last and a 3.2 average in the last 10 such auctions. We are tempted to write-off the lackluster participation to the summer and ahead of Chair Powell's speech on Friday. In addition to $110 bln in four-and eight-week bills to be sold today, the US Treasury also will sell $37 bln of seven-year notes. The yield has risen by almost 50 bp over the past month and still the concession may not be sufficient to draw strong demand. The next long maturity is not until September 12-13 and the re-opening of the 10-year note and 30-year bond. The US reports weekly jobs claims today, which appear to have stabilized recently around 250k. Yesterday's benchmark revisions added about 571k private sector jobs to the job growth reported in the year through March. This translates to an average of around 47.5k jobs a month. Also today, Q2 GDP revisions and the 0.9% contraction is expected to be shaved, with knock-on effects on productivity and unit labor costs later. The Kansas Fed's manufacturing survey is on tap too, but it is not a market mover. Lastly, the Atlanta Fed's GDPNow tracker sees Q3 growth at 1.4%, down from 1.6% previously.  Brazil's IPCA CPI measure for the first half of August fell to 9.6% year-over-year from almost 11.4% last month. The market had hoped for a slightly larger decline (Bloomberg median 9.49%). It was the first month-over-month decline since May 2020. It was the third consecutive drop in the year-over-year rate, which peaked at 12.2%. The full month's report is due September 9. It peaked at 12.13% in April and stood at 10.07% last month. The government has pushed through several anti-inflation measures, including caps on utility and fuel taxes and the effect was seen with a nearly 17% drop in gasoline prices and a 5.25% fall in transportation costs. The central bank meets on September 21. It hiked the Selic rate by 50 bp earlier this month to 13.75% and said it would review the need for a "residual adjustment" in September. The central bank may stand pat without declaring an end of the tightening cycle as price pressures remain elevated. In contrast, Mexico mid-August CPI accelerated more than expected with the headline rising to 8.62% from 8.14%. The core rate rose to 7.97% from 7.75%. Banxico hiked rates five times so far this year. The first three moves were half-point increments and the last two were 75 bp steps. It meets a week after the Fed next month. At the bare minimum it can be expected to match the US move but could go 75 bp even if the Fed does not. Today, Mexico is expected to shave its preliminary Q2 GDP rise of 2.0% and minutes from last month's meeting. After consolidating against the Canadian dollar yesterday, the US dollar has been sold today. It slipped marginally through CAD1.29 to meet the (50%) retracement objective of the rally that began off the August 11 low near CAD1.2730. The low was set in the European morning but was not confirmed by the intraday momentum indicators, a warning not to chase the greenback lower, at least immediately. Initial resistance is seen around CAD1.2950. The US dollar is easing against the Mexican peso for the fourth consecutive session, which followed a four-day gain last week. It is finding bids today around MXN1985, and a break could see a test on the MXN19.81-82 area that marked the low in late June and again near the middle of this month. The low for the year was set in late May around MXN19.4140.     Disclaimer   Source: Dollar Longs Pared as Jackson Hole Gathering is set to Start
In The Morning US Dollar (USD) Was Up, British Pound And Euro Down | US Stocks: S&P 500 Gained Almost 2% Yesterday, Dow Jones Added 1.88%, Nasdaq Increased By 2%

The US Dollar Trades Near Cycle Highs Ahead Of The Speech

Saxo Strategy Team Saxo Strategy Team 26.08.2022 09:55
Summary:  Markets are steady ahead of a widely anticipated speech at the US Federal Reserve’s Jackson Hole, Wyoming conference from Fed Chair Jerome Powell, although he may do little more than remain on message on the Fed’s plans for tightening policy. The US dollar trades near cycle highs ahead of the speech, with US treasury yields having eased back a bit yesterday on a strong 7-year treasury auction. In Europe, power and natural gas prices continue their ascent from already dire levels, thereby supporting demand for fuel-based products.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back 1.4% to the 4,200 level in what seems to have been a technical move ahead of Jerome Powell’s keynote speech at Jackson Hole which is expected today. For equities the main question is how central banks are seeing structural in the years to come because that will be linked to the terminal rate the Fed sees as neutral for the economy and inflation. The US 10-year yield is trading around the 3.05% level this morning and we expect a quiet session in US equities unless Powell’s speech delivers a hawkish tone which could then erase yesterday’s gains. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) After staging an impressive bounce from the trough of a 2-month losing streak yesterday, Hong Kong equities opened higher before giving back much of its gains to end the morning session 0.7% higher. Yesterday’s 3.6% rally in the Hang Seng Index and 6% surge in Hang Seng TECH Index were fueled by initially chatters among traders about unverified progress on resolving the audit working papers access issue in the heart of the Chinese ADR delisting risk. During New York hours, the Wall Street Journal ran an article, suggesting that the U.S. and China are nearing a deal to allow American regulators to inspect in Hong Kong the audit working papers of Chinese companies listed in the U.S. The news sent Chinese ADRs soaring, the NASDAQ Golden Dragon China Index +6.3%. US dollar steady on the strong side ahead of Jackson Hole Yesterday saw some tactical chopiness in USD pairs, as the greenback sold off to support in places and criss-crossed parity in EURUSD terms before settling back to the strong side ahead of Fed Chair Powell’s speech at the Jackson Hole conference today. Powell is widely expected to stay on message on the Fed’s hopes to get ahead of the curve, but surprises are possible if his language is a bit more pointed than expected or he brings stronger guidance on the importance of QT, etc. Next event risks for the USD in the wake of today’s Powell speech (and July PCE inflation print as noted below) are next Friday’s payrolls/earnings report, the Sep 13 Aug. CPI data release, and then the Sep 21 FOMC decision. AUDNZD The Antipodean currency pair closed yesterday at its highest level since 2017 in a bid to escape the range that has prevailed since then, with a bit more range toward 1.1300 that stretches all the way back to 2013. If the pair can make a notable foray above these levels, it might suggest that traders are viewing the pair from a current account perspective, as Australia has been running record surpluses on its formidable complex of commodity exports, while New ZEaland is running unprecedented deficits on rising costs for energy imports. In the longer term perspective, AUDNZD has traded above 1.3500 as recently as 2011. Crude oil (CLV2 & LCOV2) Crude oil trades steady with Brent trading around $100 per barrel with a tightening supply outlook offsetting the recessionary drums that have been banging ever louder in recent weeks. Focus on today’s Jackson Hole speech from Fed Chair Powell and its potential impact on bond and currency markets, and with that the general level of risk appetite in the market. EU gas and power reached new peaks on Thursday on worries about Russian gas supplies following the upcoming 3-day maintenance supporting demand for crude-based products like diesel and heating oil. The prospect of a revived Iran nuclear deal still receiving some attention although a deal may only have a small immediate impact, small change compared with the soon to expire US SPR release program which saw 8 million barrels pumped into the market last week. In Brent, the next level of upside interest can be found at $102.50. Copper (COPPERUSDEC22) Copper has settled into a $3.55 to $3.73 range after making a steady recovery from the June/July +30% collapse. The primary focus remains on China and the government’s efforts to shore up its troubled property sector and its slowing economy in general. This past week we have seen rate cuts and the announcement of a 1 trillion-yuan economic stimulus program, including a 300-billion-yuan investment in infrastructure projects, which will boost the consumption of industrial metals, including copper. Above the current range copper may target $3.85/lb next but it will likely require a rally above $4/lb before speculators reverse the net short they have held since April. US Treasuries (TLT, IEF) US treasury yields fel back a few basis points, but the 10-year benchmark still trades above 3.00% today ahead of Fed Chair Powell’s speech. (More below – special focus on longer end of the yield curve on any QT guidance in the speech). A strong auction of 7-year treasuries yesterday helped bring support to the market after the weak 5-year auction the prior day. What is going on? ECB meeting minutes suggest another 50-basis points hike The meeting minutes point to another 50-basis point hike at the September 8 ECB meeting, a move that is actually more than fully priced in by the market. At the same time, the ECB minutes noted that it saw “no evidence of significant second round effects” in which wages drive an inflationary spiral. The central bank’s “TPI” or Transmission Protection Instrument meant to prevent peripheral sovereign yield spreads from widening excessively was widely discussed and is clearly a hot potato politically. An FT article noted that hedge funds have built up a nearly EUR 40 billion speculative short in Italian BTPs Additional hawkish Fed comments before we get to Powell Several Fed speakers were on the wires echoing the same message on inflation and more rate hikes. The markets are still holding their breath for what Powell has to say later today. James Bullard (2022 voter) reiterated his year-end target of 3.75% to 4% and market expectation is not too far from that now. Esther George (2022 voter) was more open about rates going above 4% but stayed away from a specific guidance for the September meeting. Patrick Harker (2023 voter) said rates need to be lifted into restrictive territory. Raphael Bostic (2024 voter) told the WSJ it's too soon to call inflation’s peak and that he hasn't decided yet on a 50 or 75bps rate hike next month. German business sentiment is not that bad in August The headline IFO Survey reading was out at 88.5 versus 86.8 expected and 88.6 prior. This is only a bit softer than the previous month. The same goes as well for the current conditions (out at 97.5 in August versus prior 97.7) and expectations (80.3, unchanged compared to July). Overall, business sentiment remains soft. But given the quick economic deterioration, it could have been much worse. We still expect sentiment to further fall in the coming months as the German economy sinks into a recession. The energy crisis is hitting consumers and companies very hard – thus leading to lower demand and corporate investment. Yesterday, Germany’s benchmark year-end power kept rising (+13% in one day) to a new record of EU725/MWH. So far, the German government has spent roughly €60bn to limit the impact of higher energy prices on households and corporations. This represents about 1.7% of GDP according to the calculations of the Belgium-based think tank Bruegel. In percentage of GDP, this is still much less than many other European countries (3.7 % of GDP for Greece, 2.8 % for Italy and 2.3 % for Spain, for instance). In any case, this is unsustainable, of course. The US and China are getting closer to resolve Chinese ADR audit papers inspection issue According to a Wall Street Journal article, Chinese securities regulators “are making arrangements for US-listed Chinese companies and their accounting firms to transfer their audit working papers and other data from mainland China to Hong Kong” and “would allow American accounting regulators to travel to Hong Kong to inspect the audit records”. It is important to note that an agreement has yet to be reached and the regulators on both sides remain silent about it so far. One of the hurdles to the proposed arrangement of transfer of audit working papers from the mainland to Hong Kong will be whether it can satisfy the US regulators, particularly the SEC Chair Gensler who has emphasized “full access”. If this turns out to happen, it will not only benefit the Chinese companies that are listed in the US but also sets the US and China in a more conciliatory mood at least in some financial matters, and shows case the uniqueness of the position of Hong Kong U.S. discount retailers reported mixed Q2 results, highlighting pricing pressures ahead Dollar General (DG:xnys) reported revenue growth of 9% y/y to $9.4bn, in line with the consensus estimate, and EPS of $2.98, +10.6% y/y, above the consensus estimate of $2.94.  Same-store sales in Q2 grew 4.6% y/y, above the consensus at +3.8%. In the company’s guidance for 2022, revenue growth was raised to +11% from previously +10.0-10.5% and the same-store-sales growth was raised to +4.0-4.5% from +3.0-3.5%. Q2 results from another discount retailer, Dollar Tree (DLTR:xnys) were however weaker, with revenue growth of 6.7% y/y to $6.77bn, slightly below the consensus estimate of $6.79bn.  EPS came in at $1.60, in line with expectations. Same-store-sale for the quarter was +4.9%, below the consensus estimate at +5.0%.  The company lowered its 2022 full-year EPS guidance to $7.10-$7.40 and said that 60% of the cut was due to cutting prices. The management said that they “expect the combination of this pricing investment at Family Dollar and the shoppers’ heightened focus on needs-based consumable products will pressure gross margins in the back half of the year”. The comments from Dollar Tree cast a shadow over the health of consumers in the US in general.  Meituan is scheduled to report Meituan (03690:xhkg) is scheduled to report Q2 results on Friday after the market close. Analysts are upbeat about the food and grocery delivery platform’s potential benefitting from the recovery of consumer demand amid the reopening and cost control initiatives.  The consensus estimate (as per the Bloomberg survey) for Q2 revenue is to grow 11% YoY to RMB48.59 billion and an adjusted net loss of RMB2.17 billion What are we watching next? The Kansas City Fed hosts its annual symposium in Jackson Hole This year’s theme is “Reassessing Constraints on the Economy and Policy”. The symposium will last until Saturady. Fed Chair Jerome Powell will speak today. Given the loosening of financial conditions since the June FOMC meeting, the market has been concerned that Powell will echo the pushback against the notion that the Fed knows that it is set to materially slow its pace of policy tightening after the September 21 FOMC rate decision (majority looking for another 75 basis points). Data dependency will likely be underlined in his speech, but any guidance on the Fed’s approach to QT could also garner considerable attention as longer treasury yields pull back higher toward the cycle highs from June. Softer July US PCE print would not derail Fed’s tightening After a softer CPI report in July, focus will turn to the PCE measure – the version of the CPI that is tracked by the Fed to gauge price pressures. Lower gasoline prices mean that PCE prints could also see some relief, although we still upside pressures to inflation given that energy shortages will likely persist and easing financial conditions mean that inflation could return. We would suggest not to read too much into a softer PCE print this week, as the stickier shelter and services prices mean that the 2% inflation target of the Fed remains unachievable into then next year. This suggests that the aggressive tightening by the Fed will likely continue, despite any likely softness in the PCE this week. Earnings to watch Today’s earnings focus is Meituan which is expected to see 11% y/y revenue growth with estimates expecting to see growth accelerating into Q3, so this will be the market’s focus in today’s earnings release. The latest stimulus efforts by the Chinese government and lifting of mobility restrictions could provide tailwind for the consumer into Q3. Today: Meituan, China Shenhua Energy, China Petroleum & Chemical Next week’s earnings releases: Monday: Fortescue Metals, Haier Smart Home, Foshan Haitian Flavouring, Agricultural Bank of China, BYD, Pinduoduo, Trip.com, DiDi Global Tuesday: Woodside Energy, ICBC, China Yangtze Power, Midea Group, Tianqi Lithium, Bank of Montreal, China Construction Bank, Bank of China, Great Wall Motor, COSCO Shipping, Partners Group, Baidu, Crowdstrike, HP Wednesday: MongoDB Thursday: Pernod Ricard, Broadcom, Lululemon Athletica, Hormel Foods Friday: BNP Paribas Economic calendar highlights for today (times GMT) 0800 – Italy Aug. Consumer/Manufacturing Confidence surveys 1230 – US Jul. Personal Income/Spending 1230 – US Jul. PCE Inflation 1400 – US Fed Chair Powell to speak at Jackson Hole, Wyoming 1400 – US Aug. Final University of Michigan Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 26, 2022
Oil seesaws, gold edges higher

USD: Would Jerome Powell (Fed) Spill The Tea About On The Interest Rate Decision?

Ed Moya Ed Moya 25.08.2022 22:49
Oil Crude prices initially edged higher as we get further reports that OPEC+ is seriously considering lowering production and after the latest round of US economic data and Fed speak suggests the economy is still in a good position to handle more rate increases. Oil will start to form a key trading range until Fed Chair Powell’s speech at Jackson Hole. We could get a major move in the dollar post-Powell and that could trigger a major one-way move for commodities. ​ The oil fundamentals still support crude prices to make a move above the $100 a barrel level, but first, we will have to wait-and-see if the dollar cooperates. Oil is seesawing ahead of Jackson Hole and that will probably continue until we hear from Fed Chair Powell. ​ Gold Gold got a limited boost as the dollar softened ahead of Fed Chair Powell’s speech at Jackson Hole. ​ Another round of US economic data and Fed speak supported the idea that the Fed will remain aggressive tightening policy until inflation is under control. ​ Investors want to see if Fed Chair Powell locks the Fed in for another massive 75 basis point rate increase in September, but he will likely stick to the data-dependency script and leave it up to the September 13th inflation report. Gold will likely consolidate between the $1750 to $1780 zone leading up to Fed Chair Powell’s speech. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil seesaws, gold edges higher - MarketPulseMarketPulse
Droughts In China - Asia Is Forced To Buy Corn From The US. Prices Are Growing

Droughts In China - Asia Is Forced To Buy Corn From The US. Prices Are Growing

Saxo Strategy Team Saxo Strategy Team 29.08.2022 09:43
Summary:  The 8-minute speech from Powell focused on one message: no pivot to easing in 2023. The hawkish remarks sent U.S. equities sinking the most since June and down more than 3% across major indices. Policymakers in the ECB also sent out hawkish comments and brought a 75 basis point hike to the table at the September ECB meeting. The U.S. and China regulators announced a deal on audit work papers and removed for the time being the risk of compulsory delisting of Chinese companies from U.S. bourses. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities sank last Friday after Powell spent all his Jackson Hole speech on one thing: pushing back on the market’s speculation that the Fed would pivot and start easing next year.  The tech-heavy Nasdaq dropped 4.1%, leading the charge lower, Alphabet (GOOG:xnas) -6.4%, Amazon (AMXN:xnas) -4.8%, Nvidia (NVDA:xnas) -9.2%. Apple (AAPL:xnas) fell 2.8% after the U.S. Department of Justice announced working on a potential antitrust case against the company. S&P 500 had its worst day since June and plunged 3.4%, Dell Technologies (DELL:xnys) -13.5%, HP (HPQ:xnys) -8.9%. The post-Powell speech selloff capped off a two-week losing streak of the markets and turned major indices’ performance in August into the red.  Earlier in the week, the market sentiment was dampened by downbeat comments from the management of retailers on a glut of inventory and plans to cut prices.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) After Fed Chair Powell’s hawkish comments about the need to keep raising rates until inflation is under control regardless of pains incurred to the economy and employment, the U.S. yield curve twisted and flattened, with the 2-year to 5-year yield rising by 3bps to 3.37%, 10-year nearly unchanged at 3.04%, and the 30-year yield falling by 5bps to 3.19%.  The money market continued to unwind the 2023 rate cut bet and the SOFR Dec 22-Dec 23 (SR3Z2 vs SR3Z3) spread narrowed to -24bps.  Weakness on the front ends began even before Powell’s comments as the market took notice of the ECB’s readiness to consider a 75bp rate hike in its meeting in September due to a deterioration in the inflation outlook.    Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Seng Index, +1% last Friday and +2% for the week staged an impressive bounce from the trough of a 2-month losing streak on Thursday and continued to charge higher on the back of reports that the U.S. and China regulators were reaching a deal to avoid the delisting of Chinese companies from U.S. bourses due to disagreement on access to audit work papers.  Later on Friday after the Hong Kong market close, the U.S. and China regulators separately announced that an agreement had been signed and released some details.  Chinese ADRs opened higher in the U.S. session but finished the day 0.7% lower as being dragged down by the sharp decline in the U.S. equity market.  CSI 300 was little changed last Friday and was down 1% for the week.  With U.S. index futures continuing to decline this morning in Asia, the markets’ focus today is likely to be shadowed by the development in the U.S. markets rather than much follow-through from the confirmation of the U.S.-China deal on audit working papers.  Dollar’s post-Jackson Hole gains extend into Asia The dollar continued its run higher in the early Asian hours on Monday after a hawkish tone from Fed Chair Powell on Friday resulted in some volatility but eventual dollar bid. AUDUSD was the weakest in the Asian morning, sliding below 0.6900 amid volatile commodity prices. USDJPY broke above 138 to 1-month highs and USDCNH surged to 6.9000+ levels. EURUSD ended last week below parity and slid further lower to 0.9936 this morning with a tough week ahead as Nord Stream 1 maintenance will likely cause a step up in energy supply concerns. With corporate month end on Monday, and a UK holiday, the scope for further dollar gains remains. Crude oil prices (CLU2 & LCOV2) Crude oil prices ended last wee in gains on supply concerns taking centre stage again, primarily with Saudi Arabia flagging the risk that OPEC+ may cut production to stabilise volatile markets. Demand picture stabilized, and higher gas prices increased the gas-to-fuel switching demand. But oil prices eased in the Asian morning session with Brent futures back at $100/barrel and WTI futures below $93. A warmer winter in the early weeks is putting a lid on demand, and hawkish central bank messages have also hinted at slowdown concerns. Meanwhile, OPEC+ member states, including Iraq, Venezuela and Kazakhstan, suggested readiness within the 23-strong oil producing alliance to intervene and restore balance in the oil market. This is building up concerns on a potential OPEC cut at its Sept 5 meeting. Corn futures surging at Asia open US corn futures rose to a fresh 2-month high in early Asian hours, following last week’s gains supported by concerns that hot and dry weather in the Midwest during the final crop development period may limit the production outcome. USDA’s crop progress report found a 2% decline in the share of the crop rated good or excellent, with 55 percent of fields falling in those two categories. The rating was a new five-year low for this time of year and the second lowest rating since the drought year of 2012. This comes on top of slow shipments from Ukraine and drought in China. The world's fourth largest iron ore miner, Fortescue releases 2nd highest profit on record Fortuecue Metals (FMG) posted a 40% drop in full-year profits. Despite posting record shipments to China, the steep declines in iron ore prices saw the company record a A$6.2 billion profit, down from the A$10.35 billion last year. The result still marked Fortescue’s second-highest profit on record, with the company to pay a final dividend of A$1.21 per share, taking the total payout to A$2.07 (which is a 75% payout on NPAT). So what’s next for Fortescue, the world’s 4th largest iron ore miner? Fortescue sees iron ore shipments being 187m-192m tones in the year ahead (that's another record). Fortescue also overhauled its management and wants to accelerate its push into clean energy. Its clean energy business, Fortescue Future Industries aims to produce an initial 15 million tons a year of green hydrogen by 2030, to help sectors including heavy industry and long-distance transport, decarbonize. $600-$700 million will be spent on clean energy in the coming financial year. As we covered last week in our BHP interview, iron ore demand is likely to slow over the coming 30 years (that’s where Fortescue’s income comes from). Meanwhile, the world requires double the amount of green metals. So the question remains; can Fortescue diversify its business in time? Fortescue’s shares are up 21% from their July low, with investors hoping China infrastructure stimulus will support iron ore demand and boost the company’s earnings.   What to consider? Powell’s message at Jackson Hole gets serious While Powell still stayed away from clearly defining a rate path or the expected terminal rates for the Fed, his strong message did suggest that the fight against inflation is far from over. Powell reiterated that the decision on September 21st on whether the Fed will lift rates by 50bps or 75bps will be driven by the “totality” of data since the July meeting. That puts a great deal of emphasis on the US jobs report due on September 2nd, and the US CPI report due September 13th. There was also some emphasis on rates being held at the peak rate for some time, but there isn’t a substantial change to the market’s expectation of the Fed path yet, with cuts still seen for next year by the money markets. Other Fed speakers still see higher terminal rates Inflation remains the overarching theme in all the Fed talk, and no comfort is being taken from the softening in July inflation. Mester (2022 voter) accepted Fed hasn’t reached neutral rates yet, and said that rates need to go above 4% and held there for some time. Bostic (2024 voter) also suggested a higher terminal rate of 3.5-4.75% compared to what was reflected in the June dot plot, and said rates need to be held there for some time and rate cut talks are premature. The deal between U.S. and China on ADRs Market chatters about a deal between the U.S. and China regulators regarding the allowance to the U.S. regulators access to audit work papers of the auditors of Chinese companies listed on U.S. bourses first emerged last Thursday and the deal was announced by the U.S. and China regulators on Friday.  According to the Public Company Accounting Oversight Board (PCAOB), the agreement gives the U.S. regulator, “complete access to the audit work papers, audit personnel, and other information [the PCAOB] need[s] to inspect and investigate any firm ‘the [PCAOB] choose[s], with no loopholes and no exceptions. But the real test will be whether the words agreed to on paper translate into complete access in practice”. On the other hand, in its announcement and Q&As with reporters, China Securities Regulatory Commission emphasized “the principle of reciprocity” and that “the two sides will communicate and coordinate in advance to plan for inspections and investigations”. The materials such as audit work papers that the U.S. regulator need[s] access to will be obtained by and transferred through the Chines side.  The Chinese side will also take part in and assist in the interviews and testimonies of relevant personnel of audit firms requested by the U.S. side.” Meituan delivered solid Q2 results Meituan (03690:xhkg) reported a 16% YoY growth in revenues to RMB 51 billion, above market expectations across segments better performance.  Adjusted net profits turned positive to RMB 2.1 billion versus a loss of CNY 2.2 billion in Q1 and analyst consensus of an over RMB 2 billion loss.  The company’s food delivery business a strong recovery and the management said that the recovery continued into July and August, with order volumes rising in low-teens YoY in July and at about 20% YoY in August month to date. Soft US PCE confirms the CPI message Lower pump prices cooled price pressures in July, and this has been re-confirmed by the PCE print on Friday. Headline came in at 6.3% YoY (vs. 6.8% expected) while core was at 4.6% YoY (vs. 4.7% expected). The market reaction to these softer numbers was however restrained as the hawkish message from Powell at Jackson Hole took the limelight. The magnitude of the September rate hike still remains a coinflip, but the Fed members have refused to take comfort with the softer CPI print and continue to push for an aggressive fight against inflation. ECB speakers remain committed to inflation despite recession risks A host of ECB speakers on the weekend continued to push for aggressive rate hikes to fight inflation. Schnabel, speaking at Jackson Hole, said rates must be raised, even into a recession. Kazaks also emphasised on further front-loading of rate hikes after the 50bps rate hike announced by the central bank in July. In fact, there were hints of a 75bps rate hike. There were also some concerns on a weaker EUR, as that fuels further inflationary pressures and the benefit of cheaper exports is diminished by supply chain disruption. Villeroy said that the neutral rate should be reached before the end of the year while Kazaks said he would get there in the first quarter of next year. Australian retail trade surged to another record; with dining out and a winter clothing sprees fueling the charge  Australian retail sales data showed how resilient the Aussie consumer is, with retail spending rising for the 7th straight month, up 1.3% vs the +0.3% consensus expected. As electricity bills in Australia are at a record high, and likely to rise, people are layering up this Aussie winter, so retail spending surged to another new record high, A$34.7 billion in July. The Australian winter spending spree saw Department Stores sales surge 3.8% and clothing (footwear and personal accessory retailing) rocket up 3.3%. Australians are living through one of their coldest winters in history; as such spending rose the most in the coldest climates; Victoria and the ACT. Yet spending at cafes and restaurants remained strong, surging to yet another brand new record high (A$5 billion in July), up from 1.8% from the prior month. All this, is despite a softening Australian housing market and the quickest succession of rate hikes in history.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 29, 2022
Commodities Condition After Fed Chair Powell's Speech

Commodities Condition After Fed Chair Powell's Speech

Ole Hansen Ole Hansen 29.08.2022 13:39
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 23. A week that saw financial markets trade increasingly nervous with stocks selling off while the dollar and yields rose ahead of Friday’s speech by Federal Reserve Chair Jerome Powell. Developments that triggered fund selling in precious metals while energy and grains was in demand due to a tightening supply outlook Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.   Link to latest report   This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 23. A week that saw financial markets trade increasingly nervous ahead of Friday’s Jackson Hole speech from Federal Reserve Chair Jerome Powell. Stocks sold off while the dollar and bonds yields rose in anticipation of a hawkish message. In the end that was exactly what Powell delivered on Friday when he cautioned about loosening monetary conditions prematurely while flagging the likely need for restrictive monetary policy for longer than the market had priced in to curb high inflation. Commodities The Bloomberg Commodity index rose 1.6% during the reporting week with concerns about the impact on demand from central banks hiking rates to curb economic growth being more than offset by concerns about a tightening supply outlook, especially across energy and key food commodities. Precious metals being the only sector struggling amid the mentioned dollar and yield strength. Overall hedge funds increased their exposure for a fourth consecutive week, this time by 13% to 1.1 million contracts, some 264k above the end of July low point.  Energy: Funds increased bets on rising crude oil prices for the first time in five weeks with the combined long in WTI and Brent being lifted by 22% to 338k lots. This in response to a near +8% rally during the week as the focus returned to a continued tight supply outlook with the gas-to-fuel switching providing an additional layer of support. While the combined gross long was increased by 20k lots, it was a 40k lots capitulation among short sellers that provided the main input to the change.Surging gas prices driving increased demand for diesel helped lift gas oil by 10% and the net long by 24% to 76.5k lots, still only half the 152k lots peak seen from last October. Natural gas traders cut their net short by 66% with the bulk of the change being driven by fresh longs being added. Metals: Precious metals saw renewed selling ahead of Jackson Hole with the stronger dollar and rising yields triggering a fresh round of short selling by funds. The result being a 34% reduction in the gold long to 30k while silver and platinum saw big increases in already established net short positions. Copper found support after China’s government announced fresh initiatives to support an economy struggling with Covid lockdowns and a property sector crisis. The result being a 71% reduction in the net short to -4.8k lots, an 11-week low. Agriculture: The grains sector, led by corn and soybeans, continued to recover from the June to July 25% correction. Buyers bought the sector for a fourth consecutive week with an improved fundamental outlook due to adverse weather in the US and China triggering fresh buying interest. The bulk of the 111k lots increase during this time has been driven by corn with the soybean complex also picking up steam while the two wheat contracts have seen net selling during this time.     Forex The forex market responded to a 1.6% increase in the Dollar index ahead of Jackson Hole by turning broad buyers albeit in small size of dollars against nine IMM currency futures. The two exceptions being GBP and CHF where short covering reduced the net short in both. The euro net short reached 44k lots or €5.5 billion, the highest since March 2020 when the market was in covid panic mode. Overall the gross dollar long reached a three week high at $18 billion, down 24% from last months peak and high for the year at $23.8 billion.   What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: COT: Crude oil and grains bought despite Jackson Hole jitters
Gold Has Potential For The Downside Movement

Commodities: Gold Amid Stopped Rise Of US Dollar (USD)

Ed Moya Ed Moya 29.08.2022 21:55
Gold edges higher as dollar rally halts 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 that 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. â€‹ With the UK on holiday, today’s moves might be meaningless. â€‹ The true test for gold will come tomorrow. â€‹ Oil The one trade that everyone can agree upon is that the oil market will likely remain tight. â€‹ 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. â€‹ What is also helping oil today is that despite risk aversion running wild, the dollar rally is on hold. â€‹ 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. â€‹ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Gold benefits on dollar rally break, oil rises - MarketPulseMarketPulse
Why Stock Investing Is Not That Easy At The Moment?

After The Speech Global Equity Markets Are Not Risking Anymore! Nasdaq 100 Below Its 50-day Average!

Saxo Strategy Team Saxo Strategy Team 30.08.2022 09:06
Summary:  The rise in U.S. treasury yields pressured growth stocks with the Nasdaq 100 falling below its 50-day average, which puts it back in a precarious position. Fed Kashkari said he was glad to see the markets fell after Chair Powell’s Jackson Hole speech to tighten financial conditions. Global equity markets have certainly got the message and are in a risk-off mood. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  US Stocks fell for the second day, but modestly compared to Friday’s sell-off that was triggered by Fed Chair Powell vowing rates will stay higher for longer to cool runaway inflation while suggesting there will be no pivot to cutting rates in 2023, S&P 500 -0.7%, Nasdaq 100 -1%.  Minneapolis Fed president Kashkari said that “he certainly was not exited to see the stock market rallying” after the last FOMC meeting and “people now understand the seriousness of our commitment to getting inflation back down to 2%.” Tech stocks dragged the markets lower, Nvidia -2.8%, Tesla -1.1%.  Twitter (TWTR:xnys) dropped 1.1% after Elon Musk ad subpoenaed a Twitter whistleblower to share information.  Meanwhile, gains in value stocks somewhat held up the market last night, with the oil, gas, and agricultural sectors rising 1-2%. It comes as Oil prices rose 4% on Monday as potential OPEC+ output cuts and conflict in Libya helped to offset a strong U.S. dollar. While the Ag sectors were supported higher after the wheat price jumped 4.9% and corn rose 2.2% (at its highest level in 2 months) after heat damage worsened US crops more than expected. As such it appears markets are back to their risk off modus operandi, selling down growth names (which are based on future earnings which gets diminished amid higher rates), and instead, buying value (commodities), with rising cashflows. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) US treasury yield rose across the curve.  The 2-year yield rose to as high as 3.48% during the day, the highest level since November 2007, before paring the rise to settle 3bps higher at 3.42%.  The 10-year yield rose 7bps to 3.11%,  taking the 2-10 year curve steepened by 3bps to -32bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equities traded relatively calm in the midst of a large post-Jackson Hole selloff in the U.S., Hang Seng Index -0.7%, CSI 300 -0.4%.  The deal made between the U.S. and China regulators last Friday regarding access to audit work papers did not trigger much new buying in China internet stocks on Monday as it had already been well wired before the official announcement.  Further, there is much remained to be seen if the agreement will be implemented to the satisfaction of both sides as the U.S. and China regulators seem to differ in their interpretation.  Meituan (03690:xhkg) gained 2.6% after reporting solid Q2 results, which Hang Seng Tech Index dropped 1.2%. China’s industrial profits slumped to contracting 14.5% YoY from (v.s. +1.1% in June) and a fall of 11.3% sequentially from June.  The weakness was mainly driven by upstream sectors.  Coal mining stocks initially slumped but rallied later in the days and finished higher in Hong Kong and mainland bourses.   Geely (00175:xhkg) rose 1.7% as the automaker’s Zeekr line of EVs will be the first to use a new battery from CATL that provides over 1,000km range per charge.  SMIC (00981:xhkg), -2.1%, announced spending USD7.5 billion to build a plant in Tianjin to make 12-inch wafers. Chinese banks traded weak as Reuters reported that China’s central bank and bank regulators had been making calls to banks to push them to make more lending to support the real economy than put their funds in financial investments.  USDJPY weakness to bring back pressure on Bank of Japan USDJPY is back to testing its record July highs despite little change in money market pricing of the Fed rate path following Powell’s hawkish speech at Jackson Hole. The peak Fed funds rate is still priced in at 3.8%, while some of the Fed speakers have started to suggest 4%+ levels that may be needed to combat inflation. This brings the September dot plot in focus, but we get the jobs and CPI data before that as well. Any further upward re-pricing of the Fed path, if resulting in gains in US 10-year yields, could very well take USDJPY to new highs with Japanese yields still remaining capped due to the Bank of Japan’s yield curve control policy. If however, US data underwhelms, the room on the downside for USDJPY is tremendous. USDCNH made a new high at 6.9327 Wider interest rate differentials between the U.S. dollar and the renminbi and a weaker economic outlook in China continued to pressure the renminbi weaker. USDCNH surged to as high as 6.9327 on Monday during Asian hours before paring it as the greenback fell against most of the G10 and emerging market currencies in London hours.  In Asia this morning, USDCNH is trading at 6.9066. Crude oil prices (CLU2 & LCOV2) Crude oil prices saw their best day in a month amid threats of a decline in supply from OPEC cuts and production outages in Libya. Brent futures rose above $105/barrel although some softening was seen in the Asian morning, while WTI rose to $97/barrel. This follows news from last week that Kazakhstan’s exports of crude may be impacted for months because of damage to its port facility. Meanwhile, negotiations between Iran and the US over the revival of the 2015 nuclear deal could drag on for weeks, easing fears of an imminent surge in supply. What to consider? The volatility index rises to its highest level in 9 weeks, suggesting more volatility is coming. And the fundamentals back this up with US yields spiking After the Fed’s 8-minute Jackson Hole speech, the volatility index surged to its highest level in 9-weeks, forming an uptrend pattern, suggesting more market volatility is ahead. We believe the market is only just beginning to price in higher for longer interest rates and inflation. The bond market is affirming this with yields spiking again. But what is also alarming, is that the futures market is still pricing in that the Fed will cut rates in 2023. This is despite the Fed suggesting it won’t pivot to cutting rates. The other issue is keeping markets on notice is that; if the Fed makes more hawkish remarks and hikes rates more than expected, then the market will face further volatility, and selling in growth sectors and names that are interest rate sensitive, are likely to come under pressure. Shell CEO cautions against a prolonged European gas crisis Shell CEO Ben van Beurden gave comments from Norway’s ONS conference, suggesting that Europe could face gas shortages for a number of winters. This disproves reports suggesting that Europe has already built reserves for the winter demand, and reaffirms our belief that a move to broad-based energy supply will continue to be top of mind in the long run. In the near term, demand destruction appears to be the only possible solution, and Van Beurden stressed need for efficiency savings as well as rationing. Eurozone inflation and Nord Stream maintenance will be key for the ECB There is no question on the direction in Eurozone inflation, given the extensive reports on gas prices and power costs in the region over the last few days. However, some softening may be warranted after an all-time high of 8.9% was reached on the Eurozone inflation print in July, given the easing in pump prices in August. Still, gas supply concerns continue to remain top-of-mind for Germany with Gazprom announcing another leg of maintenance for the Nord Stream pipeline this week. Food prices are also seeing another pickup, and further gains in the headline print in Q4 cannot be ruled out. Calls for a 75 basis points rate hike by the European Central Bank have already picked up, and these could gain further traction if we see a strong CPI print this week. However, if Nord Stream supply comes back on time after its 3-day scheduled maintenance, and with some potential increases in capacity as has been hinted, that could mean a substantial decline in European gas prices and relief in utility costs in the months to come. ECB Lane tones dials back on jumbo rate hike expectations ECB chief economist Lane was on the wires on Monday, and hinted at a more steady pace of rate hikes in a “step-by-step” manner rather than jumbo rate hikes. This appears to be a pushback against calls for a 75bps rate hike at the September meeting, as he made the case to allow the financial system to absorb the rate changes. Moreover, on inflation, Lane said long-term inflation expectations remain close to the two per cent target, while near-term inflation expectations are quite elevated. BYD reported 1H earnings at the high end of the preannounced range Chinse auto maker BYD (01211) reported 1H revenues growing 66% YoY to RMB 151 billion.  In terms of segments, auto revenues surged 130% YoY while mobile handset revenues contracted 4.8% YoY. Net profits jumped 206% to rMB3.595 billion, at the top end of the preannounced range of CNY2.8-3.6 billion. Volume growth (353K new energy passenger vehicles in 2Q, +265% YoY) beat market expectations despite two rounds of price increases in 2022 and supply chain disruptions.  The company’s EV market share rose to 29% (vs 17% in 2021).  Pinduoduo delivered Q2 results showing stronger than peer sales growth Pinduoduo (PDD:xnas), a leading eCommerce platform with strong penetration into agricultural products and online shoppers from rural areas., reported 1H total revenue growing at 36% YoY, far exceeding the 3% YoY consensus estimate.  The company attributed the revenue growth to a recovery in consumption since mid-May, successful promotion campaigns, and 48-hour daily necessity supply packs for people facing lockdown.  The company’s strong market position in rural areas and agriculture-related products also help it stand out from its rivals.  In Q2, the company achieved a 20 percentage point improvement in margins, reaching 33.5%, but the management cautioned investors that the margin compression was attributed to temporary cost savings early in the quarter and spending had increased since mid-May.  Non-GAAP EPS came in at Rmb7.54, +161% Uranium companies and other nuclear-related companies are back in the spotlight  Elon Musk said countries should not shut down existing nuclear power plants as Europe grapples with an energy crisis “If you have a well-designed nuclear plant, you should not shut it down - especially right now”, said Musk during an energy conference in Norway. That resulted in the Global X Uranium ETF climbing 7.4% on Monday to its highest level since June 8, supported by US uranium stocks rising. Uranium stocks in the Asia-Pacific region to watch include Australia’s Paladin, Deep Yellow and Boss Energy, as well Japan’s Kansai Electric Power and Tokyo Electric Power, as well as Mitsubishi Heavy Industries. In South Korea watch Doosan Enerbility, Kepco. And in Europe, monitor Yellow Cake and Kazatomprom.      For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 30, 2022
Natural Gas Has Strong Support, Continuation Of The Downward Trend Is Unlikely

Natural Gas Prices Still Fell Besides Russia Shuts The Key Nord Stream Pipeline Down. Dependence Coming To An End?

Saxo Strategy Team Saxo Strategy Team 30.08.2022 09:18
Summary:  Markets traded mostly sideways yesterday as the US dollar’s advance was stymied and US yields pushed back slightly lower. China continues to allow its currency to trade toward the lows for the cycle versus the US dollar as the 7.00 area nears in USDCNH. The euro bobbed back up toward parity versus the US dollar yesterday as natural gas prices fell even as Russia shuts the key Nord Stream pipeline down for a purported few days of maintenance.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities stabilised yesterday following that knee-jerk reaction on Friday to the Jackson Hole presentations with S&P 500 futures touching and bouncing off the 50-day moving average closing above the critical 4,000 level. S&P 500 futures are trading around the 4,044 level this morning sandwiched between the 100-day moving average above this level and the 50-day moving average below suggesting a bigger move is shaping up in either direction. The next big shift in sentiment will be when we get the US August CPI print on 13 September as that is the key data point to shape expectations from current levels. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equities pulled back moderately, Hang Seng Index -0.9%. Tech names were weak. Hang Seng Tech Index plunged as much as 3% before bouncing off the lows to finish the morning session down 1.7%.  According to the Ministry of Industry and Information Technology, smartphone sales in China fell 2.9% YoY in the period between Jan and July. Despite reporting solid 1H results, China automaker, BYD (01211:xhg) slid 0.6%. In A-shares, mining stocks, gas, electric equipment, and auto parts underperformed, CSI 300 -0.5%. Pinduoduo (PDD:xnas), a leading Chinese eCommerce platform listed on Nasdaq reported strong 2Q results, showing stronger than peer gross merchandise value growth and better-than-expected margin improvement. US dollar and especially USDCNH The US dollar tried higher, but failed to follow through as risk sentiment stabilized and US Treasury yields eased back lower. The USDCNH rate, however, continues to push toward the high of the cycle, trading near 6.92 this morning. EURUSD trades near parity this morning after natural gas prices fell sharply in Europe yesterday and despite ECB Chief Economist Lane arguing for steady rate increases (pushing back against the pricing of a possible 75 basis point move at next week’s ECB meeting). Incoming data this week will be critical for USD direction. JPY weakness to bring back pressure on Bank of Japan USDJPY is back to testing its record July highs despite little change in money market pricing of the Fed rate path following Powell’s hawkish speech at Jackson Hole. The peak Fed funds rate is still priced in at 3.8%, while some of the Fed speakers have started to suggest 4%+ levels that may be needed to combat inflation. This brings the September dot plot in focus, but we get the jobs and CPI data before that as well. Any further upward re-pricing of the Fed path, if resulting in gains in US 10-year yields, could very well take USDJPY to new highs with Japanese yields still remaining capped due to the Bank of Japan’s yield curve control policy. If, however, US data underwhelms, the room on the downside for USDJPY is tremendous. Crude oil prices (CLU2 & LCOV2) Crude oil prices saw their best day in six weeks amid threats of a decline in supply from OPEC and production outages in Libya. Brent futures rose above $105/barrel although some softening was seen in Asia overnight, while WTI rose to $97/barrel. This follows news from last week that Kazakhstan’s exports of crude may be impacted for months because of damage to its port facility. Meanwhile, negotiations between Iran and the US over the revival of the 2015 nuclear deal could drag on for weeks, easing fears of an imminent surge in supply. Pro Farmer tour see lowest US corn production since 2019 The just completed Pro Farmer tour across the US grain belt helped drive corn futures in Chicago to a two-month high on Monday after the tour saw the US corn crop at 13.76 bn bushels, below USDA forecasts for 14.36 billion bushels. Pro Farmer predicted a soybean crop of 4.54 billion, in line with the USDA’s latest forecast. Wheat, supported by corn’s rally, touched its highest since July 12 despite news that Ukraine agricultural exports could rise to 6.5 million ton in October, double the volume in August.  The soybean vs corn ratio needs to stay low (favouring corn) ahead of the South American planting season in order to persuade farmers there to plant more of the fertilizer intensive crop. US Treasuries (TLT, IEF) US treasury yields eased lower yesterday. An interesting paper presented at the Jackson Hole conference at the weekend suggests that the Fed will have a hard time delivering on quantitative tightening without causing harm to financial market functioning, which could mean less supply of treasuries from the Fed if its shies away from reducing its balance sheet at the previously touted pace of $95 billion/month. Otherwise, incoming US data is the focus through the August CPI release on September 13. What is going on? Shell CEO warns of prolonged European gas crisis Shell CEO Ben van Beurden gave comments from Norway’s ONS conference, suggesting that Europe could face gas shortages for a number of winters. This disproves reports suggesting that Europe has already built reserves for the winter demand and reaffirms our belief that a move to broad-based energy supply will continue to be top of mind in the long run. In the near term, demand destruction appears to be the only possible solution, and Van Beurden stressed the need for efficiency savings as well as rationing. ECB Lane dials back on jumbo rate hike expectations ECB chief economist Lane was on the wires on Monday and hinted at a steady pace of rate hikes in a “step-by-step” manner rather than jumbo rate hikes. This appears to be a pushback against calls for a 75bps rate hike at the September meeting, as he made the case to allow the financial system to absorb the rate changes. Moreover, on inflation, Lane said long-term inflation expectations remain close to the two per cent target, while near-term inflation expectations are quite elevated. BYD reported 1H earnings at the high end of the preannounced range Chinese automaker BYD (01211) reported 1H revenue up 66% y/y to RMB 151bn. In terms of segments, auto revenue surged 130% y/y while mobile handset revenues contracted 4.8% y/y. Net profits jumped 206% to RMB 3.6bn, at the top end of the preannounced range of RMB 2.8-3.6bn. Volume growth (353K new energy passenger vehicles in 2Q, +265% y/y) beating market expectations despite two rounds of price increases in 2022 and supply chain disruptions. The company’s EV market share rose to 29% (vs 17% in 2021). Pinduoduo delivered Q2 results showing stronger than peer sales growth Pinduoduo (PDD:xnas), a leading eCommerce platform with strong penetration into agricultural products and online shoppers from rural areas, reported 1H total revenue up 36% y/y, far exceeding the 3% y/y consensus estimate. The company attributed the revenue growth to a recovery in consumption since mid-May, successful promotion campaigns, and 48-hour daily necessity supply packs for people facing lockdown. The company’s strong market position in rural areas and agriculture-related products also help it stand out from its rivals. In Q2, the company achieved a 20 %-point improvement in margin, reaching 33.5%, but the management cautioned investors that the margin compression was attributed to temporary cost savings early in the quarter and spending had increased since mid-May. Non-GAAP EPS came in at RMB 7.54, +161% y/y. Shares in Uranium companies and other nuclear-related companies are back in the spotlight Japan has signaled its openness to more nuclear power, at the same time, Tesla founder Elon Musk has applauded uranium as an energy alternative, during an energy conference in Norway. Uranium stocks moved higher as a result on Monday in the US, which boosted the Global X Uranium ETF up 7%, to its highest level since June 8. Shares in the Asia-Pacific region followed. Australian stocks saw the most significant moves given the country has the largest uranium reserves globally. Australia’s Paladin rose 11%, Deep Yellow 15% and Boss Energy 10%, while Rio Tinto (which owns a deposit) rose over 1%. Japan’s Mitsubishi Heavy Industries and Tokyo Electric Power gained 3%. Companies to watch in Europe, include Yellow Cake and Kazatomprom. What are we watching next? August U.S. job report is out on Friday There should not be a major surprise. The economist consensus expects a 300,000 payrolls increase in August and a stable unemployment rate at 3.5 % - this is a five-decade low. If this is confirmed, it all points to a healthy labor market (despite the moderate pace of job increases). Today, the U.S. government will also release July data on vacancies and quits. Expect job openings to remain elevated, thus pointing to resilient demand for labor. These figures are unlikely to play a major role at the September FOMC meeting since it is well-known that labor market data are lagged indicators. Inflation remains the main point of concern, as mentioned by Fed Chair Jerome Powell last week at Jackson Hole Symposium. August EZ CPI will be painfully high The consensus expects a new increase of 9 % year-over-year when the data will be released on Wednesday. This should convince European Central Bank (ECB) policy makers to raise borrowing costs by a sizable increase on September 8. At Jackson Hole, ECB’s executive board member Isabel Schnabel indicated the central bank has no other choice but to act with ‘determination’. This is a matter of credibility. According to Bloomberg, traders now price a 50 % chance of a 75-basis points rate hike in September. Earnings to watch Today’s earnings focus is China are lithium miners Tianqi Lithium and Ganfeng Lithium as the growth in electric vehicles sales is putting enourmous pressure on availability of lithium and prices of lithium carbonate. Baidu is another Chinese earnings release to watch today as the company’s footprint in online advertising will give insights into economic activity. Later in the US, earnings to watch are Crowdstrike in the cyber security industry and HP in computing hardware. Today: Woodside Energy, ICBC, China Yangtze Power, Muyuan Foods, SF Holdings, Shaanxi Coal, Midea Group, Tianqi Lithium, Ganfeng Lithium, Bank of Montreal, China Construction Bank, Bank of China, Great Wall Motor, COSCO Shipping, Partners Group, Baidu, Crowdstrike, HP Wednesday: MongoDB, Brown-Forman, Veeva Systems Thursday: Pernod Ricard, Broadcom, Lululemon Athletica, Hormel Foods Friday: BNP Paribas Fortis Economic calendar highlights for today (times GMT) 0700 – Spain Flash Aug. CPI 0830 – UK Jul. Net Consumer Credit 0830 – UK Jul. Mortgage Approvals 0900 – Euro Zone Aug. Confidence Surveys 1115 – ECB's Vasle to speak 1200 – Hungary Rate Decision 1200 – US Fed’s Barkin (Non-voter) to speak 1200 – Germany Aug. Flash CPI 1300 – US Jun. S&P CoreLogic Home Price Index 1400 – US Aug. Consumer Confidence 1400 – US Jul. JOLTS Job Openings 1500 – US Fed’s Williams (voter) to speak 1600 – ECB Speakers Holzmann and others 2030 – API's Weekly Crude and Fuel Stock Report 0130 – China Aug. Manufacturing/Non-manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 30, 2022
Crude Oil Price:  A Crucial Event Takes Place In The Week Ahead

Brent Crude Oil, WTI, Dutch TTF Gas And Henry Hub Situation. Shortly Gains And Long-Time Situation

Kim Cramer Larsson Kim Cramer Larsson 30.08.2022 14:04
Brent Crude oil has broken above its short-term falling trendline and seems to start reversing the down trend trading around the 0.382 retracement level at USD104.38. Next key resistance is 110.67-112.32, the latter is the 0.618 retracement of the June-August Bearish move. A close above those levels 120-125 is in the cards.If Brent oil drops back below the falling trend line the uptrend is likely to be reversed. If closing below 98.14 it is reversed and 90 is likely to be tested. RSI is still below 60 and needs to close above to underline the uptrend. Source: Saxo Group On the weekly chart we can see that Brent Oil retraced 0.382 of the bullish trend since 2020. RSI is testing its falling trend line and a close above is an indication of Brent resuming its medium- to long-term uptrend Source: Saxo Group WTI Lights Sweet Crude oil that broke out of its falling trendline last week is now in a confirmed uptrend (higher highs and higher lows). However, RSI has not yet confirmed the trend by closing above 60. Resistance at around USD100.23. If buyers can lift WTI above that level the big test is can it move above 55 and 100 SMA’s. If that scenario plays out a move to 0.618 retracement at around 109.18 is likely.If WTI closes below 91.13 the downtrend is likely to resume Source: Saxo Group WTI only retraced around 0.236 of the 2020 extreme low (where WTI oil went to minus 40.32) till (so far) 2022 peak. RSI is still above i.e. in positive sentiment and could test its falling trend line with in a week or so.If WTI loses steam and closes below 85.41 a bearish move to 75.27 and even 65.25 could be seen. Source: Saxo Group Dutch TTF gas has peaked out a few Euros below previous peak at EUR345 – at least short-term - and has since retraced. A correction down to around 240 which is the 0.382 retracement level and a test of the short-term rising trendline is likely. However, a correction down to test the medium-term (black) rising trendline is not unlikely before uptrend quite possibly resumes.RSI is at the time of writing below its rising lower trend line but there is no divergence indicating we could see higher price levels in coming weeks. Source: Saxo Group Henry Hub Gas is having trouble closing above USD10 and could be set for a correction. If breaking the steep rising trendline and drops below 8.87 a correction down to 8.23 is likely but could spike down to around 7.68-7.55 key support.RSI is at the time of writing breaking below its rising trendline and if closing below it support the correction picture. However, there is no divergence on RSI indicating higher levels after a possible correction. Source: Saxo Group   Source: Technical Update - Oil breaking falling trendline, building uptrend. Gas rejected at previous peaks but higher prices are in the cards
In The Oil Market  Prices Are Rising Again And Gold Is Also Gaining

Gold Is Failing To Bounce Back, Crude Oil Prices Are Lower And Lower

Craig Erlam Craig Erlam 30.08.2022 16:14
Saudi Arabia reinforces support Oil prices are easing a little with Brent potentially settling around $100 and WTI a little below around $95. While there remain many moving parts in the oil market at the moment, the comments last week from Saudi Arabia have reinforced support below the current price. It seems OPEC+ isn’t interested in the oil price slipping much below $100 a barrel and while those warnings would be put to the test in the event of a nuclear deal, which still looks very challenging, or a global recession, the words alone could keep prices high for now. Gold failing to bounce back Gold continues to struggle in the aftermath of Powell’s comments on Friday, even though the dollar is falling on Tuesday and US yields are a little lower. The yellow metal continues to test $1,730 today, a sign that not all are on board with the recovery trade we’re seeing elsewhere. A significant break of $1,730 would be a real blow for gold, with the next area of notable support falling around $1,680-$1,700. A move back above $1,765 could get gold bulls excited once more but that may be easier said than done if trading over the last few sessions is anything to go by. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: Oil prices dip, gold under pressure
Risk Appetite Across Markets Taking A Hit After Fed Chair Powell's Hawkish Speech

Risk Appetite Across Markets Taking A Hit After Fed Chair Powell's Hawkish Speech

Ole Hansen Ole Hansen 31.08.2022 14:10
Summary:  Crude oil’s bounce from a six-month low has faded fast with risk appetite across markets taking a hit after Fed chair Powell's hawkish speech once again raised concerns that the central banks aggressive stance towards combatting runaway inflation will drive down growth and demand for crude oil and fuel products. In addition, the energy market has to deal with long liquidation into a low liquidity market, reduce gas-to-fuel focus as EU gas prices drop as well as Iraq, Libya and Iran developments. Crude oil’s bounce from a six-month low has faded fast following Friday’s hawkish message from Jerome Powell, the Federal Reserve Chairman, which once again raised concerns that the central banks aggressive stance towards combatting runaway inflation would mean lower growth and with that lower demand for crude oil and fuel products. The battle between these macro concerns continues to battle with micro developments, the majority of which still point to tightness during the coming months. In Europe, the gas and power crisis continue with punitively high prices attracting substitution demand into fuel products like diesel and heating oil. In the short-term the price of gas into the autumn month will continue to be dictated by Russian flows, and not least whether Gazprom (and Putin) as announced will resume flows on the Nord Stream 1 pipeline following the three-day maintenance shutdown that ends at 0100 GMT on September 3. Other developments currently impacting the market: China’s continued battle with Covid infections which is currently found in 31 provinces, and which has led to fresh curbs being implemented, among others in two of southern China’s most economically vibrant areas. Deadly turmoil in Baghdad after Moqtada Al-Sadr, a prominent cleric, decided to resign from politics, thereby deepening a political crisis that has left the country without a government since last October’s election. For now, the clashes have not spread to oil-rich area and exports from one of OPEC’s biggest producers remain uninterrupted. Clashes in Libya’s capital Tripoli over the weekend which left at least 32 people dead have raised risks of a civil war in Libya, a very volatile producer which has seen its output swing between 0.7 and 1.2 million barrels per day during the past year. On the supply side, the market will be watching the impact of the EU embargo on Russian oil which will begin impacting supply from December and the 180-million-barrel release, at a rate of one million barrel per day, from US Strategic Reserves that look set to run until October 21. In the following months the US government plans to buy back 60 million barrels, a decision that is likely to be delayed given the prolonged war in Ukraine. Finally, an Iran nuclear deal has yet to be reached, but if successful it could lead to millions of barrels of on and offshore stored oil being released into the market. WTI Crude Oil: Following Monday’s short squeeze the subsequent sell-off has forced recently established longs to reduce their exposure. Developments that from a technical perspective have opened the risk of a return towards key support around the mid-August low at $85.5/b. Source: Saxo Group Lack of liquidity and speculative positions being wrongfooted have both added to the latest gyration which saw the biggest jump in six weeks on Monday being  followed by a near 9% two-day drop. In the week to August 23, hedge funds added 80k lots of crude oil and fuel exposure, the biggest weekly increase since January, and the latest tumble may have forced many too hastily exit those recently established and now loss-making positions.            With the summer holiday driving season winding up we are seeing gasoline refinery margins trading sharply lower while demand for diesel as a substitute for expensive gas has supported diesel margins, both in the US and especially in Europe. However, since Friday’s peak in EU gas prices we have seen softer but still elevated margins there as well.              The weekly oil and fuel stock report from the US Energy Information Administration will be watched closely given its frequency and with that the ability to provide an up-to-date snapshot of the current supply and demand situation across crude oil and fuel. Last night the API reported a 600k barrels increase in oil stocks and a combined 5.1 million barrels drop in gasoline and distillates stocks. The report will also provide the EIA’s assessment of production, which has been adjusted lower for the past two weeks to 12 million barrels a day, and somewhat short of the EIA’s latest end of year forecast of 12.45 million. Crude and distillates exports will also be watched after the combined figure hit a record last week. As per usual I will post the charts and tables on Twitter once the report has been released at 14:30 GMT.               Source: Oil drops as hawkish Fed drives fresh demand concerns
The EU And The UK Want To Tackle Soaring Energy Prices, Bank Of England Has To Digest UK Jobs Market Data, Bitcoin's Decent Performance Ahead Of The US Inflation Data

Gas Crisis Is Not Enough For Europe, Is The Power Crisis Coming?

ING Economics ING Economics 03.09.2022 08:11
  While weaker oil prices in recent months have provided some relief to consumers, the same cannot be said for European natural gas. Gas prices have seen significant strength as fears over how Russian gas flows evolve only grow as we move closer towards heating season In this article Oil market more comfortable for now No respite for the natural gas market A perfect storm for power markets Oil market more comfortable for now Oil demand has disappointed so far this year. Higher prices helped lead to some demand destruction, evident when looking at US implied gasoline demand over the summer. However, the big drag on demand this year is China and its insistence on following its zero-Covid policy. There had been expectations that oil demand would bounce back following the easing of lockdowns in Shanghai and Beijing in towards the second half of the year. However, clearly, we continue to see restrictions across parts of China weighing on demand. Global oil demand is expected to grow by around 2MMbbls/day this year, which is quite a bit lower than the more than 3MMbbls/d growth expected at the start of 2022. Russian oil supply has held up better than expected and Russian oil exports are down only marginally from pre-war levels. This is despite a number of countries imposing sanctions on the country. Several buyers have taken advantage of the large discounts available for Russian oil. This is particularly the case for China and India, which have both increased their Russian purchases significantly. In addition, the EU ban on seaborne Russian oil and refined products only comes into full effect early next year, so we have not seen a significant drop in flows just yet, but this will obviously happen once the ban is in place. As a result of slower than expected demand growth and sticky Russian oil output, we expect that the oil market will be in surplus for the rest of this year and into early 2023.  Therefore, we have revised lower our oil forecast. We expect that ICE Brent will average US$97/bbl in 4Q22 vs. a previous forecast of US$125/bbl. And for 2023, we lowered our Brent forecast from US$99/bbl to US$97/bbl. Upside risks to this view are if Russian oil flows to the likes of China and India slow from current levels, US supply growth falls short of expectations and demand surprises to the upside - not impossible given that high natural gas prices could lead to some gas-to-oil switching. The key downside risk for the market is a positive outcome in Iranian nuclear negotiations. Discussions appear to be progressing well and a deal could see in the region of 1.3MMbbls/d of supply added to the market over the course of next year. Although, recent comments from the Saudi Energy minister about the possible need to reduce output, suggest that the floor for the market is not too much further below the recent lows. Russian oil exports holding up better than expected Russian oil exports (MMbbls/d) Source: IEA, ING Research No respite for the natural gas market The European natural gas market has seen significant strength over August, up more than 70% at one stage over the course of the month and hitting record levels (on a settlement basis). Concerns over Russian gas flows have only intensified after Gazprom made a surprise announcement that flows along Nord Stream will be stopped for three days for maintenance. The pipeline is only operating at about 20% of capacity right now and there are fears over whether flows will actually restart. Strong LNG inflows into Europe continue to ensure that storage fills up, despite lower Russian flows. European gas prices trade at a significant premium to Asian LNG, whilst the same trend is seen along the forward curve, which suggests strong LNG imports should continue through the winter. European storage is still filling up at a good pace and the EU has already hit its 80% storage capacity target ahead of the actual date of 1 November. However, if Russia were to end its gas flows to the EU completely, this would still leave the market extremely tight as we approach winter. We can expect some countries to continue increasing storage levels by as much as they can in the coming months despite that 80% target being reached.  Higher prices are already leading to a large amount of demand destruction. EU gas consumption over the first half of the year is down around 6% from the 5-year average for the same period. And this will fall further. In recent weeks, several metal smelters and fertilizer producers have announced further production cuts. If these higher prices are sustained, it is clear that we will see even further demand destruction, particularly as power/gas hedges expire for some industrials, leaving them exposed to higher spot prices. So, the strength of the market comes with increasing economic costs. The most recent strength in the gas market has not only been driven by Gazprom’s announcement regarding Nord Stream. The power market in Europe has also dragged natural gas prices higher. This is evident when looking at clean spark spreads, which have strengthened. Despite rallying gas prices, it is still profitable to burn gas as power prices are also sky high. This will not help lower gas demand from the power sector. It is clear that the gas market will remain extremely volatile in the coming months; not only is there uncertainty over Russian gas flows, but also around the demand outlook (in the absence of mandatory demand cuts). Low liquidity caused by volatility in markets has led to only further volatility. This is unlikely to change anytime soon and makes it near impossible to come up with sensible price forecasts. However, we believe that European gas prices will need to continue to trade at elevated levels so that the market can balance itself through the winter, by ensuring an adequate amount of demand destruction from industrials and households. EU hits 80% storage target early as demand comes under growing pressure Source: GIE, Eurostat, ING Research A perfect storm for power markets If a gas crisis were not enough for Europe, the region is also dealing with a broader power crisis. Yes, this is partly a result of what is going on in the gas market but there are a number of other factors which have helped to see power prices skyrocket. France has experienced prolonged periods of nuclear capacity outages. This is partly due to regular maintenance and refuelling, but reactors have also been taken offline due to more serious weld issues and signs of corrosion. Nuclear output now stands at around 25 GW as a result, well below levels of more than 40 GW seen in August last year. In addition, nuclear output is not helped by high water temperatures limiting the amount of cooling water that can be returned to waterways. Heat restrictions are expected to continue to depress nuclear output as river temperatures are forecast to remain above seasonal norms. France is now facing the highest power prices in Europe, while it used to have the lowest when nuclear power operated at full capacity. The distress in the French power market is also impacting Germany due to lower exports of electricity to the industry-rich southern part of the country. Forward prices for the winter recently reached €1,000/MWh as a result, but have come down strongly in the past days after the President of the European Commission, Ursula von der Leyen informed the market that the EC is working on “an emergency intervention and a structural reform of the electricity market”. Although details are not yet known, the announcement had a sizeable impact with winter prices now trading around €600/MWh. Europe’s hydropower market is also negatively impacted by severe droughts that limit replenishment and increase the evaporation of water reservoirs. Hydro stocks in France, Spain, Italy and Portugal are all below the 5-year average. Hydro stocks in the Nordics are still at decent levels historically. But countries are taking steps to preserve hydro reservoirs ahead of winter as fears of a long dry period mount. Norway for example is taking steps to limit electricity exports to the northern power markets on the European continent. And operators of hydropower plants have been told to preserve reservoir stocks. Finally, Rhine water levels are now below the record lows last seen in 2018. Water levels also came down much earlier in the year compared to 2018. As a result, some river-based coal plants are facing supply issues and cannot generate as they would like. All in all, record low nuclear power production, hydro stocks and Rhine water levels aggravate an already tight power market with power prices settling at all-time highs. This further fuels the gas market, as power plants continue to be profitable. Power prices have reached new highs this summer and Norway is now following the rest of Europe Base load power price in euro per MWh on a weekly basis Source: Refinitiv   Russia-Ukraine Power Crisis Oil Natural gas Electricity   Source: https://think.ing.com/articles/hold-for-monthly-energy-worries-intensify/?utm_campaign=September-01_hold-for-monthly-energy-worries-intensify&utm_medium=email&utm_source=emailing_article&M_BT=1124162492   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
What Is Going On Financial Markets Today? Russia Will Not Resume Deliveries Of Gas

What Is Going On Financial Markets Today? Russia Will Not Resume Deliveries Of Gas

Saxo Bank Saxo Bank 05.09.2022 10:57
Summary:  Markets were spooked late Friday by news that Russia would not resume gas flows through the Nord Stream 1 pipeline, pressuring the outlook for the European economy as governments grapple with soaring energy costs and scramble to cap prices and ration power to get through the upcoming winter. The euro weakened toward the cycle low versus the US dollar and equities tumbled. Today, US markets are closed for Labor Day.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities actually rallied on Friday in the wake of the US jobs report, likely as US treasury yields moved lower in the wake of the data after a recent march higher in yields that had clearly pressured equity market sentiment. But later in the session the Russian pipeline news in Europe spooked sentiment and equities reversed lower, trading not far from the lows of the cycle ahead of the three-day-weekend (no cash session today in the US due to Labor Day holiday). The focus in the S&P 500 is the key support just above 3,900, the last notable area ahead of the June lows, and similarly the Nasdaq 100 focus is on the recent 12,000 area lows. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China stocks retreated, Hang Seng Index -1.3%, CSI300 -0.4%. A Bloomberg report, citing people familiar with the matter, said that the Biden administration is considering to impose restrictions over US investments in Chinese technology companies. In addition, the U.S. Trade Representative said that it received requests from more than 350 American companies to plead for keeping the “Section 301” tariff on goods imported from China.  Chengdu, the largest city in western China, extended its pandemic control lockdown for another three days. BYD (01211:xhkg) fell 5.4% as exchange filing showed that Berkshire Hathaway sold 1.72 million BYD shares on Thursday, trimming its stake further down to 18.87% from 19.02% of BYD’s H-shares. August Caixin China Services PMI came in at 55.0, edging down slightly from 55.5 in July but above market expectations.  USD as outlook for Europe darkens further The US dollar traded in choppy fashion on Friday but was generally weakening as US treasury yields pushed lower in the wake of the US jobs data. But US yields were thrown from the driver’s seat in favour of risk sentiment, which soured badly on the news that Russia will not resume deliveries of gas through a key pipeline. The risk-off took EURUSD back lower and to new lows for the cycle today below 0.9900 as Europe suffers the fallout from the darkening outlook on energy/power that ECB rate tightening can do nothing to address. Elsewhere, GBPUSD plunged to a new low below 1.1500. Focus this week may intensify on China, as USDCNH held relatively steady last week but jumped to new highs today well above the former 6.93 high. JPY crosses as US treasury yields push lower USDJPY was capped after another run higher on Friday as US treasury yields pushed back lower after the US jobs report and then sharply lower still in reaction to the Russian pipeline news in Europe. But the USDJPY pair remains above the 140.00 level, elsewhere in JPY crosses, the drop in yield brought some more sustained relief for the JPY in the crosses as EURJPY reversed sharply back below 140.00 and even AUDJPY was capped after a poke toward the cycle highs on Friday. JPY crosses are likely to remain a proxy for global sovereign bond yields. EU gas and power prices open sharply higher ... after Gazprom on Friday announced the Nord Stream pipeline will remain shut indefinitely. While an oil leak at the last compressor unit still in operation was used as explanation, the surprise decision came shortly after the G7’s announcement to initiate a price cap on Russian oil. The energy war has therefore escalated further, and Europe look set to lose around 30 mcm/d or 4% of its gas supply. While storage levels across the Euro area have grown rapidly in recent weeks due to surging imports of LNG, the prospect for rationing and further initiatives to curb demand for gas and power prices will be the focus this week. In addition, demand destruction from soaring prices has already lowered demand, but more is needed, especially if the winter turns out to be a cold one. Dutch TTF gas (TTFMV2) down 37% to €215/MWh last week on assumption supply would return jumped by around 30% on the opening to trade around €280/MWh. Crude oil (CLV2 & LCOX2) Crude oil reversed higher on Friday following a three-day drop of close to 12 dollars, and the recovery has continued today and is being led by a 4% jump in diesel prices, both in New York (HEATINGOILOCT22) and Europe (GASOILUKSEP22) as the European energy crisis adds further support to gas-to-fuel switching activity. In addition, OPEC+ meets later today in is expected to make no change, but the market is wary following a recent Saudi comment about cutting supply to stabilize then falling prices. An in-theory price bearish G7 plan to cap prices on Russian oil could turn into a “bullish shock” according to Goldman Sach as Russia, just like it has done with gas, may halt shipments to Europe and other Nato buyers. Focus on today’s OPEC+ meeting, China lockdowns hurting demand, gas-to-fuel switch boost to diesel and Wednesday’s Short-Term Energy Outlook from the EIA. US Treasuries (TLT, IEF) The run-up in US treasury yields last week was reversed in the wake of the US jobs report Friday, perhaps as the report failed to show any new aggravated rise in earnings. The move lower was cemented by an ugly turn lower in risk sentiment in the wake of the Russian natural gas pipeline news. Still, it will take a move back below 3.10-3.00% in the US 10-year yield benchmark to suggest that this run up from the 2.50% area lows of early August is turning more firmly back lower. The upside focus is on 3.50%, should the 3.25% area sticky point of last week fall. What is going on? Russia announces it will not resume deliveries of natural gas through the Nord Stream I pipeline Russian sources claimed a leak was found in the pipeline, although Germany’s Siemens disputed that claim as it is fairly obvious that Russia is using natural gas deliveries as a tool of economic war.The news broke already on Friday and sent risk sentiment plunging across global markets, taking the EURUSD to new cycle lows on Monday below 0.9900 and sending longer yields lower globally. Moderate cooling of the U.S. labor market In August, the U.S. economy added 315k jobs, slightly more than expected, but the 2 prior months of data were revised over 100k lower. The average hourly earnings rose moderately at 0.3 % month-over-month (below the 0.4 % pace of the prior three months). On a yearly basis, the increase is stable at 5.2 %. The unemployment rate rose to 3.7 %, up from its 50-year low of 3.5 %, but this was on the somewhat positive rise in the participation rate (more people seeking work) as the Household Survey showed 442k more Americans were in work in August. Overall, this labor market report is not a source of major concern. It should not weigh much on the monetary policy decision of the FOMC in September. Many economists also pointed out the fact that the August payroll growth is usually subject to higher revision than any other month. Over the past five years, the first release has undershot the third by 119k, compared to an average undershoot of 23k for all months. Therefore, we should avoid over-interpreting past Friday’s figures. Commodity traders' response to Jackson Hole speech The Commitment of Traders (COT) Report on commodities covering the week to August 30 showed the initial response from hedge funds to Federal Reserve Chairman Powell’s hawkish speech at Jackson Hole. A speech that helped drive the dollar and bond yields higher, and the general risk appetite lower. All sectors except for grains and soft commodities were sold with selling concentrated in natural gas, WTI crude, gold, platinum, and livestock. The few exceptions were Brent crude, corn, sugar, and coffee. More in our weekly update, posted later today on www.analysis.saxo. Biden administration considering initiatives to restrict US investment in Chinese tech firms Bloomberg cites unnamed sources on this story, with limitations possibly set to come via executive order in the months ahead. After the recent move to limit NVidia exports of AI-related chips to China, the US Commerce Department may look to look to limit export of other AI tech. What are we watching next? Energy summit in EU on Friday EU leaders will powwow this Friday to discuss a cap on energy prices across EU countries to limit the disruptions from soaring and illiquid pricing markets, although given limits on generation capacity, much of them due to Russia’s cutting off of gas supplies - possibly semi-permanently in the case of the Nord Stream 1 pipeline – some sort of rationing plan may be required. See our Christopher Dembik’s look at the difficult choices Europe faces on this issue here.  RBA meets tonight – set to hike 50 basis points The RBA is set for a monthly meeting tonight and is widely expected to hike the policy rate 50 basis points at its fourth consecutive meeting, although this is not fully priced in. Besides the headline decision, there will be considerable focus on the bank’s forward guidance as the market anticipates that the RBA will soon decelerate the pace of rate hikes after Tuesday’s decision. Reaction in sterling as Liz Truss set to become next Prime Minister of the UK The UK Conservative party will announce the results of its leadership election today, with Liz Truss universally expected to win the vote and become Britain’s next prime minister. Truss has promised tax cuts and rapid action on the UK’s energy emergency, a combination that is likely to leave gaping new holes in the country’s balance sheet at a time when sterling is already collapsing. How will market’s great the next PM’s policy initiatives this week? Earnings to watch The earnings calendar is running light this week. The two earnings releases of importance for the week are DocuSign on Thursday and Dollar Stores on Friday. Tuesday: Ashtead Group Wednesday: People’s Insurance Co Group, Exor, Copart, NIO Thursday: Sun Hung Kai Properties, Sekisui House, Zscaler, DocuSign Friday: Dollar Stores, Kroger Economic calendar highlights for today (times GMT) US Markets Closed for Labor Day Holiday 0715-0800 – Eurozone Final Aug. Services PMI 0800 – Switzerland Weekly SNB Sight Deposits 1530 – UK Bank of England’s Catherine Mann to speak 2301 – UK Aug. BRC Sales Like-for-like 0430 – Australia RBA Cash Rate Target Announcement  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher
The EU And The UK Want To Tackle Soaring Energy Prices, Bank Of England Has To Digest UK Jobs Market Data, Bitcoin's Decent Performance Ahead Of The US Inflation Data

Energy: Natural Gas News Scares Markets, OPEC+ Meeting Takes Place Today!

ING Economics ING Economics 05.09.2022 14:59
There is plenty going on in energy markets at the moment, which should keep prices volatile . The market has largely ignored the G-7 agreeing to a Russian oil price cap, instead focus is on today’s OPEC+ meeting. In addition, supply concerns in the European natural gas market have grown once again, with Nord Stream gas flows not resuming Energy - OPEC+ likely to keep output targets unchanged G-7 nations agreed on a price cap for Russian oil at the end of last week. This is an idea that has been pushed for several months now by the US with the hope that it would offer some relief to the oil market. However, looking at the price action since the announcement (prices have moved higher), it is pretty clear that the market is not convinced that the cap will work. The idea of the cap is to allow buyers to access G-7 and EU insurance and shipping services for Russian oil, if the price is at or below the price cap. However, there are still a lot of obstacles and unknowns regarding the cap. Firstly, EU members will have to accept the proposal and changes will need to be made to the sanctions package. It could be difficult getting all member states to agree to this latest proposal. Secondly, and even if all EU members agree to the cap, G-7 nations need to ensure that buyers are willing to take part in the price cap plan to make it effective. This means that larger buyers such as China, India and Turkey would need to take part. There is no guarantee they will, particularly after Russia has said that it will not supply any country who follows the price cap. In addition, a big unknown is what price level the cap will be set at. It is pretty clear that it will need to be set above Russian production costs, otherwise there is little incentive for Russia to maintain production at current levels. Finally, monitoring and enforcing the price cap will be a significant challenge as well. While there is plenty of uncertainty over Russian flows, there is also quite a bit of uncertainty over OPEC+ output policy and what the group will decide today at its monthly meeting.  Previous comments from the Saudi energy minister suggested that the group may have to cut output due to a dislocation between the physical and paper markets. Several OPEC producers have since echoed these comments. However, we believe that OPEC+ will leave output targets unchanged for next month. It is difficult to justify cutting output when the market is trading near US$100/bbl. In addition, Russia is reportedly against cutting output as it sends the wrong signal to the market about the supply and demand picture. Furthermore, it would make more sense for OPEC+ to wait for further clarity on Iranian nuclear talks before taking any action. These talks appear to have taken a turn for the worse, with the US saying that Iran’s latest response was “not constructive’. Finally, we are likely to see further volatility in the European gas market this week. And this is after gas flows along the Nord Stream pipeline did not resume over the weekend, following maintenance. Gazprom claims that an oil leak at the Portovaya compressor station means that the Nord Stream pipeline will be fully shut down “until the operational defects in the equipment are eliminated”. Prior to last week’s maintenance, Nord Stream was operating at only 20% of capacity. The halting of flows means that Europe will lose close to 1bcm of natural gas supply per month. The market will now likely become increasingly nervous about flows via Ukraine as well as TurkStream. What is clear is that the more Russia reduces gas flows to Europe, the less leverage they have over Europe. Metals - more supply woes for aluminium While most industrial metals ended lower on Friday, LME aluminium managed to eke out a small gain due to persistent supply risks (especially from Europe and China as the power crisis lingers). As per the latest reports, Dutch aluminium smelter Aldel is going to suspend its remaining capacity due to high energy prices and a lack of government support. The smelter has an annual production capacity of 110kt for primary aluminium and 50kt for recycled aluminium. Meanwhile, there are some concerns that Yunnan province in China could see some similar power rationing to what has been seen in Sichuan province, due to lower hydro power output. Yunnan province is home to a large amount of aluminium smelting capacity, which stands at around 5.6mtpa, accounting for 12.7% of China’s total installed aluminium smelting capacity according to Shanghai Metals Market. Novelis Inc. joins the list of industrials trying to avoid exposure to Russian metal since the invasion of Ukraine. A new tender issued for 2023 supply to its European plants specifies that no metal of Russian origin would be allowed as part of any deal. Existing Novelis contracts won’t be affected by the new conditions and would allow the supply of Russian metal. The latest CFTC data shows that speculators increased their bearish bets in COMEX copper by 3,544 lots over the last reporting week, leaving them with a net short position of 8,312 lots as of last Tuesday. Moving to precious metals - speculators decreased their bullish bets in COMEX gold by 9,600, to leave them with a net long of 20,726 lots at the end of the last reporting week. Agriculture – speculative interest in corn remains high It was another week of strong buying interest from speculators in CBOT corn as adverse weather in the US and parts of Europe is keeping current crops in poor condition and is weighing on supply prospects. CFTC data shows that money managers increased net longs in CBOT corn by 39,251 lots over the last week, with them holding a net long of 221,467 lots as of 30 August. The move higher was predominantly driven by fresh longs, with the gross long position increasing by 30,446 lots.  Meanwhile, the managed money net long in CBOT soybeans fell by 2,670 lots over the week to 101,801 lots last week, whilst the managed money net short in CBOT wheat declined by 3,822 lots over the week, to leave net shorts at 22,247 lots. Ukraine has increased exports of agricultural products to around 5mt in August according to Ukraine’s Ministry of Infrastructure, which has been driven by a ramping up of shipments through sea ports. Ukraine reportedly shipped around 1.7mt of product through the three ports that opened after the Russia-Ukraine deal, around 1.6mt through the Danube port, and rest by rail and road . Ukraine aims to increase exports to around 8mt in September. Read this article on THINK TagsRussian oil price cap Russia-Ukraine OPEC+ Nord Stream Gazprom Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gas Tenders And Gazprom Is Ready To Discuss About The Supply

It's Said That Gazprom Could Compensate The Nord Stream 1 Shutdown By Rising Deliveries Via Ukraine

Craig Erlam Craig Erlam 05.09.2022 15:49
European stock markets are plunging at the start of the week following a day of mixed trade in Asia, with Gazprom’s announcement on Friday weighing heavily on the bloc. In the USA there is a bank holiday, Euro goes down as Nord Stream 1 is shut down A bank holiday in the US often results in relatively quiet trade everywhere else but that’s certainly not looking the case today. The decision not to restart gas flows via Nord Stream 1 after an oil leak was apparently discovered has created enormous uncertainty in Europe going into the winter. The euro slipped to a new 20-year low against the dollar in response to the shutdown. The decision conveniently came hours after the G7 agreed to an oil price cap and as countries announced they’re ahead of schedule in filling gas reserves. Many would argue it was only a matter of time until the decision was taken, with Europe having been squeezed over a number of months for one reason or another. There have been reports that Gazprom could increase deliveries via Ukraine as a result of the shutdown but it’s not clear whether this would be enough to offset the loss of Nord Stream 1. And considering Siemens has claimed that such a leak would not ordinarily affect the operation of a turbine and is easily fixed, you have to wonder whether Russia would actually take that decision. A painful winter lies ahead. A massive job for the incoming UK PM The UK will discover who its new Prime Minister will be today, with Liz Truss the standout favourite to win the run-off against Rishi Sunak. Whoever is victorious, the job facing them is enormous, with the economy facing a long recession and eye-watering inflation. Alleviating one while not exacerbating the other will be the first job for the incoming Prime Minister and it won’t be easy, to put it mildly. There’s a huge amount of pessimism around the UK at the moment, as evident by the pound, which looks on course to fall to its lowest level since 1985 against the dollar. Chinese headwinds strengthen China is also facing numerous headwinds going into the end of the year, with Covid once again creating huge uncertainty. Beijing’s commitment to its zero-Covid policy has created major challenges for the economy this year and with mass testing taking place over the weekend and lockdowns being extended in Chengdu, that’s going to persist. ​ The pressure is being felt in the yuan which fell for a sixth month in August and is continuing to fall against the dollar. That’s despite the best efforts of the PBOC which continues to set the yuan fix stronger than markets expect. To make matters worse, US President Biden is reportedly weighing up measures to limit US investment in Chinese tech firms. The US is becoming increasingly hawkish toward China and the latest move is another blow to its tech space. Major support being tested Bitcoin is continuing to show resilience around $20,000 but that’s really being put to the test as risk aversion sweeps through the markets once more. It’s down 1% so far today and trading a little below that crucial support level. A significant break at this point could be really damaging, with the following key level below here being the June lows around $17,500. Considering the outlook for risk appetite in the near term, it’s not looking good. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Risk aversion sweeps across Europe - MarketPulseMarketPulse
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

Crude Oil: What Is The Expected OPEC+ Decision On The Output?

Craig Erlam Craig Erlam 05.09.2022 16:02
OPEC+ meets after price cap announcement Today’s OPEC+ meeting has been somewhat overshadowed by all the talk of oil price caps and Nord Stream 1. The group is expected to leave output targets unchanged but it’s likely that a cut will be at least discussed which, if followed through on, would create more volatility and uncertainty at a time of considerable unease. The economic outlook and potential for a new nuclear deal have weighed on prices recently, much to the frustration of Saudi Arabia in particular. An output cut won’t make them any friends at a time when the world is facing a cost-of-living crisis already and the group has failed to keep up with demand this year. The more sensible option may be to hold this month and revisit in the future when there’s more clarity; something that is seriously lacking at this moment in time. ​ Gold holding up for now Gold is treading water at the start of the week even as the dollar rallies strongly once more. Traders are favouring the safety of the greenback this morning but that’s not damaging appeal for the yellow metal. It’s come under considerable pressure in recent weeks as yields have risen and the dollar has bounced back and it’s now trading around a key area of support, which may be why we’re seeing more resilience. While $1,700 looks like a psychological barrier, $1,680 is key. A break of that could signal further pressure on gold, especially if accompanied by more aggressive tightening from central banks. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil eyes OPEC and Nord Stream 1, gold steady - MarketPulseMarketPulse
The World’s Top Oil Exporter Expects Demand To Recover

Energy: OPEC+ Surprise To Markets And Its Meaning

ING Economics ING Economics 06.09.2022 08:14
OPEC+ members surprised the market yesterday by agreeing to cut their output target by 100Mbbls/d for October. However, given that OPEC+ has been producing well below production targets for some time now, the impact of this cut on actual supply is limited What was agreed? OPEC+ agreed to cut production in October by 100Mbbls/d, which would take production targets back to the same levels as in August. The group highlighted volatility and reduced liquidity in the market as justifications for the move by helping improve stability and ensuring that the market functions in an efficient manner. Given the volatility in the market coupled with plenty of uncertainty, OPEC+ has not ruled out further action if and when it is needed. Is a 100Mbbls/d cut really a 100Mbbls/d cut? While the headline number is for a 100Mbbls/d cut, in reality, the actual cut will be much smaller. It is important to remember that OPEC+ have failed to hit their production targets all year. In July, OPEC+ output was actually more than 2.7MMbbls/d below the target production. Most producers have not been able to hit their targets and are producing quite some distance below where they should be. It is only Saudi Arabia, the UAE and Kuwait that have been producing at or near their agreed output levels. Therefore, it will likely be only these producers that will need to reduce output by their share of the 100Mbbls/d. Combined, these three producers would need to reduce output by around 40Mbbls/d from September levels. What does this mean for the market? Fundamentally this changes little in our supply and demand balance, and we will be keeping our oil price forecasts unchanged for the remainder of this year and 2023. However, the action from OPEC+ does seem to confirm that the floor for Brent is not too far below US$90/bbl. And while little changes in the supply/demand balance, it does not send a great message to the US administration, which has been putting pressure on OPEC for much of the year to increase output more aggressively. Read this article on THINK TagsSaudi Arabia Russia-Ukraine OPEC+ Oil Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tech Stocks: Tesla Stock Price Supported By Earnings! Italy Is Experiencing Political Issues! Mario Draghi To Quit!

This Week's Tesla Stock Split Could Be The Best Moment To Buy The Stock! Twitter Stock Price Plunged!

Swissquote Bank Swissquote Bank 24.08.2022 11:27
The US dollar bounced lower, yesterday, following the weak economic data in the US, which showed that the new home slowed, and business contracted. The ugly PMI data also hammered the mood among the European stock traders, as well. The DAX already gave back half of summer gains. But, situation in the British FTSE 100 is different, as the FTSE 100 has a solid exposure to energy and mining stocks, and having exposure to energy stocks is still one of the most interesting hedging options. Crude Oil Price Speaking of oil, oil stocks were boosted again yesterday, by firmer oil prices after crude rebounded past the $93 level on news that OPEC could cut production as they feel that the prices fell too much over the past two months. Also, the latest API data came to support the oil and oil stock bulls, as the latest figures suggested another bigger-than-expected decline in the US oil inventories. We can now say that there are signs of a positive momentum building among the oil bulls despite the recession woes. The rebound in oil prices, along with the surge in nat gas futures could have two effects depending on the market’s actual mood. In one hand, the higher energy prices dampen the economic activity, and therefore could revive the Fed doves. But on the other hand, the rebound in energy prices boost inflation and inflation expectations, and therefore could keep the Fed hawks alert. Which scenario is more likely to influence the market pricing?   Watch the full episode to find out more! 0:00 Intro 0:34 Stocks under pressure as weak data couldn’t revive Fed hawks 1:38 DAX gave back half of summer gains on deepening energy crisis 3:22 But FTSE remains a good hedge against soaring energy 5:20 What does rebound in oil means for market pricing? 6:17 Hedge funds increase bets against S&P500 companies 7:44 Tesla’s 3-for-1 stock split is about to happen! 8:15 Twitter down 7% on whistle-blower complaint 8.57 What we will be watching today? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #market #selloff #Fed #JacksonHole #USD #EUR #DAX #FTSE #enegry #crisis #inflation #USD #EUR #crude #oil #natgas #energy #stocks #XOM #Chevron #BP #Tesla #stocksplit #Twitter #ElonMusk #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Crude Oil Inventories Decreased, What Make The Prices Go Up! Iranian Nuclear Deal Talks

Crude Oil Inventories Decreased, What Make The Prices Go Up! Iranian Nuclear Deal Talks

ING Economics ING Economics 25.08.2022 08:06
A large decline in US crude oil inventories has supported prices, while the market continues to wait for further detail on how Iranian nuclear talks are progressing Source: Flickr Energy- hefty US crude draw EIA numbers released yesterday were fairly constructive. US commercial crude oil inventories fell by 3.28MMbbls over the last week. However, when taking into account releases from the strategic petroleum reserve, total US crude oil inventories declined by a significant 11.37MMbbls. While crude oil exports fell by 823Mbbls/d over the week to 4.18MMbbls/d, these historically are still fairly strong flows. In fact, when looking at total oil and product exports over the week, they hit a record 11.08MMbbls/d, due to strong product exports. Gasoline inventories saw a marginal decline of 27Mbbls, while distillate fuel oil stocks fell by 662Mbbls. We are in a period where we should be seeing distillate stocks building. Instead, the gap to the 5-year average continues to grow. Total US distillate stocks are around 35MMbbls below the 5-year average. This tightness in middle distillates is something that we continue to see in all regions around the world. The one bearish factor from the EIA release was implied demand. Total implied demand for products fell by 1.88MMbbls/d over the week, while gasoline demand declined by 914Mbbls/d. There was further progress on the Iranian nuclear deal yesterday. The US finally replied to the EU’s proposal for reviving the deal. And while clearly, negotiations appear to be moving in the right direction, the US has said that “we’re not there yet” and that there are still “gaps” that remain. We are currently not assuming an increase in Iranian supply in our balance sheet, and so a deal would mean the need for us to make revisions to our current price forecasts. Metals – aluminium stocks jump higher LME aluminium yesterday gave up much of the gains made earlier in the day after a sudden jump in LME inventories was reported. The latest data from the LME shows that aluminium stocks jumped by 10.6kt - the largest daily increase since 10 February. The majority of the inflows were reported at Malaysia’s Port Klang warehouses. The latest monthly update from the International Copper and Study Group shows that the supply deficit for copper stood at 66kt in June, compared to a deficit of 34kt in the previous month. Over the first half of the year, the market was in a deficit of 72kt, compared to a deficit of 130kt during the same period last year. Global mine and refined production increased by 3%YoY and 3.2%YoY respectively, while overall apparent consumption over the same period grew by 2.7%YoY. Agriculture – grains benefit from adverse weather conditions CBOT grains have been trading firm this week as weather and crop reports from China and the US added to supply concerns. Weather reports show that China has witnessed severe heatwaves over the past few weeks which could negatively impact crop production for the current season. China’s National Meteorological Services warned again of high temperatures and drought in large parts of the country, with the government issuing notices to several provinces to use water resources conservatively. Similarly in the US, dry and hot weather was seen impacting corn yields, especially in the Midwest region. Read this article on THINK TagsIran nuclear deal Grains EIA Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Is The OPEC+ Decision Only Economic? Oil Is Caught Between Fears Of A Reduction In Demand

Is The OPEC+ Decision Only Economic? Oil Is Caught Between Fears Of A Reduction In Demand

InstaForex Analysis InstaForex Analysis 06.09.2022 11:56
What caused the first OPEC+ decision to cut production in more than a year? Why was the verdict so symbolic? 100,000 bpd is a negligible amount, especially given that the alliance has been producing about 3 million bpd below its quotas in recent months. Only because of Nigeria and Angola, it was missing 1 million bpd. Investors are scratching their heads over the outcome of the meeting of the cartel and its allies, which forces Brent to stabilize near the $95 per barrel mark. At first glance, the OPEC+ decision is purely economic in nature. Over the past three months, oil has lost about a quarter of its value. The West is going to restart the nuclear deal with Iran, which will increase the supply by more than 1 million barrels per day. Meanwhile, China's COVID-19 lockdown expansion has already reduced the country's apparent oil consumption by 9.7% in July and threatens global demand. The revenues of Saudi Arabia and other producing countries are falling, and a signal must be given to prevent further declines. The 100,000 bpd is ideal. Such a symbolic sum is reminiscent of a warning shot in the air. If the markets do not listen, it will be possible to shoot point-blank. On the other hand, politics may be involved in the OPEC+ verdict. Russia intends to take revenge on the West for sanctions, which it has already proved by first reducing the capacity of the Nord Stream to 20% and then completely ceasing to supply gas to Europe. It is more difficult with oil since the eurozone is less dependent on this raw material than on blue fuel. It easily replaced Moscow with the United States and Africa, and together with the United States, is making plans to punish the Russian Federation for its interference in the life of Ukraine. Dynamics of Russian oil flows The discussion by the G7 countries of the price ceiling mechanism for Russian oil also does not look like a good idea. Moscow is already reorienting its oil flows from West to East, and the creation of a cartel of European and American buyers, on the one hand, will accelerate this process, on the other hand, will challenge OPEC+. And the alliance can easily respond to what it hinted at by deciding to cut production. Without the backing of India and China, the G7's price flow plan doesn't look deadly, and Asian giants joining it is doubtful. Thus, oil is caught between fears of a reduction in demand from China and the EU and the intention of OPEC+ to support prices by reducing supply. Given the modest steps taken by the alliance, Brent is likely to continue to be under pressure. At the same time, consolidation in the range of $89.5–103.5 per barrel looks quite real. Technically, on the daily chart, the failure of the North Sea variety to break above the $97.2 pivot point, where the moving averages are also located, is a sign of bullish weakness. Only a successful test of this resistance will make it possible to buy oil. On the contrary, the fall of Brent below $92.7 is a reason for sales.   Relevance up to 09:00 2022-09-11 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320917
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

OPEC+ Switch To 100K Barrels Has Affected Brent Crude Oil Price

Craig Erlam Craig Erlam 06.09.2022 12:18
Brent steadies after OPEC+ boost Brent crude is a little lower today after seeing decent gains at the start of the week following the OPEC+ output announcement. The decision to reverse the 100,000 barrel per day increase in September was more symbolic than fundamentally significant, in that it doesn’t really change the dynamics in the market but it will make traders think twice about driving prices lower in the way they have recently. Read next: Interest rates hiked. The most important indicators continue their downward trend| FXMAG.COM The disturbing global economic outlook combined with the prospects for a nuclear deal between the US and Iran created a bearish case for oil prices, something that hasn’t been the case for much of the year. But the cartel has sought to quash that quickly by not just signalling a willingness to cut output but also leaving the door open to emergency meetings in order to address market volatility. In other words, if the market tries to drive the price much lower again, or the fundamentals change, the group will cut again and it won’t wait until 5 October. As far as Brent is concerned, that may have reinforced support around $90, with the group clearly favouring a price closer to $100. It will be interesting to see if the market tries to test the group’s resolve again or if this initial warning shot will prove enough. Recovering but for how long? Gold is enjoying a bit more of a recovery today, this time aided by a pullback in the US dollar. The greenback has been a strong headwind for the yellow metal and, along with rising yields, has driven it back towards $1,680 where it has once again run into firm support. While some may be encouraged by the rebound we’ve seen, I wonder how much appetite there’ll actually be for a significant and sustainable rebound. We’re seeing it face its first test now around $1,730 which until recently was a key area of support. If it overcomes this, further resistance could be found around $1,750-1,760 which would be a big test. A move above here could inspire some optimism but in this environment, that will be easier said than done. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Brent edges lower after OPEC, gold rises - MarketPulseMarketPulse
Forex: Finally Bank Of Japan (BoJ) Intervened! Euro: Could Today's Speeches Support Euro?

EUR/USD Is Vigilant To The Highly Awaited Jerome Powell's (Fed) Speech. Rise Of Monthly Bond Sales Could Make Stock Market Decrease By Over 20%!

Alexander Boltyan Alexander Boltyan 06.09.2022 14:21
The head of the Federal Reserve (Fed) Jerome Powell is expected to deliver a speech on Friday at Jackson Hole annual symposium. Investors are completely focused on Powell’s testimony mostly ignoring incoming macroeconomic data. However, some economic data was a matter of concern. Shocking PMI Prints PMI indexes in the United States and in some other countries came out shocking as Services PMI in the U.S. dropped in august to 44.1 points, while Production PMI in the United Kingdom fell to 46.0 points. The3se are worst reading since 2020. PMI’s in other countries with a minor exclusion are pointing to a global economic slowdown. Some positive tunes were brought by the Q2 2022 second GDP estimate in the U.S. and Germany. Estimates were upgraded to -0.6% from the previous -0.8% in America and to 0.1% from 0.0% in Germany. This could hardly comfort investors, but together with lower Initial Jobless Claims in the U.S. it leveled up the market before the weekend. Read next: Interest rates hiked. The most important indicators continue their downward trend| FXMAG.COM Stock Market Could Plunge! S&P broad market index lost around 2% this week. Major investment houses are warning its clients that a rise of monthly bond sales by the Fed to $95 billion in September would plunge the stock market by another 25-30%. Technical picture of the S&P 500 index demonstrates a downside patter of the index with primary target at 3900-4000 point. The U.S. stock market benchmark fell below the support at 4220 points close to the gap of the beginning of this week. It is quite possible this gap could be closed after Powell’s testimony. . During two previous week short positions for the 70% of targeted amount for S&P 500 index were opened at the average price at 4285-4290 points. The rest of the targeted volume would be used once new technical signals would emerge. The target area is located at 2100-2300 points that is expected to be reached by the end of 2022. Technical Analysis Suggest Brent Crude Oil Could Even Hit $50-60 Oil market is short of time to active an upside scenario with targets at $135-145 per barrel of Brent crude benchmark. There are no triggers for such a scenario to become real at the moment. Moreover, if Brent prices would close this week below $106 per barrel an aggressive downside formation could pressure prices to $75-85 per barrel, and even to the extreme targets at $50-60 per barrel by the end of November. So, the Powell’s speech at Jackson Hole could be the last chance for bulls to avoid this scenario. What Are Gold's Downisde Targets? Gold prices slightly rebounded from the support at $1700-1730 per troy ounce to $1760. However, it does not change much as the decision to open short positions has to be made in the first half of September either from $1800-1820 per ounce, or after prices drop below the support at $1700-1730. Both scenarios have downside targets at $1350-1450 per ounce.  Powell's Can Make EUR/USD Go Much Below Parity! EURUSD met its primary target at 0.99500-1.00500, and has missed a chance for a rebound. The pair is likely to continue diving deep below after it tested 0.99500 support level several times this week. Next week the euro may fell to 0.98500 is Powell’s speech would be disappointing. GBP/USD - It Seems It's Not The Best Moment To Start GBPUSD continues aggressive downside with the completed primary target at 1.18000-1.19000 with the remaining secondary targets at 1.15000-1.16000 that are becoming more as the Euro goes down. However, there are no good entry points to open any trade positions so far. Read next: ECB Will Continue To Hike Rates To Slow Inflation? | FXMAG.COM
Gas Tenders And Gazprom Is Ready To Discuss About The Supply

Gas Supplies To Europe Via The Nord Stream 1 Pipeline Will Not Resume In Full. Gold And Silver Trades Higher

Saxo Bank Saxo Bank 06.09.2022 09:57
Summary:  Markets poked around with little conviction yesterday as US markets were closed for Labor Day. Overnight, the JPY dropped to new lows versus the US dollar and weakened broadly even as global bond yields bounced around in a range, a sign of mounting pressure on the Bank of Japan to abandon its policy of capping bond yields. In Europe, the focus this week is on plans to cap gas and power prices and new UK Prime Minister Liz Truss has announced a 130 GBP billion plan to deal with soaring energy costs - more than 5% of UK GDP.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are trying to find some stabilisation in the short-term trading higher this morning at around the 3,935 level with the 3,903 being the key level to watch on the downside. The US 10-year yield is still seeing upward momentum sitting at 3.24% this morning and consensus is slowly moving on ECB in favour of significant tightening to reign in inflationary pressures in the economy. Today’s ISM Services print for August is the key macro figure to watch today. A negative surprise in the US services sector could be a positive for equities as it could cool inflation expectations and longer-term US yields. EURUSD and USD outlook for Europe moves to cap energy prices With the US out on holiday yesterday, the US dollar backed off a bit, not including the move in the Japanese yen to new cycle lows, which is more about the BoJ’s reluctance to change policy (more below). The greenback is at a technically pivotal spot here in EURUSD (trying but so far failing to separate from parity after posting a marginal new low in the wake of the as Europe attempts its move against soaring energy prices, which will require some energy rationing and therewith a reduction in real GDP even if successful and as the ECB scrambles to gain credibility in its fight against inflation, with expectations for the policy rate through the December ECB meeting rising nearly 70 basis points since mid-August. JPY crosses suggest mounting pressure on Bank of Japan USDJPY has rallied to new 24-year highs overnight, trading nearly 141.00 this morning, even as US long treasury yields remain a few basis points below their recent peak, suggesting that the market is set to challenge the Bank of Japan policy of capping yields. A Bank of Japan that continues to hold the line on capping yields could create a pressure cooker of a situation on the yen and tremendous volatility, particularly if US 10-year treasury yields continue back higher toward the 3.50% peak from June. The next important economic data points for the US are today’s ISM Services survey for August and Monday’s August CPI. EU gas and power EU gas and power market rallied on Monday following Putin's decision to further weaponize its energy supplies to Europe by closing Nord Stream 1. However, the sense it can hardly get much worse saw the market turn its attention to the EU and Friday’s energy summit where proposals to mitigate Russia’s hostile actions will be discussed. After surging to €290/MWh on the opening, the Dutch TTF benchmark gas contract ended the day at €245/MWh, up 14% and well below the €350 peak seen when the Nord Stream 1 maintenance was announced. German year ahead power closed at €570 after failing to get anywhere near the panic peak above €1000 seen last Monday, an indication the market is looking for a new pricing structure and speculators worrying about the derivative market being shut down for a period. Crude oil (CLV2 & LCOX2) Crude oil rallied on Monday after the OPEC+ group of producers in a surprise move took away the token 100k b/d production increase that was added last month in response to lobbying from the US President. Additional action to keep prices stable (read supported above $90) could be enacted at short notice, the group said. Other developments traders must deal with is the prospect of an unlikely revival of the Iran nuclear deal until after the November US Midterm elections, further lockdowns in China hurting demand, and a deepening energy crisis in Europe where punitively high gas prices will likely support demand for refined products such as diesel and heating oil. The EIA will publish its monthly Short-Term Energy Outlook on Wednesday. Brent is currently stuck between support at $91.50 and the 21-day moving average, last at $97.15. Gold and silver Gold and silver trades higher supported by selling fatigue and short covering following last week’s rout, especially silver that was dragged down by copper’s slump on China growth concerns. All three metals have, however, managed to find a bid but the question remains how much further they can recover without the support from a weaker dollar and yields pausing following their recent ascent. Copper needs to hold support at $3.38/lb, the 61.8% retracement of the July to August bounce while silver needs a solid break above $18.40 and gold above $1728/oz. US Treasuries (TLT, IEF) The dip in US treasury yields from Friday has so far proven a one-day affairs as yields have rebounded slightly ahead of the next important couple of important US macro data points, the August. SM Services survey today and the August CPI data on Monday. Technically, the remainder of the range from 3.25% to 3.50% in the US 10-year treasury benchmark is critical for whether rising global yields once again become the market’s primary focus. What is going on? Liz Truss won the contest to become the next UK Prime Minister Her promises range from quick action on energy security to alleviating the cost-of-living crisis for the hardest hit by price rises, all while cutting corporate and other taxes. She has announced a GBP 130 billion plan to freeze energy bills, which is around 5% of currently rapidly rising nominal UK GDP and a recipe for ballooning fiscal deficits, an issue that is already an ingredient in sterling’s steep fall this year, so an even steeper recession is in the wings. This could come either from a drop in real GDP due to soaring inflation aggravated by further sterling declines or as demand is crushed by a steep recession due to the need for the Bank of England to accelerate its pace of rate hikes or more likely a combination of the two. Longer term, investments in fracking shale gas and new North Sea exploration could pay dividends. For the moment, sterling is enjoying a modest relief rally. Russia makes a clear case of weaponizing gas supplies While the Kremlin had earlier said that they were halting gas supplies on Nord Stream 1 for a technical fault, it has now clearly stated that gas supplies to Europe via the Nord Stream 1 pipeline will not resume in full until the “collective west” lifts sanctions against Moscow over its invasion of Ukraine. Russia is still supplying gas to Europe via Soviet-era pipelines through Ukraine that have remained open despite the invasion, as well as the South Stream pipeline via Turkey. But supplies along the northern pipeline routes, including Nord Stream 1 and the pipelines through Ukraine, have fallen by more than 90% since September last year. Higher supplies from Norway, the UK, north Africa and increased imports of LNG have helped to an extent offset the loss of Russian supplies. PBOC cuts currency deposit reserve requirement ratio by 200 bps The PBoC announced that the central bank is cutting the reserve requirement ratio for foreign exchange deposits (the “FX RRR”) to 6% from 8%, effective September 15. The cut is expected to release about USD 19bn (2% of the USD 954bn FX deposits outstanding) in FX liquidity for banks to make loans in foreign currencies. The PBoC last cut the FX RRR to 8% from 9% on 15 May, to send a signal to the market to put a pause to the depreciation of the USDCNY which had weakened from 6.40 to 6.80 in one month (15 April to 13 May). After the surge of the USDCNY from 6.75 to above 6.90 in about half a month since 15 Aug, the PBoC apparently wants to send a signal again to the market to slow the speed of the renminbi depreciation against the USD. OPEC+ announced a production cut of 100k bpd A token cut by OPEC+ last night of 100k barrels per day just reverses the output increase agreed to last month. The decision was ‘symbolic’, with the new quotas taking effect in October. The amount is significantly small compared to a 100 million bpd market but it shows that OPEC+ wants to set a floor near $100/barrel in Brent. Saudi Arabian oil minister Prince Abdulaziz bin Salman had warned last week that a cut was a possibility given what he said was a disconnect between financial and physical oil markets. Newcastle Coal futures price hits a new record high As Europe is facing an energy crisis this winter, it will need to increase energy imports. The UK is already importing Australian LNG. In anticipation of such a scenario, this might explain why the Australia coal price trades at a record, along with the futures price. The Australian energy supply is already likely to run low in 2023, meaning inflation will continue to worsen and for coal companies, their earnings and free cash flow will likely increase. Australia’s hikes 50 basis points as expected, says it is not on a pre-determined route from here. The property sector is already struggling to absorb the hikes already in the bag from this cycle, so we will be watching signs of further strain in the banking sector, along with property stocks and property ETFs, given Australia’s private debt to GDP is one of the highest in the world. What are we watching next? Explosion in JPY volatility ahead? It appears that the market is ready to challenge the Bank of Japan more directly again on its yield-curve-control policy as the entire developed market complex ex-Japan has been marked to continue tightening policy, while the Bank of Japan tries to remain an unmovable object, and this is without a notable further jump in the important longer yields . Even GBPJPY is tearing higher this morning as sterling catchs a bit of a relief rally in the wake of PM LIz Truss’ arrival on the scene. US August ISM Services vs. S&P Global Aug. Services PMI – which shows the true state of US Services economy? Already in July, there was a significant contrast between the two surveys, with the S&P Global survey suggesting that the US services sector is in contraction, with a reading of 47.3, a number that dropped to 44.1 for the preliminary August release of the survey. Meanwhile, The July ISM Services survey surprised to the upside with a strong 56.7 reading in July and the August release later today is expected in at 55.4. Which is correct? Australian economic growth data in focus Australian economic growth is expected to show 1.2% growth q/q in the second quarter and 3.8% y/y. Second quarter GDP will likely get a boost from record retail sales, and a pickup in overseas travel. However, construction costs and hampered residential construction activity could weigh on the headline GDP figure. Earnings to watch While the earnings release date for NIO has been moved around multiple times it should be final now so tomorrow one of China’s largest EV-makers will report Q2 earnings. Investors will focus on the Q3 outlook for revenue growth and margins in order to gauge when NIO can break even on its operations. Today: Ashtead Group Wednesday: People’s Insurance Co Group, Exor, Copart, NIO Thursday: Sun Hung Kai Properties, Sekisui House, Zscaler, DocuSign Friday: Dollar Stores, Kroger Economic calendar highlights for today (times GMT) 0830 – UK Aug. Construction PMI 1345 – US Aug. S&P Global Services PMI 1400 – US Aug. ISM Services 2105 – New Zealand RBNZ’s Silk to speak 0130 – Australia Q2 GDP Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-6-2022-06092022
Oil Is An Indicator Of The Health Of The Global Economy

Liz Truss As The New Party Leader. OPEC+ And Production Cut

Saxo Bank Saxo Bank 06.09.2022 09:50
Summary:  While the US markets were closed overnight for Labor Day, the futures this morning in Asia are indicating some respite after weeks of red. The US dollar was also softer in early Asian hours, while the focus remains on the European energy crisis and the EU emergency meeting scheduled for Friday. A token cut by OPEC+ and diminishing hope of a revival of the Iran nuclear deal supported oil prices, although China’s tightening restrictions continue to pose demand concerns. Sterling made a sharp recovery after new UK PM Liz Truss announced plans to freeze energy bills, easing some short-term concerns. Consensus expects another 50 basis points rate hike from Reserve Bank of Australia today, and US ISM services will be on the radar later. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. stock markets were closed for Labor Day. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The treasury market was closed for Labor Day. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng TECH Index (HSTECH.I) plunged 1.9% as a Bloomberg story, citing people familiar with the matter, said that the Biden administration is considering imposing restrictions on US investments in Chinese technology companies, Bilibili (09626:xhkg) -3.2%, JD.COM (09618:xhkg) -3.0%, Tencent (00700:xhkg) -2.9%, Alibaba (09988:xhkg) -2.4%. Hang Seng Index fell 1.2%. Chengdu, the largest city in western China, extended its pandemic control lockdown for another three days. The spread of Covid-19 cases and pandemic control measures fueled risk-off sentiment in the market.  Over the weekend, the U.S. Trade Representative said that it received requests from more than 350 American companies to plead for keeping the “Section 301” tariff on goods imported from China, and the Biden administration will remain in place during the review. BYD (01211:xhkg) fell 5.9%, as exchange filing showed that Berkshire Hathaway continued to off-load its stake in BYD.  Other car makers lost as well, Geely (00175) -7%, NIO -6,9, Li Auto 02.3(August).  Thermal coal prices surged in China, following the news that Russia’s Gazprom suspended the supply of natural gas to Germany on the Nord Stream pipeline.  Share prices of coal miners gained, Yancoal Australia (03668:xhkg) +6.6%, Yankuan (01171:xhkg) +12.2%, China Coal (01898:xhkg) +8.3%.  Caixin China Services PMI came in at 55.0, edging down slightly from 55.5 in July but above market expectations. CSI300 spent the day in range-bound trading.  GBPUSD falls to fresh lows, EUR in focus this week The USD lost some ground early in Asia on Tuesday with GBPUSD making the most gains to rise towards 1.1600 as the appointment of new Prime Minister and her plan to freeze energy bills spelled some short-term relief. EURUSD saw a brief drop to 20-year lows below 0.99 yesterday but rose back to 0.9960+ levels in early Asian trading. EURGBP seen sliding slower to 0.8600 but downside may be limited if ECB decides to go for a 75bps rate hike today. But the energy situation and the EU summit on Friday certainly garners more attention with some tough decision ahead. USDJPY retreated from Friday’s 24-year highs of 140.80 to 140.30-levels with Japan’s household spending underperforming expectations at 3.4% y/y vs. expectations of 4.6% y/y. Wage pressures, which remain a key focus for Bank of Japan, also eased with labor cash earnings up 1.8% y/y from last month’s 2.0% y/y. Crude oil prices (CLU2 & LCOV2) Crude oil prices rose on Monday as OPEC+ announced an output cut of 100k bpd in October (more details below). The intention appears to be to keep Brent prices capped at $100/barrels. WTI futures rose to $89/barrel while Brent was above $95/barrel. Price action was also supported by a diminishing hope of a revival of the Iran nuclear deal. US and Iranian positions have diverged in recent days, and it is now expected that the negotiations could stretch beyond the US midterm elections in November. Still, it is key to watch the demand concerns picking up as well, particularly as China lockdowns were extended and will likely remain strict ahead of the CCP meeting on October 16. What to consider? OPEC+ announced a production cut by 100k bpd A token cut by OPEC+ last night of 100k barrels per day just reverses the output increase agreed to last month. The decision was ‘symbolic’, with the new quotas taking effect for October. The amount is significantly small compared to a 100 million bpd market but it shows that OPEC+ wants to set a floor near $100/barrel in Brent. Saudi Arabian oil minister Prince Abdulaziz bin Salman had warned last week that a cut was a possibility given what he said was a disconnect between financial and physical oil markets. The RBA meets today, and is expected to raise rates to 2.35% regardless of the property market struggling Consensus expects the RBA to hike rates by 0.5% which will take Australia’s official interest rate to 2.35%. That will be the highest rate since 2015. However, interest rates futures are pricing in a smaller hike, of just 0.4%. The RBA will likely then proceed to rise rates over the rest of 2022 and then continue to rise rates into the 2023, in a bid to stave off inflation. The issue is, the RBA only has one tool to fight inflation, which is rising rates. But the property market is already struggling to absorb the 1.75% in hikes from May, with property prices falling at their quickest pace since the 80s and construction seeing its biggest decline since 2016. This has seen banks margins (profits) be squeezed, and they face a further squeeze. Why? Australia has one of the highest debt levels in the world (Debt to GPD is 126%). So if the RBA keeps rising rates to slow inflation, it could cause a credit issue and debt to income levels are at risk of hitting GFC highs. RBA outcomes for investors, traders and the macro landscape We highlighted sectors to watch and why yesterday in the Saxo Spotlight. That's worth a quick read. Today, we will be watching what the RBA estimates inflation to be, at the end of the year, remembering the RBA previously said it expects inflation to peak at under 8%. But consider, we traditionally see peak energy (coal) demand later this year, which is likely to support coal prices higher. As such, we think the RBA will rise its inflation target and may allude to commentary about keeping rates higher. For investors and traders, we will be watching energy stocks, which will likely get extra bids today and see momentum rise (not only because of the energy crisis in Europe), but also because Australian energy prices (coal) remains supported, with Australian energy reserves expected to also run out next year. For traders, the currency pair that we are watching is the AUDEUR for an extension to the upside, on the basis that Europe will need to increase energy imports and its balance of trade will likely continue to worsen, vs the Australian balance of trade, likely to hit another record high, with Australian LNG and coal exports to see a lift in demand.    PBOC cuts FX deposit reserve requirement ratio by 200 bps to restrain yuan weakness The PBoC announced that the central bank is cutting the reserve requirement ratio for foreign exchange deposits (the “FX RRR”) to 6% from 8%, effective September 15.  The cut is expected to release about USD19 billion (2% of the USD954 billion FX deposits outstanding) in FX liquidity for banks to make loans in foreign currencies.   The PBoC last cut the FX RRR to 8% from 9% on May 15, in an attempt to send a signal to the market to put a pause to the depreciation of the USDCNY which had weakened from 6.40 to 6.80 in one month (April 15 to May 13, 2022).  After the surge of the USDCNY from 6.75 to above 6.90 in about half a month since Aug 15, the PBoC apparently wants to send a signal again to the market to slow the speed of the renminbi depreciation against the U.S. dollar. Liz Truss won the contest to become the next UK Prime Minister In the UK, the Conservative party has voted for Liz Truss as the new party leader, making her the UK’s next Prime Minister. Her promises range from quick action on energy security to alleviating the cost-of-living crisis for the hardest hit by price rises, all while cutting corporate and other taxes. She has announced a GBP 130bn plan to freeze energy bills, a recipe for ballooning fiscal deficits, an issue that is already an ingredient in sterling’s steep fall this year, so an even steeper recession is in the wings. This could come either from a drop in real GDP due to soaring inflation aggravated by further sterling declines or as demand is crushed by a steep recession due to the need for the Bank of England to accelerate its pace of rate hikes or more likely a combination of the two. Longer term, investments in fracking shale gas and new North Sea exploration could pay dividends. Russia makes a clear case of weaponizing gas supplies While the Kremlin had earlier said that they were halting gas supplies on Nord Stream 1 for a technical fault, it has now clearly said that gas supplies to Europe via the Nord Stream 1 pipeline will not resume in full until the “collective west” lifts sanctions against Moscow over its invasion of Ukraine. Russia is still supplying gas to Europe via Soviet-era pipelines through Ukraine that have remained open despite the invasion, as well as the South Stream pipeline via Turkey. But supplies along the northern pipeline routes, including Nord Stream 1 and the pipelines through Ukraine, have fallen by more than 90% since September last year. Higher supplies from Norway, the UK, north Africa and increased imports of LNG have helped to an extent offset the loss of Russian supplies. Energy summit in EU on Friday EU leaders will meet this Friday to discuss a cap on energy prices across EU countries to limit the disruptions from soaring and illiquid pricing markets, although given limits on generation capacity, much of them due to Russia’s cutting off of gas supplies - possibly semi-permanently in the case of the Nord Stream 1 pipeline – some sort of rationing plan may be required. See our colleague Christopher Dembik’s piece on at the difficult choices Europe faces on this issue here. US ISM services PMI due today With the services sector of the US economy slowing, there are expectations of a slight retreat in August US ISM services, but it should still remain above the 50-mark which differentiates between expansion and contraction. The S&P services PMI for August had also shown a slight decline to 44.1, with the payroll data hinting at still-strong labor market conditions in the services economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-6-sept-2022-06092022
Energy Crisis May Be Too Much For UK Economics, Australian Dollar (AUD) Loses As Risk Is Reduced

Energy Crisis May Be Too Much For UK Economics, Australian Dollar (AUD) Loses As Risk Is Reduced

Jing Ren Jing Ren 07.09.2022 08:27
AUDUSD struggles for bids The Australian dollar takes a hit as risk appetite continues to recede across markets despite the RBA’s 50bp hike. A bearish MA cross on the daily chart shows a deterioration in sentiment. A fall below the demand zone near 0.6800 has left the aussie vulnerable. A lack of buying interest may send the pair to the recent lows around 0.6680, which is a critical floor to keep the price afloat in the medium-term. 0.6830 is a fresh hurdle but rebounds have so far been opportunities to sell at a better price. USOIL tests critical floor WTI crude weakens due to lingering concerns over demand. The recent bounce has failed to clear the daily resistance at 109.00, given back all its gains instead by retesting the base at 91.50. As sentiment remains pessimistic, the path of least resistance might still be down. A bearish breakout would force the bulls to bail out and attract momentum sellers, exacerbating volatility in the process. A drop below the psychological level of 90.00 could extend losses beyond 85.00. A recovery may be brief with 97.20 as the first resistance.   UK 100 in limited recovery The FTSE 100 struggles as the UK's finances might over-stretch with the energy crisis. On the daily chart, the index is going sideways between two boundaries 7000 and 7640. A breakout on either side would dictate the next direction in the weeks to come. In the meantime, range trading could be the name of the game. The short-term recovery is heading up to 7380, but 7480 from a faded bounce could be a tough level to crack. On the downside, 7180 is the immediate support and 7050 a major level to test the bulls’ resolve.
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

OPEC+ Plan For October Assumes Reduced Supply, Europe Considers Gas Price Cap

ING Economics ING Economics 07.09.2022 08:54
Oil prices came under further pressure yesterday, despite OPEC+ agreeing on a small supply cut for October. Meanwhile, supply disruption in the metals market continues to grow, with further aluminium supply cuts in Europe due to high energy prices Source: Shutterstock Energy- OPEC+ cut does little to support the market The decision by OPEC+ to cut output by 100Mbbls/d over October does not appear to have had the intended impact on the market. Instead, Brent settled a little over 3% lower yesterday. And this pressure has continued in early morning trading in Asia today. As we wrote yesterday, while on paper the cut is small, in reality, it is even smaller, given that most OPEC+ members are already producing below their target production for October. If this downward pressure continues we cannot rule out OPEC+ holding an emergency meeting, which they have made very clear could happen if necessary. The Saudis released their official selling prices (OSP) for October and there were some fairly large cuts for Asia and Europe. Arab Light into Asia was lowered by US$3.95/bbl MoM to US$5.85/bbl over the benchmark. Expectations were for an even larger reduction, given the narrowing that has been seen in the Brent/Dubai spread. All other grades into Asia also saw reductions, whilst all grades into Europe were also cut. It seems that Europe is moving closer toward a gas price cap, as Russia continues to reduce gas flows to the region. According to reports, the European Commission is looking at options including a price cap on gas imported from Russia and a country-by-country cap system, which would depend on a country's energy mix. While price caps may offer some much-needed relief in terms of prices, it will do little to help balance the market through demand destruction. If we look to Spain, which introduced a price cap on gas for the power market earlier in the year, gas demand in June increased by more than 14% MoM and 7% YoY. Metals - aluminium stocks jump higher LME exchange inventories for aluminium rose by 31.3kt (the largest daily addition since 10th February) to 308kt yesterday; with the majority of inflows at Malaysia’s Port Klang warehouses. These large inflows have put pressure on the market, with prices settling a little more than 1% lower yesterday. However, this weakness comes despite further aluminium supply cuts in Europe. France’s largest aluminium smelter, Aluminium Dunkerque, announced that it will cut production by 20% due to soaring power prices. The smelter, which has a capacity of 285ktpa, is expected to operate at a reduced rate until early next year. In addition, Norsk Hydro said that it will not restart operations at its Karmoey and Husnes plant (after completing maintenance), as demand for the metal remains sluggish. The producer said that “a few tens of thousands of tonnes” could be impacted out of the 1.1mt of aluminium produced annually in Norway. The difficulty in the aluminium market at the moment is trying to balance the number of supply cuts we are seeing with weaker downstream demand. In mine supply, copper output in Peru fell 1.6% MoM to 195kt in July. The majority of the decline was due to production losses from the Cia Minera Antamina mine (-9.1%) and the Southern Peru Copper Corporation mine (-14.5%). Among other metals, zinc production fell 2.9% YoY, while silver output declined 15.4% YoY last month. Agriculture – favourable weather conditions in Australia Australia’s Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimates that winter wheat production in Australia will reach 32.2mt in 2022/23, slightly below the all-time high of 36.3mt reported last year. The latest forecast is 6.3% higher than the previous estimate of 30.3mt, as overall crop production has benefited from favourable weather conditions. Australia is expected to export 25.8mt of wheat to global markets in 2022/23, marginally lower than last season’s record 26mt. The  USDA’s weekly export inspection data shows that demand for US corn and wheat remained soft over the last week. US weekly inspection of corn for export fell to 518kt over the last week, compared to 689kt in the previous week. Similarly, wheat shipment inspections fell to 478kt over the last week, compared to 631kt from a week ago. However, soybean inspections rose last week from 440kt to 496kt; while also coming in well above the 94kt seen for the same week last year. Read this article on THINK TagsWheat OPEC+ Natural gas Energy crisis Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The AUD/USD Currency Pair Trading At Its Lowest Level Since Two Years, Hang Seng Index Was Flat

The AUD/USD Currency Pair Trading At Its Lowest Level Since Two Years, Hang Seng Index Was Flat

Saxo Bank Saxo Bank 07.09.2022 09:54
Summary:  Good news to the US economy spells bad news to the bond markets and equities. Crude oil prices stumble on restricted movements in the city of Guiyang in China, while the Newcastle Coal price moves to its own beat roaring to a brand new record high. With this in light, Australian GDP data will be a focus today with Australian coal exports hitting $100 billion. USDJPY at record highs again, so what's next for that FX pair, plus why to watch the AUDUSD. Plus what to expect from the Bank of Canada today, and NIO earnings. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  Good news to the economy is bad news to the bond markets and the stock market.  The solid ISM Services data removed the little remaining hope of a soft landing from the mind of bond traders and pushed up yields and the higher bond yield in turn dragged down the stock markets.  After the end of the reporting season and companies headed for the blackout period, stock traders spent their days mulling over what the Fed is going to do next and turned deeper into the belief that the summer rally might end up being a bear market rally and decided to trim long positions amid low liquidity and lack of retail participation. The unfolding of an energy crisis across the pond in Europe added to the negative sentiment.    S&P500 was down 0.4% and Nasdaq100 declined 0.7% on Tuesday. Bed Bath & Beyond (BBBY:xnas) tumbled 18.4% following the news that the company’s CFO committed suicide, the announcement of firing 20% of its workforce and selling 12 million of new shares.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) After the much strong than expected ISM Services prints, treasuries were sold off, 2-year yields +12bps to 3.5%, 10-year yields +16bps to 3.35%; 30-year yields +16bps to 3.50%. The money market curve is pricing in over a 70% chance of a 75bp hike at the September FOMC and a terminal rate of about 3.90%. The long-end of the curve was also pressured by the announcement of 19 investment grade new issues with a total amount over USD35 billion.   Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) A-Shares in the mainland markets noticeably outperformed shares traded in the Hong Kong bourse.  CSI300 surged almost 1% but Hang Seng Index was flat. The escalated natural gas price in Europe cast doubts on the resilience of the European chemical industry to maintain its output level of basic chemicals and encouraged expectations of Chinese basic chemical makers to export more to Europe. The A-share basic chemical space gained over 3%.  Increases in lithium carbonate prices caused a rise in the share prices of lithium miners.  The National Energy Administration released a consultative paper that encourages the development of the national electric grid to enable the taking up of more solar power onto it.  The non-ferrous metal names gained after the Ministry of Industry and Information Technology issued draft guidelines on reaching the stage of intelligent manufacturing for the non-ferrous metal industry by 2025.  Intelligent manufacturing is solve optimization problems in production by utilizing real-time data analysis, artificial intelligence, and machine learning.   Shares of Chinese property developers listed in Hong Kong surged after Guangzhou R&F (02777:xhkg) sold a hotel for RMB550 million and CIFI (00884:xhkg) sold a Hong Kong site.  These asset disposals stirred up optimism about improving the balance sheet and liquidity of Chinese developers, Country Garden (02007:xhkg) +9.3%, Longfor (00960:xhkg)+5.8%, and China Resources Land (01109)+4.5%. Electric vehicle manufacturers rebounded from 1% to 3%, bringing the industry’s week-long meltdown in share prices to a halt.Newcastle Coal prices hit new record highsAs Europe is facing an energy crisis this winter, it will need to increase energy imports. So, in anticipation of such a scenario, this might explain why the Australian coal price trades at a record, along with the futures price. We already know the UK importing is Australian LNG, so consider Australian coal could be heading to Europe more broadly next. Australian energy supply is already likely to run low in 2023, which also supports coal prices running higher. But for coal companies, their earnings and free cash flow will likely increase. Coal companies have been the best performers in global equities this year, after delivering the most earnings growth, with some companies like Whitehaven Coal (WHC) seeing 1,500% earnings growth YoY. Coal loaded at Australia’s Newcastle port hit $436.71, an all-time high. And triple the price this time last year. Coal futures prices are $463, implying the coal price will move up.USDJPY at record highs againA run higher in US yields, with 30-year yields touching 3.5%, underpinned a further move lower in the Japanese yen. USDJPY inched higher to 143.55 this morning in Asia, printing a fresh 24-year high. The market is challenging the Bank of Japan’s yield-cap policy yet again, and with no resistance in sight, the move and volatility is set to rise further. While the FX weakness alone may not be enough for the BOJ to pivot in order to maintain its credibility, higher oil prices and weakness in yen is spelling immense trouble on the inflation story as well. That could feed some pressure from the government on the BOJ policy.    The offshore yuan weakened to 6.98 At the back of the spreading of pandemic lockdowns and the strong U.S. dollar, USDCNH rose to 6.9800 and is set to challenge the 7 handle. USDCNY fixing will be on watch today, as a sharp depreciation of the currency is unlikely to be accepted just ahead of the 20th party congress that starts on October 16.  Crude oil prices (CLU2 & LCOV2) Demand concerns seemed to take over the supply issues yet again with China’s lockdowns extending further. The city of Guiyang joined Chengdu in restricting movement by the public amid renewed outbreaks of COVID-19. WTI futures slumped below $87/barrel while Brent dropped below $93. Global demand slowdown concerns also picked up after rate hikes this week. The Reserve Bank of Australia announced a 50bps rate hike on Tuesday, with Bank of Canada expected to go today and European Central Bank on the cards for tomorrow. A fresh surge in dollar also weighed on commodity prices.    What to consider? US ISM services in further expansion While the S&P services index continued to signal weakness with a 43.7 revised print for August, the ISM services on the other hand expanded further to 56.9 from 56.7 in July and came in above expectations. Business activity accelerated to 60.9 from 59.9, while the prices paid component remained elevated at 71.5, in contrast to the decline we saw to 52.5 for the manufacturing sector. New orders rose to 61.8 from 59.9 and employment rose into expansionary territory at 50.2 from 49.1.  China’s exports in August are expected to have slowed China’s exports in August would probably come in weaker (Bloomberg consensus: 13% YoY vs 18.0% YoY in July) as container throughput data suggested. The resurgence of pandemic control restrictions, production disruptions due to power rationing, and a high base last year could have contributed to the deceleration.  Economists are expecting China’s imports in August to slow (Bloomberg consensus: 1.1% vs 2.3% in July). South Korea’s August export data released last week showed a 5.4% YoY decline in total exports and a 3.4% YoY decline in chip exports to China.  Slower commodity inflation could have depressed China’s import growth as well in August. Australian economic growth data is a big focus today down under. If weaker than expected AUD could weaken Australian economic growth is expected to show 1% growth q/q in the second quarter and 3.5% y/y. GDP will likely get a boost from record commodity exports (which will likely account for 1% of GPD YoY), record retail sales, and a pickup in overseas travel. However, construction costs and hampered residential construction activity could weigh on the headline GDP figure. AUDUSD is on watch with the currency pair trading at its lowest level since June 2020. If the figures today are better than expected, we could see a knee-jerk short-term rally up. However, over the medium to longer term, the fundamentals support the USD moving up and the AUD potentially continuing to lose out with the favored FX currency, the USD gaining momentum and strength amid the energy crisis and Fed hawkishness. The technical indicators suggest the AUDUSD could also retest the March 2020 low of 0.61380, which is the currency pairs lowest level in 19 years. Australia’s Reserve Bank rose rates 0.5% to 2.35%, but it will do little to slow inflation The RBA hiked rates by 0.5% as expected yesterday, in a bid to stave off inflation, taking Australia’s official cash rate to 2.35%. The only thing that the RBA has slowed after hiking rates 1.75% so far since May is the property market. Property prices have seen their biggest drop since the 80’s and construction made its biggest decline since 2016. This is a credit concern as Australia has one of the highest debt levels in the world (debt to GPD is 126%). If the RBA keeps rising rates as they suggest, debt-to-income levels could hit GFC highs. The RBA’s rate hikes have done nothing to slow inflation, and coal prices, which are the biggest contribution to Australian CPI. What you need to consider, is how can the RBA's hikes fix the commodities supply/demand imbalance. We also think coal momentum is likely to rise in anticipation of demand picking up with peak energy season around the world, and Europe is likely to tap on Australia's shoulder for energy.   Australia’s trade surplus surged up for the 13th month, propelled by coal exports  Australia’s trade surplus rocked up to A$18.3bn in the June quarter, bolstering Australia’s balance on goods and services to A$43.1bn, which is the highest level on record. This was fueled by commodity exports and Australia’s trade balance (exports less imports) rising to a record after commodity exports hit a record high, with coal exports exceeding A$100bn annually for the first time. Bank of Canada to hike rates today After a July rate hike of 100bps, Bank of Canada meets again today. The consensus is calling for a 75bps rate hike to bring rates to a restrictive territory, given that inflation continues to run well above target and economic demand is holding up well. The pace of tightening is however likely to slow down in October, and so the messaging will be key to watch at today’s meeting.  NIO earnings ahead While the earnings release date for NIO has been moved around multiple times it should be final now so tomorrow one of China’s largest EV-makers will report Q2 earnings. Investors will focus on the Q3 outlook for revenue growth and margins in order to gauge when NIO can break even on its operations. California’s blackout threat worsens, and the state keeps nuclear power on standby  Amid a massive heatwave and wildfires sweeping the state, power use in California has hit an all-time high and officials have again warned residents to prepare for rolling blackouts. We first wrote about this on Monday but now the state’s grid operator issued another round of warnings, calling on consumers to limit energy demand while the state issued a level-2 energy emergency alert. Officials expect to ratchet the emergency warning up to level 3, which would mean blackouts are imminent. The prospect of outages underscores how grids are becoming vulnerable amid extreme weather as they transition from fossil fuels to renewable energy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – September 6, 2022 | Saxo Group (home.saxo)
Forecasts For Q4: The Power And Gas Crisis Will Reach Its Peak

The Bank Of Japan Must Change Policy For JPY, Crude Oil Hits Lowest, Norway Is Open To Discussing Gas Delivery

Saxo Bank Saxo Bank 07.09.2022 10:11
Summary:  Markets are jumpy, with US equities trading back and forth over the key supports at the former lows of the cycle in the major indices. The action settled near those important support levels and then futures traded softer overnight in an Asian session that saw the downward spiral in the Japanese yen accelerating despite stern words from Japan’s Ministry of Finance. It seems only a change of course from the Bank of Japan has the chance of slowing the yen’s slide.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continued to slide lower yesterday as the US 10-year yield advanced to close at 3.35% getting closer to the recent high of 3.5%. The culprit was the much stronger than expected ISM Services yesterday pushed the Fed Funds forward curve lower indicating higher policy rates for longer. S&P 500 futures fell 0.9% and is trading lower again this morning in early European trading hours sitting around the 3,897 level. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong stocks notably underperformed their mainland counterparts for the second straight session. Hang Seng Index lost 1.7% and Hang Seng Tech Index dropped 2.4% while CSI300 was flat. Heavyweight financial names HSBC (00005:xhkg) and AIA Group (01299:xhkg) tumbled nearly 3%. China internet names traded in the Hong Kong bourse also contributed to leading the indices lower, Alibaba (09988:xhkg) and Tencent (00700:xhkg) dropped about 2%, and Bilibili (09626:xhkg) fell by almost 6%. The Covid19-related lockdowns, a weakening yuan, the disappointing August trade data from China, and the rise in US interest rates hurt the market sentiment. Strong USD on the rampage once again While the focus is chiefly on the cratering Japanese yen (see more below), the US dollar is broadly stronger again and thriving on higher US treasury yields after a strong US August ISM Services data point yesterday, as well as on weaker risk sentiment. EURUSD found more separation from parity and traded to new lows briefly yesterday ahead of the ECB meeting tomorrow, while AUDUSD, for example, trades this morning below its lowest daily close for the cycle, if not below the intraday low of 0.6682 from July. The USDCNH bears watching as well, as 7.00 has now rolled into view. JPY downward spiral intensifies as global yields jump The USDJPY spike accelerated again yesterday in the wake of strong US data, as Market the world wonders how long Japan can allow the pressure from rising yield differentials globally to pile into the country’s currency, given the Bank of Japan’s insistence on capping yields out to 10 years under its yield-curve-control policy.  The situation has created a pressure cooker of a situation on the yen and tremendous volatility, which could get worse still if US 10-year treasury yields continue back higher toward the 3.50% peak from June. The next important economic data point for the US is Monday’s August CPI – and the next chart focus in USDJPY is 147.66 the 24-year high of 1998. Stern verbal warnings from Ministry of Finance officials overnight hardly even registered on the market. The BoJ must change policy for JPY to find its lows. Crude oil (CLV2 & LCOX2) Crude oil hits lowest since January as demand concerns have once again overtaken worries about supply with China lockdowns and restrictions on movements now impacting 46 cities. In addition, a surging dollar, weaker equity markets and central banks in hiking mode continue to negatively impact the general level of risk appetite. In Europe the energy crisis has raised concerns about a ‘Lehman’ moment with utilities buckling under the weight of growing margin calls. Instead of supporting prices, the token 100k b/d OPEC+ production cut announced on Monday has had the opposite effect with the market concluding the group worries about demand going forward. WTI futures slumped below $86/barrel while Brent dropped below $92. Focus on EIA’s Short-Term Energy Outlook for September and API’s weekly inventory data. US Treasuries (TLT, IEF) US Treasury yields rose sharply in the wake of the strong US ISM Services survey for August, which suggests that the US’ dominant services sector remains in strong expansion, while price pressures for the month eased. The 10-year yield benchmark traded near 3.33% this morning, above all but the highest two daily closes back in a mid-June spike to 3.50%. Above current levels, US treasury yields are likely to dominate focus across markets, likely driving US dollar and risk sentiment direction. What is going on? Signs of a flagging world economy send commodities lower One week into September, the Bloomberg Commodity Index trades down more than 4% with losses seen across all sectors led by energy and industrial metals. The prospect of aggressive Federal Reserved Monetary tightening has lifted the dollar to a record against a broad basket of currencies while the yield on ten-year US government bonds has climbed to 3.34%, just below the 3.5% June peak. In addition to rising interest rates, soon also from the European Central Bank, the market is also dealing with an energy crisis in Europe and lockdowns in China hurting growth and demand in both areas. With the stock market suffering declines and geopolitical tensions being elevated, some safe-haven demand has helped cushion precious metals, the best performing sector so far this month. Xi Jinping invokes “whole nation system” With the recent US restrictions on Nvidia selling its most advanced AI chips to Chinese customers Xi Jinping invoked the so-called whole nation system to coordinate and allocate resources for China to become fully independent from the technologies that the US is trying to curb going to China. This speech bolsters our view that the world is moving towards a bipolar world with more fragmented supply chains and economies. US ISM services in further expansion While the S&P Global Services PMI survey continued to signal weakness with a 43.7 revised print for August, the BLM’s historically more close watched ISM Services survey on the other hand expanded further to 56.9 from 56.7 in July, slightly above expectations. Business activity accelerated to 60.9 from 59.9, while the prices paid component remained elevated at 71.5, in contrast to the decline we saw to 52.5 for the manufacturing sector. New orders rose to 61.8 from 59.9 and employment rose into expansionary territory at 50.2 from 49.1. Norway says it is open to discussion of energy price caps in Europe Norway is the largest supplier of natural gas to Europe and the country’s prime minister Jonas Støre said the country is open to discussing shorter- and longer-term gas delivery arrangements that cap prices, saying that the discussions would have to occur with the country’s oil and gas producers, chiefly Equinor, but that it is important to not jeopardize production levels. France’s nuclear energy production is in free fall More than half of the fifty-six nuclear reactors are down due to corrosion issues on reactors which could take years to solve. Nuclear production is now at its lowest point, around 23,000 MWh per day on average versus 40,000 MWh in the same period last year. So far, this has not created a power emergency as electricity demand is usually not elevated during the summer (around 45 GWh per day). But it might become an issue when higher winter consumption will push electricity demand around 80-90 GWh on average. This could cause an electricity shortage at the worst time ever (see Chart of the Week : The energy crisis is hitting France, 29 August 2022). China’s exports in August slowed more than expected In U.S. dollar terms, China’s exports in August come in weaker at +7.1% y/y (Bloomberg consensus: +13% y/y; July: +18.0% y/y). The resurgence of pandemic control restrictions, production disruptions due to power rationing, weaker demand from U.S. consumers, and a high base last year contributed to the deceleration. 46 cities in China are implementing various degrees of lockdowns or restrictions on mobility, affecting nearly 300 million people and close to 25% of the country’s GDP. Imports also were slower than expected, coming in at +0.3% y/y (Bloomberg consensus +1.1% y/y; July: +2.3%). Australia assures it will remain a reliable LNG supplier Australia’s Minister for resources has again been called on to ‘pull the trigger’ and limit gas exports given the projections show Australia will have an energy shortage next year. The Minster said although it has the matter under control, it cannot guarantee it won’t be limiting exports. Japan imported AUD 17bn of the fossil fuel from Australia last year. As such Japan says it’s watching the situation closely. What are we watching next? Bank of Canada to hike rates today After a July rate hike of 100bps, Bank of Canada meets again today. The consensus is calling for a 75bps rate hike to bring rates to a restrictive territory, given that inflation continues to run well above target and economic demand is holding up well. The pace of tightening is however likely to slow down in October, and so the messaging will be key to watch at today’s meeting. Canada’s Ivey PMI for August is also out today after dipping sharply in July to just below 50. ECB meeting on Thursday A 75-bp hike that takes the policy rate to 0.75% is the favoured scenario, although not fully priced. To surprise the market and bolster its claim that it is serious about getting ahead of inflation, the ECB will have to move 100 basis points. Guidance will also be important, as the ECB is expected to take the rate to at least 1.5% through the December meeting (two more meetings after the meeting tomorrow). Several key points will be discussed at the EU emergency energy meeting on 9 September According to Reuters, the EU energy ministers will try to find an agreement on a gas price caps (yesterday, European gas jumped 31 % as Russia kept Nord Stream link shut) and on providing companies facing high margin calls emergency liquidity support (several utilities are already on the edge of bankruptcy in Germany and in Austria, for instance). The ministers will also focus on reforming more deeply the European electricity market. Two main options are on the table: the ‘Iberian exception’ and the Greek non-paper (see EU Emergency Energy Meeting : A Never Ending Story, 31 August 2022). Earnings to watch Today’s key earnings release is NIO which one of the most prolific EV-makers in China. Revenue growth is expected to slow down to 16% y/y in Q2 as Covid restrictions slowed down consumer markets in Q2. Expectations are looking for revenue growth to accelerate to 66% y/y and a narrower EBITDA loss of CNY 1.7bn. Today: People’s Insurance Co Group, Exor, Copart, NIO Thursday: Sun Hung Kai Properties, Sekisui House, Zscaler, DocuSign Friday: Dollar Stores, Kroger Economic calendar highlights for today (times GMT) 0900 – UK Bank of England Governor Bailey and others testify before Parliament Poland Rate Announcement 1230 – US Jul. Trade Balance 1230 – Canada Jul. International Merchandise Trade 1300 – US Fed’s Barkin to speak 1400 – Bank of Canada Rate Decision 1400 – Canada Aug. Ivey PMI 1400 – US Fed’s Mester (Voter) to speak 1600 – EIA's Short-Term Energy Outlook 1640 – US Fed Vice Chair Brainard to speak 1800 – US Fed Beige Book 1800 – US Fed’s Barr (Voter) to speak on Financial System Fairness & Safety 2030 – API's (delayed) Weekly Report on US Oil Inventories 2301 – UK Aug. RICS House Price Balance 0130 – Australia Jul. Trade Balance 0305 – Australia RBA Governor Lowe to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher       Source: Financial Markets Today: Quick Take – September 7, 2022 | Saxo Group (home.saxo)
The Australian Dollar (AUD) Reacts Negatively To The RBA's Decision

Australia’s Economy, ECB Decision In Focus, The UK Has Problem With A Dockers

Saxo Bank Saxo Bank 08.09.2022 09:27
Summary:  The combination of a nearly 6% drop in crude oil price, a retracement of the dollar to close to parity with the Euro and a 8bp fall in the 10-yar treasury yields have jointly put together an environment for the stock market to rally and snap a 7-day losing streak since the Jackson Hole. The Bank of Canada raise its policy rate by 75bps, as expected. August trade data from China was much weaker than expectation with both exports and import falling. Excluding inflation, real export growth was estimated to be negative and crude oil import growth in volume terms was negative in August. The news contributed to the fall in crude oil price yesterday. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  The U.S. equity markets bounced off from the trough of the post-Jackson Hole decline and snapped a 7-day losing streak to finish Wednesday decisively higher, S&P500 +1.8%, Nasdaq 100 +2.1%.  The move higher was largely driven by a confluence of macro factors: lower bond yields, and announcing new products at the company’s annual event.  lower US dollar, and lower crude oil price plus short covering and call option delta hedging. With a 5.7% decline in crude price, the energy space was the only sector in the S&P 500 that fell. Twitter (TWTR:xnys) surged 6.6% following a Delaware court rejected Elon Musk’s request to delay a trial into the reclination of his offer to acquire Twitter. Snap (SNAP:xnys) jumped 6.4% after the Verge magazine cited an internal memo from CEO Spiegel stating the company’s goals to grow its user base by 30% and bring up revenue by 20% by the end of 2022. Apple (AAPL:xnas) gained 1.4% after a new line of products at its annual event. Apple did not raise prices for its new iPhone 14 series.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Nick Timiraos at the Wall Street Journal (who is believed to be the Fed’s mouthpiece to guide market expectations) suggested that Fed Chair Powell’s “public pledge to reduce inflation even if it increases unemployment appears to have put the central bank on a path to raise interests by 0.75 percentage point rather than 0.50 point this month”. Fed Vice Chair Brainard pledged to fight against inflation “for as long as it takes” but also mentioned risks that might potentially be caused by over-tightening. The money market curve is pricing in a 78% chance a 75bp hike at the September FOMC. Treasury yields however fell across the curve as crude oil price went sharpy lower, 2-year yields -7bps, 10-year yield -8bps. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong stocks notably underperformed their mainland counterparts second day in a row.  Hang Seng Index lost 0.8% and Hang Seng Tech Index dropped 1.3% while CSI300 was little changed. Heavyweight financial names HSBC (00005:xhkg) and AIA Group (01299:xhkg) tumbled about 2%.  The short video and live streaming names dragged on the China Internet space, Kuaishou (01024:xhkg) -3.7%, Bilibili (09626:xhkg) -4.2%.  U.S. House Representative Dusty Johnson (Republican, South Dakota) introduced the Block the Tok Act, a bill that would if enacted, prohibit Tik Tok from accessing U.S. citizen’s user data from within China and block Tik Tok’s apps on U.S. government devices.  Tencent (00700:xhkg) is increasing its stake in French video game developer Ubisoft (UBIP:xpar) but the latter’s founder retaining majority control.  Following President Xi Jinping stressing China’s determination to “mobilize resources nationwide to achieve breakthroughs in core technologies in key fields” in a high-level reform planning meeting on Tuesday, semiconductor leader SMIC (00981:xhkg) gained 1.2%. China developer Soho China (00410:xhkg) jumped 11% after Chairman Pan Shiyi and CEO Pan Zhangxin Marita resigned.  The Covid-19-related lockdowns, a weakening yuan, the disappointing August trade data from China, and the rise in U.S. interest rates continued to pressure the sentiment of the stock market.     USDJPY holding up despite softer yields USDJPY eased after hitting highs of 145, but still remained above 144 in early Asian hours on Thursday despite softer US yields overnight. The threat of intervention remains as Japan’s final Q2 GDP released this morning suggests markets may continue to test the Bank of Japan’s resolve to keep an accommodative policy. Q2 GDP was revised higher to 3.5% q/q annualized from 2.2% earlier. 10Y JGB yields are also at 2-month highs and in close sights of the 0.25% cap. Verbal intervention has had little effect, and real intervention will need a coordinated effort and will only increase the volatility as long as the US yields are on the rise. The only real scope of a yen recovery will be seen if US economic data starts to deteriorate or Bank of Japan tweaks policy. Crude oil prices (CLU2 & LCOV2) Oil prices steadied in the Asian morning after steep declines in the last few days amid demand concerns especially with China pushing further with its zero Covid policy. Chengdu extended a lockdown in most of its downturn areas, raising concerns the restrictions will hurt oil consumption. A stronger dollar, despite softer yields, also weighed on investor appetite. Supply issues made little impact, even as EIA lowered its annual oil production targets, with domestic production now expected to reach 12.6mb/d, and raised its demand outlook, with annual petroleum usage rising 2mb/d through next year. The likelihood of an Iran nuclear deal in the near term is also fading. What to consider? Fed speakers, and another possible WSJ leak? Federal Reserve Vice Chair Brainard noted rates will need to rise further and policy will need to be restrictive for some time. She needs to see several months of low inflation readings to be confident inflation is moving down to 2% but how long it takes to get back to target will depend on a combination of continued easing in supply constraints, slower demand growth, and lower markups, against the backdrop of anchored expectations. Mester (2022 voter) reaffirmed that she is not yet convinced about inflation peaking yet, and she also spoke on the August jobs report, where she said they are beginning to see some moderations but labour market conditions remain strong. Besides, WSJ's Nic Timiraos wrote: "The Federal Reserve appears to be on a path to raise interest rates by another 0.75 percentage point this month in the wake of Chairman Jerome Powell’s public pledge to reduce inflation even if it increases unemployment." While the Fed is not yet in a blackout period, with Chair Powell set to be on the wires later today, there is little chance this could be a leak like last time. Still, money market pricing of a 75bps rate hike at the September meeting has picked up from 68% on Tuesday to 81% now. China’s exports in August slowed In U.S. dollar terms, China’s exports in August come in much weaker at +7.1% YoY (Bloomberg consensus: +13% YoY; July: +18.0% YoY).  Once adjusting the data with export price inflation, the real growth of exports may have turned negative in August YoY.  Export growth decelerated across destinations, except Russia (having risen to 26.4% YoY in August from 21.4% in July).   The growth of export to the U.S. was particularly weak, having turned to minus 4.2% YoY in August from a growth of 10.9% in July.  Imports growth was also slower than expected, coming in at +0.3% YoY (Bloomberg consensus +1.1% YoY; July: +2.3%). The weakness in import growth tends to indicate weak domestic demand.  The growth of imports from the U.S. slowed to -7.5% YoY in August from -4.3% YoY in July. Import volume growth for crude oil was negative at -9.4% YoY in August, little changed from -9.5% in July but import volume of coal bounced to a growth of 5.0% YoY in August from -22.1% in July. Import volume of iron ore declined to -1.3% YoY in August from a growth 3.1% in July.  The import volume of copper, however, increased to +26.4% YoY in August from 9.3% in July.     Australia’s economy grew stronger than expected YoY vindicating more rapid hikes are coming Australia’s A$2.2 trillion economy grew at 0.9% q/q in the second quarter (beating Bloomberg estimates), while growing 3.6% y/y also beating the 3.4% expected. Australia’s economic firepower came from record high commodity exports, with exports now accounting for 1% of GPD YoY. The data also showed the economy strengthened by a boost in retail sales with department store sales at record pace. Services and economic earnings were also able to offset the pull back in savings rates, which fell for the third straight quarter to 8.7%, as households are having to dive into their bank accounts to pay record high energy prices. AUDUSD vulnerable of another pull back The USD against the Aussie popped to its highest level since June 2020, after a Wall Street Journal article suggested Fed Chair Powell is committed to reducing inflation with a 0.75% hike likely in September. What also supports this is that stronger than expected US economic data continues to come through (with the most recent data showing the US services sector is healthy), validating the Fed has room to rise rates. Basically, the market is thinking the Fed has room to be more aggressive, while the RBA’s hikes are more subdued. Bottom line, you can’t fight the Fed. The technical indicators suggest the AUDUSD could also retest its lows, while the USDAUD could touch its April 2020 high. Australia assures its Asian customers it will remain a reliable LNG supplier; but it won’t guarantee anything Australia’s Minister for resources has again been called on to ‘pull the trigger’ and limit gas exports given the projections show Australia will have an energy shortage next year. The Minster said although it has the matter under control, it cannot guarantee it won’t be limiting exports. Japan imported A$17 billion of the fossil fuel from Australia last year. As such Japan says it’s watching the situation closely. Bank of Canada raised rates As expected, Bank of Canada hiked rates by 75bps bringing the rate to 3.25% into restrictive territory, given the central bank’s estimate of neutral rate is 2-3%. The tone remained hawkish, but lacked clear guidance as it reiterated that further hikes will be necessary to bring inflation to target, implying the BoC is not done yet and will move even further into restrictive territory. While growth is slowing and housing prices are down 18% since February, but short-term inflation expectations remain high, signalling a risk that elevated inflation becomes entrenched. NIO earnings Chinese EV maker NIO (NIO:xnys/09866:xhkg) reported better-than-expected revenue of RMB 9.57 billion due to pent-up demand. The company delivered 25,059 vehicles in Q2, a 14.4% growth from last year. Gross margins, however, decreased to 16.7% from 18.1% in Q1 this year and 20.3% in Q2 last year. Management’s guidance for Q3 delivery was 31,000 to 33,000 vehicles, below analyst expectations.  ECB rate hike in focus; what could it mean for EURUSD? The European Central Bank meeting will be in focus after plenty of chatter around front-loading rate hikes in the last few days. Most members have come out in support of a 75 basis point rate hike for the September, and the market pricing suggests 125 basis points between September and October meetings (so one 75bps and one 50bps). Only Philip Lane seemed to strike a different tone, saying that he would prefer step-by-step hikes to make sure the financial markets have time to absorb the tightening in a measured manner. August inflation for the Euro area, reported last week, also suggested further price pressures with a 9.1% YoY print from 8.9% YoY previously. Market pricing suggests a 67bps rate hike today, and a cumulative hike of 129bps by October or 157bps by year-end. With a 75bps rate hike not fully priced in for September, such a move along with commitment to do more front-loading could be positive for EURUSD in a knee-jerk. Still, with energy crisis in focus and EU emergency meeting scheduled for tomorrow, it may remain hard for EURUSD to stay above parity. Only a 100bps rate hike will really count as a hawkish surprise. If ECB decides to go for 50bps, we could see EURUSD test the cycle lows. New dockers strike in the United Kingdom (UK) The UK has been facing recurring transport disruptions over the past few years. This is related to Brexit, Covid and now higher cost of living. A dockers strike at Felixstowe port (the country’s first container port) ended a few days ago. But a new one is looming at the port of Liverpool. The dockers trade union is calling for a strike from 19 September to 3 October (at least) after negotiations to raise salary failed. This matters a lot. The port of Liverpool is a key hub for transatlantic sea transport. If inflation continues to rise (which is likely), expect much more strikes to come and not only in the transport industry. Social tensions will probably increase sharply in the coming months.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – September 8, 2022 | Saxo Group (home.saxo)
Yen (JPY) Takes A Stab At Resilience, The Grains Sector Has Survived Well

Concerns About Global Supply On The Wheat, Apple Without Price Increases

Saxo Bank Saxo Bank 08.09.2022 09:39
Summary:  US Treasury yields retreated sharply yesterday, bringing relief to equity markets and turning the US dollar back lower. The soaring USDJPY found resistance near 145.00, while EURUSD backed up toward parity ahead of today’s ECB meeting, which is set to deliver the largest rate hike in the central bank’s history of 75 basis points as the bank seeks to catch up with global peers in its fight against inflation. Crude oil slumped below support on demand concerns, especially in China.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities rallied hard yesterday with S&P 500 futures surging 1.8% in what mostly looks like a technical rebound across many asset classes as positions maybe are trimmed ahead of the US CPI report on Tuesday. The obvious key level to watch in S&P 500 futures on the upside is the 4,000 level with the futures trading around the 3,988 level this morning. The 50-day moving average at 4,027 is currently colliding with the 100-day moving average making the 4,030 level a key area to test in the short-term. Apple unveiled a low-risk update to its iPhone suite introducing the iPhone 14 with a few hardware updates. The cost-of-living crisis may jeopardize Apple’s expected upgrade cycle that the market is currently expecting. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Despite the S&P 500 rallied by nearly 2% and the Nasdaq Golden Dragon China Index surged by 2.3% overnight in the US, Hang Seng Index (-0.4%) continued its multi-session decline since the beginning of September. In mainland China, the CSI300 had a lackluster day fluctuating between small gains and losses. The weakness in Tencent (00700.xhkg), -2.3%, dragged down the benchmark index in Hong Kong. According to filings to the stock exchange, about $7.6bn worth, or 2% of the market cap, of Tencent shares have been transferred to the exchange’s clearing and settlement system. The news stirred up speculation that Prosus, a majority shareholder holding over 28% of Tencent, is selling Tencent shares.  In June, Prosus (PRX:xams) announced that the company was going to offload its stake in Tencent to raise cash to buy back its own shares and Naspers’ (NPN:xjse) shares (Prosus’ parent) at a discount to NAV. Strong USD tamed by treasury yields. EURUSD focus today in FX on ECB The latest leg higher in the US dollar was driven by a sharp move higher in US Treasury yields, a move that reversed yesterday and took the US dollar back a few notches with it. An important test ahead for the broader US dollar picture today is in EURUSD as the ECB is expected to deliver a 75-bp rate hike, the largest hike in its history, in an attempt to play catchup with global peers in its inflation fight – will the move support the Euro further or does Europe’s grinding energy emergency keep a lid on EURUSD for now? The market has priced more than 50/50 probability of a 75-bp move versus a 50-bp move and would need to hike 100 basis points to really impress the market. JPY downward spiral as global yields jump The USDJPY spike finally found resistance at the 145.00 level yesterday as US Treasury yields reversed lower. The move higher has been aggravated by the rising tide of global yields that contrasts with the Bank of Japan policy of standing pat with its yield-curve-control (YCC) policy. Often, a weak JPY encourages hedging activity by the Japanese holders of enormous savings held abroad but hedging activity has been low this time as Japanese investors abroad have enjoyed strong returns. The cycle top in EURJPY just above 144.00 is also a focus today as the ECB is set to hike as noted above. Given the scale of JPY weakening in recent days, Japanese officials will likely be out soon with a more determined response, generating two-way volatility. Crude oil (CLV2 & LCOX2) Oil prices steadied in the Asian morning after steep declines in the last few days amid demand concerns especially in China where its zero Covid policy is now impacting areas and a population that accounts for around 25% of GDP. Before the slump below $90 in Brent and WTI $85 the market had briefly rallied on Putin threats that he would cut supplies to countries agreeing on a price cap for Russian oil and gas. Supply issues had little impact, even as EIA lowered its annual oil production forecast for this and next year while raising its global demand outlook amid rising gas-to-fuel switching activity, mainly in Europe. The likelihood of an Iran nuclear deal adding supply is also fading. Focus on further OPEC+ action with Brent sliding further away from $100/b. Resistance: WTI at $85.75 and Brent at $91.50. Gold (XAUUSD) Gold once again managed to find buyers below $1700 thereby avoiding another attempt at challenging key support around $1680, a level from where the price has bounced multiple times during the past two years. Main source of directional input continues to be provided by yields and the dollar, both of which trade softer overnight (see above and below comments). Gold’s best chance of a further bounce at this point would come from short covering from recently established short positions, but for that to happen, the price as a minimum would need to break above $1735. Focus today on today’s expected ECB rate hike and its impact on EURUSD. US Treasuries (TLT, IEF) US Treasury yields reversed much of the previous day’s gains yesterday and followed through a bit lower still, taking the 10-year treasury yield below 3.25% this morning. The move helped bring relief to global risk sentiment as the USD also edged lower. The persistent move higher in US longer yields from the early August base allows for a test all the way to the 3.00% yield area in that 10-year benchmark without reversing the trend. The focus to the upside is the 3.50% peak from mid-June, around the timing of the June FOMC meeting. What is going on? Putin supply threat lifts wheat futures The Chicago and Paris contracts both jumped by more than 3% on Wednesday with the US traded contract reaching the highest level in nearly two months, after Putin criticized the UN-brokered Ukrainian grain export deal, saying the developing world had been “cheated” with the bulk of the shipments going to Turkey and Europe. Comments that could see Russia trying to revise its term to limit countries that can receive shipments. Paris Milling wheat, the high protein variety used for human consumption, still trades 25% below the May panic peak but any developments that reduces flow from Ukraine may add to global supply worries and lift the price further. New dock workers strike in the United Kingdom The UK has been facing recurring transport disruptions over the past few years. This is related to Brexit, Covid and now higher cost of living. A dockers strike at Felixstowe port (the country’s biggest container port) ended a few days ago. But a new one is looming at the port of Liverpool. The dockers trade union is calling for a strike from 19 September to 3 October (at least) after negotiations to raise salaries failed. This matters a lot. The port of Liverpool is a key hub for transatlantic sea transport. If inflation continues to rise (which is likely), expect many more strikes to come and not only in the transport industry. Social tensions will probably increase sharply in the coming months. Apple unveils iPhone 14 models If investors were hoping for a major product release of the most popular and iconic smartphone on the market they were left disappointed yesterday. Apple delivered a low-risk upgrade to its iPhone series with the iPhone 14 delivering some few hardware upgrades and no change to its overall design. The computer chip A15 Bionic is also staying the same. The biggest positive was probably no price increases which is quite telling, but also underscoring the cost-of-living crisis that many consumers are facing and in fact is jeopardizing the expected upgrade cycle of the iPhone. US retail investor readings still rock-bottom The AAII investor readings are still dire reading for the market with the spread between bullish and bearish readings hitting -35.2 in its latest data point which is worse than during the lows in 2020 and on par with the darkest hours during the Great Financial Crisis. This very negative sentiment of course could be fuel for a sharp rebound in the case Tuesday’s US inflation print turns out lower than expected. Dovish speech from Reserve Bank of Australia chief Philip Lowe In Australia overnight, RBA Governor Lowe delivered perhaps the first somewhat dovish speech in a long while from a non-BoJ developed market central bank, arguing that “the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises”. This lowered anticipation that the October RBA meeting will deliver another 50-bp hike after four consecutive half-point increases that have taken the policy rate to 2.35%. Australia’s trade surplus halves as coal and iron ore exports fall from record highs Australia’s trade surplus almost halved in July, plunging from A$17.1b to a A$8.7b surplus, when the market expected the surplus balance to fall to just A$14.5b. It comes as exports of coal and iron ore fell from their record highs, dragging down total exports by 10%. Coal export earnings fell 17% with the northern hemisphere in peak summer, while iron ore export earnings fell 15% tarnished by China’s slow down. Australian imports (covering outbound tourists) rose 5% with Aussies escaping the record cold winter to enjoy European sun. Fed speakers, and another possible WSJ article “guiding” for the September FOMC Meeting? Federal Reserve Vice Chair Brainard noted rates will need to rise further and policy will need to be restrictive for some time. She needs to see several months of low inflation readings to be confident inflation is moving down to 2% but how long it takes to get back to target will depend on a combination of continued easing in supply constraints, slower demand growth, and lower markups, against the backdrop of anchored expectations. The Cleveland Fed’s Mester (2022 voter) reaffirmed that she is not yet convinced about inflation peaking yet, and she also spoke on the August jobs report, where she said they are beginning to see some moderation, but labour market conditions remain strong. Elsewhere, the WSJ's Nick Timiraos wrote: "The Federal Reserve appears to be on a path to raise interest rates by another 0.75 percentage point this month in the wake of Chairman Jerome Powell’s public pledge to reduce inflation even if it increases unemployment." After a Timiraos article triggered a spike in anticipation that the June FOMC meeting would deliver 75 basis points rather than 50 bps, the market may have taken note, as money market pricing of a 75bps rate hike at the September 21 FOMC meeting has picked up from 68% on Tuesday to 81% now. Bank of Canada hikes 75 basis points As expected, the Bank of Canada hiked rates by 75bps bringing the rate to 3.25% and into restrictive territory, given the central bank’s estimate of neutral rate is 2-3%. The tone remained hawkish, but lacked clear guidance as it reiterated that further hikes will be necessary to bring inflation to target, implying the BoC is not done yet and will move even further into restrictive territory. While growth is slowing and housing prices are down 18% since February, short-term inflation expectations remain high, signaling a risk that elevated inflation becomes entrenched. What are we watching next? Japan’s Ministry of Finance, Bank of Japan and FSA to hold first three-way meeting since June This is clearly in response to the breathtaking weakening in the Japanese yen this week. We can expect some form of more determined intervention from here and with it, more two-way volatility. ECB interest rate hike today The ECB will have no other choice but to send a strong signal to the market regarding its commitment to lower inflation (expect a 75-basis point interest rate hike today). We forecast the ECB will need to keep increasing rates in the coming months for at least four main reasons: 1) inflation is high and it is not just about energy prices. Core inflation stands at 4.3 % year-over-year and is likely to continue rising in the short-term; 2) inflation expectations are up sharply. In the space of only eight months, inflation expectations for 2023 have risen from 1.5 % to 4.2 %; 3) the economy is able to cope with higher interest rates (eurozone consumer credit growth is steady which seems to indicate that monetary policy is not tight enough); and 4) the low euro exchange rate is a headache (since it increases imported inflation). The ECB will need to convince the markets they are able to curb the decline of the single currency. This is not an easy task. EU proposes five measures to curb gas demand and prices Ahead of Friday’s emergency energy meeting, European Commision President Ursula von der Leyen proposed five radical steps to curb costs and demand: 1) Smart savings of electricity by mandatory targets to reduce peak hour demand for electricity; 2) Cap on revenues of companies producing electricity with from low-cost sources such as wind and solar with profits being re-channeled to vulnerable people and companies; 3) Solidarity contribution from fossil fuel companies; 4) Liquidity support for energy utility companies in order for them to cope with elevated market volatility; 5) Cap on Russian gas revenues on the remaining 9% Russia supplies  to Europe, down from a pre-war level around 40% Earnings to watch Today’s key earnings release is DocuSign which was a pandemic darling but has since been seeing growth coming down dramatically and its valuation hit by higher interest rates. Analysts expect FY23 Q2 (ending 31 July) to show revenue growth of 17.7% y/y with a significant jump in operating income which the company must deliver to avoid further downward pressure on its valuation. Thursday: Sun Hung Kai Properties, Sekisui House, Zscaler, DocuSign Friday: Dollar Stores, Kroger Economic calendar highlights for today (times GMT) 1100 – Mexico Aug. CPI 1215 – ECB Rate Announcement 1245 – ECB President Lagarde Press Conference 1300 – Poland central bank governor Glapinski press conference 1310 – US Fed Chair Powell to speak at a conference (includes Q&A) 1430 – EIA Natural Gas Storage Change 1500 – EIA's Weekly Crude Oil and Fuel Stock Report (delayed by a day) 1525 – Canada Bank of Canada’s Rogers to deliver report 1600 – US Fed’s Evans (voter 2023) to speak 1820 – US Fed’s Kashkari (voter 2023) to speak 1900 – US Jul. Consumer Credit 0130 – China Aug. PPI/CPI  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher     Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-8-2022-08092022
Podcast: The Situation In Ukraine Helps The European Market, The Yena's Situation

Podcast: Forex Market Is Focus On The Yen, Power Prices In EU

Saxo Bank Saxo Bank 08.09.2022 11:45
Summary:  Today we ponder whether yesterday's bounce in sentiment after technical support once again survived offers room for at least tactical optimism. Certainly, investor sentiment in the US is in the dumps, nearly matching record low levels according to at least one survey. Elsewhere, we breakdown the impact of EU proposals to cap power prices, particularly on alternative energy equities, the latest on crude oil and Putin boosting wheat prices with threats to revisit Ukraine export deal. In FX, the focus is on the JPY as officialdom there is getting religion on the need to do something soon and on the EUR as the ECB is likely set to hike 75 basis points today. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Share       Source: https://www.home.saxo/content/articles/podcast/podcast-sep-8-2022-08092022
European Union Has The Crude Oil Price Cap In Mind. How Could Russia Make Price Go Up?

Brent Crude Oil Price Hit Surprising Levels Yesterday, In Chengdu (China) Lockdowns Has Been Extended

ING Economics ING Economics 08.09.2022 10:35
The broader strength seen in the USD has weighed heavily on the commodities complex, whilst Chinese demand concerns are certainly not helping. For oil, we will need to keep an eye on OPEC+ and how they might react to the more recent weakness in the market Energy - Brent breaks below $90/bbl The oil market continues to come under pressure. Brent settled more than 5% lower yesterday at US$88/bbl. This morning we are seeing somewhat of a relief rally. The strength that we have seen in the USD is not helping oil or the broader commodities complex, whilst there are clear demand concerns, particularly when it comes to the continued Covid-related lockdowns that we are seeing across parts of China. Chengdu has seen another extension to its lockdown. The more recent weakness in oil prices does increase the risk that we see some form of intervention from OPEC+. The group made it clear that further action could be taken if they felt it was necessary, and the market is likely trading towards levels where they are starting to get a bit uncomfortable.   While there are clear demand concerns in China, imports of crude oil rebounded in August. Imports averaged 9.54MMbbls/d over the month, up 8.1% MoM and the highest import volumes seen since May. These flows are still down 9.4% YoY, while cumulative imports over the first 8 months of the year are down 4.7% YoY. We will get a better idea on how much of these imports in August went towards stock building once output data is released. In its latest Short Term Energy Outlook, the EIA made revisions lower to its US oil production forecasts. US crude oil output in 2022 is expected to average 11.78MMbbls/d, up around 540Mbbls/d YoY. In August the EIA was forecasting output to average 11.86MMbbls/d. As for 2023, output is expected to grow by around 850Mbbls/d to average 12.63MMbbls/d. This is down from a previous forecast of 12.7MMbbls/d. Finally, comments from Putin yesterday were a clear sign of an escalation in the use of energy as a weapon. The Russian president threatened that any country which adopts the G-7 oil price cap would see all flows of Russian energy stop - including oil, refined products, natural gas and coal. While Russia may be able to afford taking this action if big buyers don’t take part in the cap, it becomes a little bit more difficult to follow through with this threat if the likes of China and India were to join the price cap. Clearly that is a big "if", as it could be a significant challenge for G-7 nations to convince China and India to take part in a price cap. Metals - rising USD weighs on the complex Weaker-than-expected trade data from China along with a stronger USD weighed on the metals complex yesterday. Copper settled lower on the day, whilst aluminium fell to an intra-day low of US$2,233/t (the lowest levels since April 2021) yesterday. Aluminium supply cuts in Europe continue to get more severe as yet another smelter announced production cut plans yesterday. Speira GmBH announced it will curb production by 50% at its smelter in Germany due to elevated energy costs. The smelter expects the curtailment process to be completed in November for an indefinite period. Speira's plant in Germany can produce about 160ktpa of aluminium, however, current output is around 140kt. The market continues to ignore these cuts, with the market of the view that downstream demand is taking a bigger hit than supply. The latest trade numbers from China Customs shows that imports for unwrought copper rose 7.4% MoM and 26.4% YoY to 498kt in August. Cumulative imports over the first 8 months of the year are up 8.1% YoY to total 3.9mt. Meanwhile, copper ore and concentrate imports rose 19.5% MoM and 20% YoY to a record high of 2.27mt last month. Iron ore imports saw somewhat of a recovery, rising 5.4% MoM to 96.2mt in August and reaching their highest levels since February. Lower prices and peak construction season are likely to have supported imports. However,  YTD inflows are still down 3% YoY to total 723mt. Agriculture – Putin questions Ukrainian grain deal Wheat prices surged higher yesterday, trading almost 7% higher at one stage during the day. This comes after Putin questioned the Ukrainian grain export deal from the Black Sea, claiming that poorer countries are not benefiting from this supply and that instead the bulk of these supplies are going to Europe. Ukraine has pushed back on these comments, saying that two thirds of shipments from the deal have gone to Africa, Asia and the Middle East. The latest trade data from China Customs shows that soybean imports fell by 24.5% YoY (down 9% MoM) to 7.17mt in August, as higher prices and softer demand for edible oils weighed on import requirements. Soybean crushing margins in China have been in negative territory for quite some time now, with current margins at around negative CNY170/t. Although a significant improvement in hog farming profits in recent months should support soymeal demand in the latter half of the year. Read this article on THINK TagsRussian oil price cap Russia-Ukraine OPEC+ Energy crisis China Trade Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US Economy, Black Gold, China And Strategic Petroleum Reserve | Gold

Situation On Crude Oil Market Is Really Absorbing

Craig Erlam Craig Erlam 08.09.2022 16:20
OPEC+ will be watching closely Oil prices are rebounding slightly on Thursday, up almost 1%, after collapsing more than 5% a day earlier on renewed global growth concerns. With policymakers around the world still hawkish on interest rates, most notably in the US, and China locking down major cities in its zero-tolerance fight against Covid, the demand outlook is weakening. After such a long period of supply driving the crude price, it’s demand that appears to be dominating now with traders anticipating a slowdown, maybe even a recession next year. I can only imagine how OPEC+ is taking the recent price moves, with its warnings and token cut seemingly falling on deaf ears. An emergency meeting may well be on the cards ahead of its scheduled October gathering. Gold recovers as dollar pares gains Gold enjoyed a little reprieve on Wednesday, as yields pared recent gains and the dollar pulled off its highs. I’m not sure we should get too excited about gold’s resurgence just yet, in fact, it’s already slipping a little today. The rebound means crucial $1,680 support continues to hold for now but given the backdrop of hawkish central banks and immense uncertainty in the markets, I’m not sure traders are ready to abandon the dollar just yet. That said, it will be interesting if gold can manage to catapult itself back above $1,730 as that would suggest – in the short term at least – it has found some favour in the markets. With a double bottom perhaps forming in gold, a break of $1,730 could indicate a much more significant corrective move, even if the longer-term trend is still very much against it. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil bounces back, gold recovers - MarketPulseMarketPulse
The AUD/USD Lost After RBA Governor Remarks, The End Of An Era For The UK

The AUD/USD Lost After RBA Governor Remarks, The End Of An Era For The UK

Saxo Bank Saxo Bank 09.09.2022 09:11
Summary:  U.S. Treasury yields rose 6-7bps after the ECB hiked 75bps and Fed Chari Powell’s speech. U.S. equity markets were quiet and managed to finish the session moderately higher. Reserve Bank of Australia Governor Lowe said interest rates were not on a “pre-set path” as the economic outlook was uncertain. Crude oil bounced by 1%. In Japan, a meeting between the MOF, BoJ, and FSA sent signals that FX intervention remains on the cards. The European Union is holding an emergency meeting to discuss measures to tackle the energy crisis in Europe and China is scheduled to release CPI and PPI today. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. stock markets closed higher in a choppy session, S&P 500 +0.7%, Nasdaq 100 +0.5%.  Trading was quiet after the well-anticipated ECB 75bp hike and Powell’s now consistent hawkish script.  The 6-7bp rise in bond yield did not move stocks.  VIX edged down further to 23.6. On the corporate front, T-Mobile (TMUS:xnas) announced a buyback program authorization for 7.5% of the company’s market cap and expected to complete the buyback by Sep 2023. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Following a 75bp hike by the ECB and Fed Chair Powell sticking to his hawkish stance in a speech yesterday, U.S. treasury yield jumped 6 to 7 bps across the curve.  Money market rates are pricing in a 85% chance of a 75bp hike on September 22.  Chicago Fed President Evans said the Fed “could very well do 75 in September” but his mind “is not made up” yet. The Treasury Department announced the size of next week’s 3/10/30-year auction at a total size of USD91 billon.  Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index underperformed its major Asian peers which advanced more than 1% across the board to continue its multi-session decline since the beginning of September and finished the day 1% lower.  The weakness in Tencent (00700.xhkg), -3.1%, Chinese developers, and energy stocks dragged down the benchmark index in Hong Kong.  According to filings to the stock exchange, about USD7.6 billion worth, or 2% of the market cap, of Tencent shares have been transferred to CCASS, the Stock Exchange of Hong Kong’s clearing and settlement system.  Prosus, Tencent’s largest shareholder holding 27.99% of shares outstanding, confirmed that it has transferred 192 million shares of Tencent to CCASS and is selling Tencent shares.  In June, Prosus (PRX:xams) announced that the company was going to offload its stake in Tencent to raise cash to buy back its own shares and Naspers’ (NPN:xjse) shares (Prosus’ parent) at a discount to NAV. The Chinese developer space was once again under selling pressure.  CIFI (00884:xhkg) tumbled 13.6% following credit agency S&P downgraded the long-term rating of the company’s senior unsecured debts by 1 notch to BB- from BB. Country Garden (02007:xhkg) plunged by 6.8%.  Energy stocks declined on sharp fall in crude oil price, CNOOC (00883:xhkg) -3.6%, PetroChina (00857:xhkg) -1.9%.  The Chinese automaker space was sold, Great Wall Motor (02333:xhkg) -4.7%, Geely (00175:xhkg) -3.1%, BYD (01211:xhkg) -3.0%, Li Auto (02015:xhkg) -3.0%, XPeng (09868:xhkg) -2.6%. After the Hong Kong market close, Bilibili (09626:xhkg/BILI:xnas) reported a larger than expected loss in 2Q2022 on the deterioration of gross and operating margins.  The company’s ADR plunged 15%.     USDJPY paid little heed to Japan’s three-party meeting USDJPY stuck close to 144-levels on Thursday despite stronger signs of concern from the Japanese authorities. The meeting between Japan’s MOF, central bank and FSA ended with some strong verbal signals that direct intervention remains on the cards, but even if that was to happen, it will only increase the volatility in the yen and cannot possibly reverse the move as long as the monetary policies of the US and Japan continue to diverge. EURUSD gained some bids in early Asian morning to rise to 1.002, but the move remains fragile especially with the emergency meeting scheduled for today. GBPUSD reversed the overnight weakness to rise to 1.1540 with dollar losing some momentum in early Asian trading hours.  Crude oil prices (CLU2 & LCOV2)  A slight recovery was seen in crude oil prices overnight despite the hawkish Fed rhetoric and a further surge in the dollar. Supply side dynamics remained in focus, with the EIA saying that crude inventories rose by 8.85 million barrels last week, while supplies dropped in the largest storage hub of Cushing. Gasoline inventories also gained, but there was no change to oil production. Putin warned that Russia will not supply energy to any nation that backs a US-led price cap on its crude oil sales. However, with WTI futures now priced at ~$83/barrel and Brent futures below $90, eyes are again on OPEC+ which hinted earlier this week the intention was to keep crude oil prices around the $100-mark. Demand concerns have picked up since the OPEC meeting due to widening China lockdowns and more aggressive central bank rate hikes.   Copper (HGc1) Copper is showing signs of stabilizing despite demand concerns from China as Covid restrictions continue to be tightened. Copper rose above $3.50 per pound overnight, as supply concerns remain top-of-mind with mining companies continued to struggle to meet their production targets with top producer Chile has seen its exports slump to a 19-month low due to water restrictions and lower ore quality - while demand from China, surprisingly is showing signs of strengthening as infrastructure push ramps up. Having found support last week at $3.36/lb, after retracing 61.8% retracement of the July to August rally, copper is currently staring at resistance in the $3.54 area where recent lows and the 55-day moving average merges. For a real upside and trend reversal to occur the price needs to break above $3.78/lb while a break below $3.36/lb could see the metal take aim at $3/lb.  What to consider? The Queen of England has passed away and Charles has taken the throne  It’s the end of an era for the UK with the passing of Queen Elizabeth, age 96. Some of the Queen’s key moments since reigning from the 1980s to today include: in 1986 Elizabeth became the first monarch to visit China. It was an important piece of Britain’s diplomatic effort as it prepared to return Hong Kong to Chinese control. In 2011, The Queen became the first British monarch to set food in Ireland in 100 years, with the trip being widely praised as a historic moment of reconciliation. In 2012 the Queen celebrated 60 years on the throne and in 2022 Elizabeth became the first and only British monarch to reach 70 years on the throne. Politicians from the Commonwealth and across the world paid tribute to the Queen. UK Parliament will pay tribute to Queen Elizabeth on Friday and Saturday. Australian Parliament will not sit next week.   ECB’s 75bps rate hike As was generally expected, the European Central Bank went ahead with a 75bps rate hike on Thursday, taking the deposit rate to 0.75%. President Lagarde said risks to inflation are on the upside and growth are on the downside, but did not rule out further tightening. The ECB raised projections for inflation (5.5% in 2023 now vs 3.5% earlier), lowered growth for 2023 (0.9% vs 2.1%), and 2024 (1.9% vs 2.1%) while raising growth for 2022 by a notch. Lagarde said that 75 bps was not the norm, but “moves will not necessarily get smaller” as policy was dependent on data and on a meeting by meeting basis, echoing Lane’s comments from last week. ECB’s Lane was however noted to be more hawkish yesterday than what his previous comments suggested. This keeps the door for another 75bps rate hike still open.  Fed Chair Powell stays in the chorus Fed Chair Jerome Powell stuck to the tune that the Federal Reserve members have been singing, suggesting a 75bps rate hike at the September meeting as inflation reins. He noted that the labor market is “very, very strong” and wages are elevated, while also signaling that growth will likely fall below trend. On inflation expectations, a key concern for Fed officials, the Fed chair said that today they are well anchored over the long-term, but the clock is ticking and the Fed has more concerns that the public will incorporate higher inflation expectations in the short-term. Fed’s Evans also hinted at a 75bps rate hike for September. With the chorus on inflation getting louder and market pricing for September being very close to a 75bps rate hike, a softer headline inflation print next week likely has the potential to usher in a relief rally. If, however, inflation remains high, we could see another leg down in equities.   Australia’s trade surplus halves as coal and iron ore exports fall from record highs. What next? Australia’s trade surplus almost halved in July, plunging from A$17.1b to an A$8.7b surplus, when the market expected the surplus balance to fall to just A$14.5b. It comes as exports of coal and iron ore fell from their record highs, dragging down total exports by 10%. Coal export earnings fell 17% with the northern hemisphere in peak summer, while iron ore export earnings fell 15% tarnished by China’s slowdown. Australian imports (covering outbound tourists) rose 5% with Aussies escaping the record cold winter to enjoy the European sun. The market responded to the drop in exports, with the Coal futures price falling to a 3-day low, losing 1.7%, taking the two-day loss to 7%, which pulls the price away from its record. For investors it’s a timely reminder, energy commodity prices are seasonally impacted, and could remain volatile before picking up later this year when we think peak buying is expected. Australian bonds and equities price in the RBA will be less aggressive, so it’s risk-on again RBA Governor Phillip Lowe sees a slower pace of rate hikes while conceding a sharp slowdown in global growth will make it hard to avoid a soft landing. The AUDUSD lost 0.4% after his remarks. While short-term rates as measured by the 3-year Australian bond yield fell 0.17% - supporting the risk assets rally. As such, the Australian Technology Sector surged to its highest level in a week. But sophisticated Australian investors seem skeptical that the RBA will slow the pace of hikes. Australian interest rate futures suggest rates could peak at 3.6% by mid-next year. We think the market would also be especially rate rises will slow as Australia’s Resources Minster was tapped for the second time to restrict Australian energy exports, as the nation is tipped to run out of energy in 2023. EU proposes five measures to curb gas demand and prices Ahead of Friday’s emergency energy meeting, European Commission President Ursula von der Leyen proposed five radical steps to curb costs and demand: 1) Smart savings of electricity by mandatory targets to reduce peak hour demand for electricity; 2) Cap on revenues of companies producing electricity with from low-cost sources such as wind and solar with profits being re-channeled to vulnerable people and companies; 3) Solidarity contribution from fossil fuel companies; 4) Liquidity support for energy utility companies in order for them to cope with elevated market volatility; 5) Cap on Russian gas revenues on the remaining 9% Russia supplies to Europe, down from a pre-war level around 40%. China’s PPI is expected to have risen as CPI remained stable in August PPI is expected to fall sharply to 3.2% (Bloomberg consensus) in August from 4.2% in July.  Base effect and a decline in coal prices in August could be factors contributing to the deceleration in producer price inflation.  CPI, however, is expected to edge up to 2.8% in August from 2.7% in July.  Analysts suggest that favourable base effect was offset by vegetable price increases amidst the heatwave. Bilibili reported below expectation earnings on margin compression   Bilibili (09626:xhkg/BILI:xnas) reported a worse than expected adjusted loss per share of RMB4.98 (Bloomberg consensus: loss per share RMB4.37, 2Q2021: loss per share RMB2.23). Revenue came in at RMB4.91 billion, largely in line with analyst estimates. The larger-than-expected loss came from disappointing margins.  Gross margin contracted to 15.3% from 16.4% in 1Q2022 and 22.4% in 2Q2021 due to the weak performance of the mobile game business (segment revenue -15% YoY).  Operating margin deteriorated to -39.4% in 2Q2022 from -33.9% in 1Q2022 and -20.9% in 2Q2021 which are attributable to higher general and administrative expenses +44% YoY) as well as research and development expenses +68% YoY).   The company’s revenue guidance of RMB5.6bn-5.8bn for 3Q was below market expectations.  A lender appointed receivers to siege Evergrande’s Hong Kong headquarters premises The Financial Times said that a lender had appointed receivers to siege the headquarters building of China Evergrande (03333:xhkg, suspended) and looked to force a sale of the premises.  The distressed developer’s Hong Kong headquarter has been pledged to secure a loan from a syndicate of lenders led by China Citic Bank International.  Evergrande has previously been served a winding-up petition and is scheduled to have a hearing on the petition at the High Court on 28 Nov 2022. Separately, the Wall Street Journal reports that a consortium of Chinese state-owned banks and private enterprises agreed to pay USD1.05 billion in a court-arranged auction for Evergrande’s 14.6% in Shengjing Bank, a regional bank based in Shenyang, Liaoning province. For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: APAC Daily Digest: What is happening in markets and what to consider next – September 9, 2022 | Saxo Group (home.saxo)
Forecasts For Q4: The Power And Gas Crisis Will Reach Its Peak

The United Kingdom's Anti­-inflation Plan, The ECB Doesn't Expect A Recession In The Eurozone

Saxo Bank Saxo Bank 09.09.2022 09:19
Summary:  The USD weakened sharply overnight, led by a tumbling USDJPY on comments from Bank of Japan governor Kuroda after he met with Prime Minister Kishida. Risk sentiment was buoyant yesterday and overnight on the weaker US dollar and after the ECB hiked by 75 basis points as most expected, the most in the central bank’s history. EURUSD has backed up well above parity again ahead of an EU Summit that will attempt to outline a common approach to soaring power/gas prices amidst limited supplies ahead of winter.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continued to rally yesterday with S&P 500 futures pushing above the 4,000 level to close at 4,005, and even more impressively momentum is extending this morning in early European trading hours. The rally still seems to be mostly technically driven, but there was some support for US equities in yesterday’s initial jobless claims data showing little negative pressures in the US labour market. After the US market close, DocuSign shares rose 17% as the technology company delivered a strong result and raised its outlook breathing some fresh optimism into the technology sector. The next big event for US equities is the US August CPI report on Tuesday. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index soared 2.6% today, snapping a six-day losing streak, following August inflation data in China surprised on the downside and raised hope for more monetary easing to come from the Chinese policymakers. Mega-cap internet stocks strongly, Meituan (03690:xhkg) +5.5%, Netease (0999:xhkg) +4.8%, Baidu (09888:xhkg)+3.6%, Alibaba (09988:xhkg) +3.1%, Tencent (00700:xhkg) +1.7%. One notable underperformance in the internet space was Bilibli (09626:xhkg/BILI:xnas) which plunged nearly 17% after reporting a larger than expected loss in 2Q2022 on the deterioration of gross and operating margins. Ahead of the mid-autumn festival, catering stocks gains, Jiumaojiu (09922:xhkg) +6.7%, Haidilao (06862:xhkg) +2.6%. Chinese property names rallied, led by Country Garden (02007:xhkg) which jumped 14%. CSI 300 climbed 1.3%, led by property names, financials and dental services.  USD broadly weaker after ECB meeting and USDJPY correction overnight Bank of Japan Governor Kuroda commented on the undesirability of sharp JPY moves in comments overnight after meeting with PM Kishida. This took USDJPY back below 143.00 two days after it nearly touched 145 in its latest surge higher. The threat of intervention may not hold the JPY higher for long if global yields continue higher again. Elsewhere, the USD was sharply lower despite a solid bounce-back in US treasury yields and EURUSD traded well north of parity again after an initially choppy reception of the expected 75-basis point hike from the ECB and President Lagarde’s press conference. The action took EURUSD back to the cusp of important resistance in the 1.0100 area, which has been the resistance of note for more some three weeks. The move was supported by surging European short yields, although the energy/power situation will remain the focus for the euro. Crude oil (CLV2 & LCOX2) The oil price weakness seen this week following the break below $91.5 and $85 in Brent and WTI may still end up being a temporary development with the dollar weakness seen overnight, especially against the yen and euro, adding a bid back into the market. Dr. Copper meanwhile is recovering as demand from China show signs of improving. Potentially a signal to the energy market of not getting too carried away by a temporary lockdown related slowdown in Chinese demand. However, with US implied gasoline demand falling below 2020 levels last week, a potential recovery above the mentioned level is likely to be muted. Focus on Putin and his threat to cut supply to nations backing the US-led price cap on crude sales and OPEC+ which may intervene should price weakness persist. Copper (COPPERUSDEC22) Copper trades higher with the futures market signaling increased tightness, primarily due to a pickup in Chinese demand and imports, which despite lockdowns has seen the infrastructure push ramping up. In addition, a lower-than-expected August CPI and PPI may give the PBoC more room to ease conditions. Exchange monitored inventory levels has dropped to an 8-month low at a time where mining companies struggle to meet their production targets with top producer Chile seeing its exports slump to a 19-month low due to water restrictions and lower ore quality. Speculators have increased short positions in recent weeks as a hedge against recession and China weakness, and they are now increasingly exposed. Support at $3.54 and for a real upside and trend reversal to occur the price needs to break above $3.78/lb. Bitcoin This morning Bitcoin rose the most in more than a month, surpassing the psychological $20k level and now trading at around $20.5k. This is despite a report published by the White House Office of Science and Technology Policy yesterday, stating that cryptocurrencies make a significant contribution to energy usage and greenhouse gas emissions in the US, and that they recommend monitoring and potential regulation. It could have a significant impact on cryptocurrencies using the proof-of-work consensus mechanism such as Bitcoin. US Treasuries (TLT, IEF) US Treasury yields bounced back toward the top of the range after the previous day’s decline, keeping the attention on the cycle highs for the 10-year yield near 3.50%. The treasury sell-off was sparked around the time of Fed Chair Powell firm comments on fighting inflation, which sent 2-year treasury yields some 8 basis points higher. The latest weekly jobless claims figures was out around the same time and showed the lowest level of claims since late May. What is going on? The ECB hiked interest rates by 75 basis points This was a unanimous decision of the ECB governing council. This is a major signal sent to the market. The move was aimed to catch up with the neutral rate (though the ECB acknowledges they don’t know where the neutral rate is). The ECB also revised upward its inflation forecasts sharply (from 6.8 % to 8.1 % this year). Growth forecasts were also revised. But the ECB still doesn't expect a recession in the eurozone (GDP growth expected at 0.9 % versus prior 2.1 % this year). During the press conference, ECB president Christine Lagarde opened the door to further interest hikes. This is no surprise. She committed to keep hiking over 2, 3 or 4 meetings (including today’s). This implies further hikes until October, December or February, followed by a pause. Forward guidance is not dead, finally. Expect a 50 basis point hike in October, in our view. The German 2-year Schatz yield rose over 20 basis points to yesterday to close at new cycle high of 1.33%. The United Kingdom announces a massive anti­-inflation plan Yesterday, the new prime minister Liz Truss announced a major plan to fight the high cost of living related to energy prices. There are five major measures: 1) capping household bills at £2500 per month. 2) a new £40bn liquidity scheme with the Bank of England for energy firms who need it. 3) no further windfall tax (a tax levied on an unforeseen or unexpectedly large profit). 4) speeding up the deployment of clean energy but at the same time granting more oil and gas licenses for North Sea. and 5) commitment to net zero 2050. If this is successful, it means that the peak in UK inflation will certainly be lower (by 4-5 %). So far, the government believes that the peak could be between 13 and 18 %. This is a broad range. But it shows the level of uncertainty about the short-term economic outlook. Finally, Truss refused to evaluate the total cost of the new plan. Several experts believe it could be close to £150bn, over 6% of UK GDP. DocuSign shares up 17% in extended trading Q2 revenue was much better than expected but confirmed its fiscal year outlook on revenue which was better than the underlying consensus which was clearly below analyst estimates. The company sounded optimistic on the billing outlook, which is the key indicator for future growth, and as a result traders pushed shares 17% higher in extended trading. Apple warned by US government against using Chinese chips Congressional Republicans including Senator Marco Rubio of the Senate intelligence committee and Michael McCaul of the House foreign affairs committee expressed alarm at reports that Apple cited Yangtze Memory Technologies as one of its suppliers of flash memory chips used for phone storage.  “Apple is playing with fire”, said Senator Rubio, threatening scrutiny of the company. Apple said it would not sell iPhones using the chips outside China. What are we watching next? EU Summit today on emergency intervention in power markets and possibly to cap imported Russian gas prices The EU may be able to cap electricity prices, but this could mean a shortage of output relative to demand, i.e., forcing rationing over the winter period when demand surges. Russian leader Putin has called any plan to cap prices “another stupidity”. Swedish election this weekend Swedes go to the polls on Sunday, with the right populist Sweden Democrats expected to become the second-largest political party. In the past, the right-leaning main parties have been unwilling to consider alliances with the Sweden Democrats, as their positions were seen as too extreme, but this has made for very fragile left-coalitions in recent years because of the lack of a sufficient plurality in Parliament. Earnings to watch Today’s key earnings release is Kroger which is a large US supermarket chain with a strong competitive position in the current inflationary environment. Analysts are expecting revenue growth of 8.6% y/y in FY23 Q2 (ending 31 July) and lower operating margin expected due to rising input costs. Today: Kroger Earnings releases next week: Monday: Oracle Tuesday: DiDi Global Wednesday: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0930 – ECB President Lagarde to speak 1230 – Canada Aug. Net Change in Employment / Unemployment Rate 1600 – US Fed’s Waller (Voter) to speak 1600 – US Fed’s George (Voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher         Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-9-2022-09092022
Less Precipitation Make Aluminium Smelters In Yunnan (China) Change Its Operating Rate

Commodities: Metals Boosted, It's Time To Talk Energy Crisis In The EU

ING Economics ING Economics 09.09.2022 15:08
Metals have received somewhat of a boost, with supply risks growing and some optimism in Chinese construction. For energy markets, all attention will be on EU energy crisis talks today Source: Shutterstock Energy - EU energy crisis talks today The oil market yesterday managed to recoup some of its declines from earlier in the week. ICE Brent continues to trade below US$90/bbl and the market will be watching for any signs from OPEC+ of possible intervention. The partial recovery in the market comes despite fairly bearish EIA numbers. The EIA reported that US commercial crude oil inventories increased by 8.85MMbbls over the last week - the largest increase seen since April. When you factor in the SPR release, total US crude oil inventories increased by a more modest 1.32MMbbls. An increase in crude imports, lower exports and lower refinery utilization (due to the BP Whiting outage) over the week all contributed to the crude build. Despite lower refinery activity, gasoline and distillate fuel oil stocks increased by 333Mbbls and 95Mbbls respectively. European gas prices continue to trade in a volatile manner, with TTF breaking below EUR200/MWh at one stage yesterday, only to finish the day above EUR220/MWh. The market will be sensitive to developments today, given that EU ministers will be meeting to go through proposals to tackle the energy crisis. These proposals include various forms of a price cap, along with potentially mandatory demand cuts not just for gas but also the power market. Liquidity measures for European power companies will also be pretty high on the priority list. As we have mentioned before - while price caps will offer some relief to consumers, it doesn’t help the market try to balance itself through demand destruction.   Metals – Escondida strike lifts copper prices LME copper prices ended the day higher, amid reports of potential mine strikes in Chile. Workers at BHP’s Escondida, the world’s largest copper mine, voted to go on a partial strike from next week over safety concerns, according to the mine’s union. The strike will result in a partial stoppage on 12 and 14 September and will be followed by an indefinite strike lasting until a deal with BHP is reached. Spread action also suggests a tightening in the prompt copper market. The LME copper cash/3m backwardation reached US$145/t (highest since November) yesterday, compared to a backwardation of US$76/t a day earlier and a contango of US$7.75/t at the start of 2H22. Vale SA raised its nickel production guidance to reach 230-245kt per year in the medium term, higher than its previous forecast of 200-220kt in May, the battery metal producer announced. In the long-term, Vale expects annual nickel production to reach over 300kt to tap into the growing demand for the metal. In ferrous metals, the most active SGX iron ore contract moved above US$100/t yesterday amid hopes of a recovery in construction activity in China. According to the latest market reports, the Chinese city of Zhengzhou will resume all stalled housing projects by 6 October, by making use of special loans, asking developers to return misappropriated funds, and encouraging some real estate firms to file for bankruptcy, according to Reuters reports. Read this article on THINK TagsOil Nickel Natural gas Energy crisis Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
In The Oil Market  Prices Are Rising Again And Gold Is Also Gaining

Crude Prices Are Rallying On Supply Risks, Gold Is Higher

Kenny Fisher Kenny Fisher 10.09.2022 15:00
As the world mourns the death of Her Majesty Queen Elizabeth II, world leaders pay tribute for her incredible service and leadership. The UK enters a 10-day mourning period that will see some events delayed or suspended. ​ The BOE announced they will push back their interest rate decision to September 22nd. UK train strikes will be delayed as three British trade unions will suspend their scheduled strike action. ​ The Office of National Statistics confirmed the upcoming economic publications are due to go ahead. ​ That includes UK trade, GDP, unemployment, inflation, housing, and retail sales data. Wall Street is finishing the week on a positive note as the dollar’s rally has run out of steam as optimism grows for inflation to continue to come down. Economists are slightly lowering their inflation forecasts and that could mean the Fed won’t have to take rates above 4%. Another round of hawkish speak from both the Fed’s Bullard and Waller was not able to derail today’s stock market rally. ​ ​ It is looking like traders are growing confident they will soon see the end of the Fed’s interest rate hiking cycle. ​ Supporting the risk-on narrative was softer-than-expected Chinese consumer and producer inflation data that could pave the way for more easing by the PBOC. Oil Crude prices are rallying on supply risks and as the dollar has tentatively peaked. Lately it has been mostly bad news for oil prices as demand concerns worsened given China’s deteriorating COVID situation, a surprise jump in stockpiles, and on expectations world leaders will continue to exhaust emergency measures to send energy prices lower. Energy Secretary Granholm said President Biden is considering the new releases from the US Strategic Petroleum Reserve (SPR). Russia President Putin’s threat to cut off all energy supplies is a growing risk as Ukraine recaptures territory. ​ The risk of some supply disruptions over the next few months remains elevated and that should help oil prices stay above the $90 a barrel level. Gold Gold is higher as the historic run higher in the dollar appears to have run out of steam. It seems Wall Street is getting comfortable with the idea of another 75-basis point rate hike by the Fed. ​ Fed’s Bullard supports a third straight 75-bp interest rate hike even if next week’s inflation reports show price pressures continued to ease. ​ Fed’s Waller also supports another significant rate hike this month. Gold is finding a home above the $1700 level and that could continue if investors continue to look beyond hawkish central bank speak. Gold’s fate could be determined after this next inflation report. ​ If consumer prices come in hotter-than-expected, gold might see selling pressure target the $1680 region. ​ A sharp deceleration with pricing pressures might only provide a modest boost higher for gold as policy makers. Bitcoin Bitcoin is welcoming the return of risk appetite and a falling US dollar. ​ The broad market rally has rejuvenated cryptos and that could continue if investors continue to look beyond hawkish central bank overtures and lingering recession risks. ​ ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Will Bank Of Japan Remain Committed To Its Easy Policy?

Power Producers Need To Buy Carbon Permits, In China Loans To Households Remained Sluggish

Saxo Bank Saxo Bank 12.09.2022 10:01
Summary:  Ukrainian success in taking back significant territory from Russia over the weekend has driven a cautious further recovery in the euro and sterling at the open of trade this week. Elsewhere, yields have jumped higher, helping drive new yen weakness and taming risk sentiment as the US 10-year treasury benchmark trades near the cycle highs since June. Focus this week is on tomorrow's US August CPI release, the most important data point ahead of next week’s FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities Friday on a strong note up 1.5% and S&P 500 futures have extended their gains overnight touching the 4,100 level because before receding to around the 4,085 level in early European trading hours. The US 10-year yield continues to move higher trading at 3.34% and if it sets a new high for the recent cycle it will probably cause headwinds for US equities so watch the US bond market. Next big macro event is tomorrow’s US August CPI report which is expected to print –0.1% m/m suggesting inflation is beginning to cool. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong, Shanghai, and Shenzhen are closed today for the mid-autumn festival holiday. Last Friday, Hang Seng Index soared 2.7%, snapping a six-day losing streak following China’s August inflation data surprising to the downside and raising hope for more monetary easing to come from the Chinese policymakers. Chinese property names rallied on market chatters about unconfirmed stimulus measures from policymakers to boost the ailing property sector. Ahead of the mid-autumn festival, catering stocks gained. CSI 300 climbed 1.4%, led by property, dental services, infrastructure, and digital currency.  Northbound inflows into A-shares reached USD2.1billion equivalent last Friday, the largest inflow in a single day since the beginning of the year. Ukrainian success on the battlefield drives EUR and GBP strength The surprise offensive and the re-capture of a key transport hub in the northeastern sector of the front after recent focus on operations in the south caught the market by surprise and has seen the euro and sterling rebounding versus the US dollar in early trading this week, with EURUSD trading to new local highs well clear of 1.0100 briefly overnight before edging back lower. Likewise, GBPUSD pulled north of 1.1650 before treading water back toward 1.1600. It will take some time and further developments to assess whether Ukraine can capitalize on its gains and this in turn triggers a new stance from Russia on its energy policy. JPY crosses back higher as yields rise The USDJPY correction on Friday inspired by somewhat stern language from Bank of Japan Governor Kuroda has mostly faded, as USDJPY bobs back above 143.00 overnight on US treasury yields challenging cycle highs. EURJPY pulled back close to the cycle high well above 144.00 overnight on hopes that the war in Ukraine is turning in the Ukrainians favour. New highs in USDJPY may bring more two-way volatility again if Japanese officialdom backs up its concern on the situation with market intervention (buying JPY). Crude oil (CLV2 & LCOX2) Crude oil starts the week in defensive mode with the focus staying with demand concerns amid continued lockdowns in China hurting demand from the world's top importer and a rapid succession of interest rates from major central banks negatively impacting the global economic outlook. Into the mix a US-backed plan to cap prices on Russian oil sales from December 5, a stranded Iran nuclear deal, strong demand for fuel products such as diesel at the expense of punitively high gas prices and a softer dollar. In addition, the collapse of Russian defenses in Ukraine and the response from Moscow will be watched closely. Monthly oil market reports from OPEC tomorrow and IEA on Wednesday should provide some further guidance on the supply/demand outlook. Brent’s current range: $92.75 and $87.25 US Treasuries (TLT, IEF) The 10-year US Treasury benchmark edged higher toward the local range high north of 3.3% overnight, with only the June peak at 3.50% remaining as the focus to the upside (this was the highest yield for the cycle since early 2011 and the run higher in yields in June coincided with the major low of the equity bear market this year. Tomorrow’s US August CPI number is the next key test for sentiment and yield direction, while the US Treasury will also auction both 3-year and 10-year treasury notes today and will auction 30-year t-bonds tomorrow. What is going on? France’s manufacturing production contracted in July According to the latest estimate released by the French Institute of National Statistics (INSEE), the manufacturing production decreased by a stunning 1.6 % month-over-month in July. It remains in expansion on a yearly basis (+0.2 %). Without much surprise, the drop is mostly explained by higher prices, especially higher energy prices. The INSEE does not forecast a recession in France this year. Nonetheless, growth is likely to decelerate very sharply in the coming quarters. The institute forecasts that growth will be around 0.2 % in Q3 and will be stagnant in Q4 2022. India’s rice export ban risk aggravating global food crisis After a ban on wheat exports earlier this year, India has now announced restrictions on rice exports, aggravating concerns of a global food crisis. Bloomberg reported India imposed a 20% duty on white and brown rice exports and banned shipments of broke rice. The new curbs apply to about 60% of India's rice exports and go into effect Friday. India’s rice output has been depressed due to the severe heatwaves, but also possibly to cap domestic price pressures. If these measures are duplicated by other key rice exporting countries like Thailand and Vietnam, there could potentially be a severe grain shortage globally, especially weighing on poor rice importing nations. We continue to see a threat of climate change to global agricultural output, which along with a prolonged energy crisis, suggested price pressure will stay in the medium-to-long term despite some cooling off from the recent highs. European carbon price drops as EU considers sale of permits from reserves The December ECX emissions contract (EMISSIONSDEC22) has fallen by around one-third since hitting a record high last month above €99 per tons. Given the current energy crisis, EU energy ministers are moving towards a deal to sell surplus permits from its Market Stability Reserve (MSR) in order to support a reduction in the cost of producing power and heating within the region. Power producers need to buy carbon permits to offset the polluting impact of using coal and gas over renewables. Occidental Petroleum shares rise on Berkshire accumulation In a filing on Friday, Berkshire Hathaway announced that it has lifted its stake to 26.8% in Occidental Petroleum. The move comes after the investment firm got regulatory approval for increasing the stake to over 50%. Berkshire’s move in Occidental Petroleum shares is seen as a move of confidence in the oil and gas industry as a much-needed industry for bridging the gap during the green transformation. Semiconductors are in focus as the US is expected to announce more curbs on exports The US Commerce Department is expected to publish new regulations curbing exports of semiconductors to China with companies such as KLA, Lam Research, and Applied Materials likely being impacted by the upcoming regulation. The move by the US further confirms the deglobalisation under the rule of self-reliance applied by increasingly more countries. China’s medium to long-term corporate loans picked up in growth  Over the past months, Chinese policymakers instructed policy banks and gave window guidance to commercial banks to extend credits to support infrastructure construction and key industries of the economy. Some results showed up in the August loan data which recorded a growth of 16% m/m annualized in the outstanding medium to long-term loans to the corporate sector. The amount of new medium to long-term loans to corporate was RMB 735bn in August versus RMB 346bn in July and RMB 522bn in August 2021. Loans to households remained sluggish. PBoC issues a list of 19 systemically important banks The People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a list of 19 systematically important banks.  These 19 banks will face between 0.25% and 1% higher minimum capital requirements and additional leverage requirements. They are also asked to prepare contingency plans for major risk events. These 19 banks are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, China Minsheng Bank, China Everbright Bank, Ping An Bank, Hua Xia Bank, Ningbo Bank, China Guangfa Bank, Jiangsu Bank, Bank of Shanghai, Bank of Beijing; China CITIC Bank, China Postal Savings Bank, Shanghai Pudong Development Bank, Bank of Communications, China Merchants Bank, and Industrial Bank. The CPC is set to amend the party constitution at its upcoming national congress The Political Bureau of CPC Central Committee said in a readout last Friday that the Communist Party of China (CPC) is set to “work out an amendment to the Party Constitution that facilitates the innovative development of Party theories and practices and meets the need of advancing the great new project of Party building in the new era” at the CCP’s national congress to convene starting on October 16.  It further elaborates that “the latest adaption of Marxism to China's context and new circumstances will be fully epitomized and so will the new ideas, new thinking and new strategies of governance developed by the CPC Central Committee since the Party's 19th National Congress in 2017. What are we watching next? The Bank of England (BoE) will need to go big on 22 September The meeting initially scheduled for this week is postponed following the Queen Elizabeth II. Last week, both the Bank of Canada and the European Central Bank hiked their benchmark interest rate by 75 basis points. All eyes are turning to the BoE now. Pressure is mounting for the BoE to go big this week – meaning a 75-basis points hike. In August, the central bank hiked rates by 50 basis points to 1.75 %. Despite prime minister Liz Truss’s new anti-inflation plan (which will likely lower the peak in inflation), we think the BoE will need to show its commitment to fight inflation. The Bank forecasts that UK CPI will increase to 13.3 % year-over-year in Q4 2022. But the peak in inflation is only expected in 2023. This means that the cost of living will continue increasing in the short term, anyhow. Fed speakers stay hawkish before the blackout period begins and ahead of US CPI release tomorrow Fed rate hike expectations have picked up strongly since Jackson Hole, and we have heard an extremely unanimous voice from the Fed speakers since then. Some of them have clearly made the case for a 75bps rate hike in September, with Bullard on Friday even saying that Tuesday’s CPI report is unlikely to alter the incoming 75bps rate hike in September. Governor Waller leaned hawkish as well, but did not specify the size for September’s decision, but a “significant” hike still points to that. Esther George stayed away from guiding for individual meetings but made the case for sustained rate hikes. Ethereum merge The second-largest cryptocurrency, Ethereum, is scheduled to undergo a major upgrade this week (estimated on Thursday) which, if successful, will fundamentally change the way the cryptocurrency is working. It will go from the computationally intensive proof-of-work consensus to the more energy-friendly proof-of-stake, as well as introducing a mechanism to limit the inflation in Ethereum. The crypto community is looking very much forward to this upgrade, although some are concerned about the security in the new framework. Earnings to watch Today’s key earnings release is Oracle which a better-than-expected earnings result on 13 June surprising the market on EPS by 12% as the legacy database and software maker is gaining momentum in its cloud offering. Analysts expect FY23 Q3 (ending 31 August) revenue growth to accelerate to 18% y/y, which includes its recent acquisition of Cerner in the health care sector, which is impressive for the previously low growth company despite some of the growth being driven by acquisitions. If the outlook remains strong a longer-term repricing of the company’s valuation could be in the making. Today: Oracle Tuesday: DiDi Global Wednesday: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0730 – ECB's Guindos to speak 0800 – Switzerland Weekly SNB Sight Deposits 1200 – ECB’s Schnabel to speak 1530 – US 3-year Treasury auction 1700 – US 10-year Treasury auction 2100 – New Zealand Aug. REINZ House Sales 0030 – Australia Sep. Westpac Consumer Confidence 0130 – Australia Aug. NAB Business Conditions/Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean engraver Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-12-2022-12092022
Podcast: The Influence Of Geopolitical Tensions On The Currencies Of Central And Eastern Europe, The Bad Apple Situation

The Military Activities In Ukraine Are Also Supporting The Markets

Saxo Bank Saxo Bank 12.09.2022 10:23
Summary:  Amid depressed sentiment, with Fed officials reiterating their consistent hawkishness, US equities managed to close higher on the week for the first time in four weeks. It comes as technical trading, short-covering is at play. Meanwhile, fuel shortages see more investment moguls buy in, with Occidental Petroleum shares rising after hours. The volatility index, as measured by the VIX index dropped to its lowest level in 10 days (to 22.8), supporting risk-on sentiment, while Bitcoin moved up 10% to $21,704, after breaking above the $20,000 psychological level. However markets are ready to pivot, with a full calendar of data on tap that with provide clues on the Fed's tightening path. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rally amid another bear market bounce US equities rallied for the third day closing off Friday at the highest level since August 26, while also ending higher over the five days, for the first time in four weeks. S&P 500 gained 1.5% on Friday, 3.7% on the week, Nasdaq 100 2.2% Friday, 4.1% on the week. We think a technical quant rally is at play and short-covering, which is why there is a risk-on mode, in the midst of depressed sentiment, with Fed officials reiterating their consistent hawkish chorus. The last three trading days have also seen dealers report larger buying from long-funds and hedge funds buying into information technology, banks, pharmaceutical, and consumer discretionary (in particular luxury brands), while there has also been unusually large volume in option activity. The volatility index, as measured by the VIX index dropped to its lowest level in 10 days (to 22.8) while Bitcoin moved above the $20k psychological level, after moving up 10% to $21,704. Companies big moves in the US   The Grocer Kroger (KR:xnys) soared 7.4% after the company updated its full-year EPS guidance to USD4.05 from the previous forecast of USD3.95, citing strong demand for fresh food and a shift to private-label products. RH (RD:xnys) gained 4.5% despite the upscale home retailer lowering its sales and operating income guidance due to weaker demand and delayed store openings. While the CEO of RH said the US it would not lower prices to boost salesas it fears discounting will erode its luxury brand, this is despite saying the US is already in a recession. Shopify (SHOP:xnys) jumped 8.9% following the company appointing a Morgan Stanley investment banker to take up the role of CFO. Fuel shortages see more investment moguls buy in. Occidental Petroleum shares, one of the hottest shares to watch After hours one of the biggest movers in the US was Occidental (OXY.xnys) after Warren Buffett increased his stake in the company, pushing up Occidental shares 1.6% to ~$66.68 (after hours). On Friday night, data filings showed Berkshire Hathaway increased its stake to 26.8%, up from the 20% holding the fund held previously (according to Bloomberg data). It comes as Buffett won regulatory approval to buy up to 50% of the stock, after he has been growing his stake in the company over the last three years. So will Buffett take over the oil and gas giant? A Wall Street Journal article quashed such theories, but one thing is certain, Buffett is bullish on energy amid the energy crisis. So why is Occidental attractive to some? Its price to earnings (PE) ratio is 6.2 times, meaning its relatively cheap, and is expected to report another record profit in 2023 (according to Bloomberg data). Plus, its gas production is forecast to rise in the coming years, as the US bolsters LNG exports to Europe who is weaning itself off Russian fuel. Currently Occidental only makes 50% of its revenue from gas. Also note, Occidental is the best performer in S&P500 this year, up 126%, and you’d think if Buffett increases his stake from ~27% up to 50%, this would excite shareholders. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) With another round of fed talks, this time from Fed Governor Waller, St. Louis Fed President Bullard, and Kansas Fed President George reiterating the Fed’s intention to go for another significant rate hike, i.e. 75 basis points on Sept 21, and auctions of USD42 billion 6-month T-bills, USD41 billion 3-year T-notes, and USD32 billion 10-year (fronted loaded) scheduled for Monday, and USD18 billion 30-year T-bonds on Tuesday, the 2-year yield rose 5bps to 3.51%.  The treasury yield curve flattened as the 10-year yield remained unchanged last Friday.  Tuesday’s August CPI will be the last key economic data release before the Sept FOMC meeting.  While traders are eagerly awaiting the CPI report to get some hints about the Fed’s path of rate hikes, Bullard said on Friday that a “good CPI report shouldn’t affect September Fed call”. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index soared 2.7% last Friday, snapping a six-day losing streak, following China’s August inflation data surprised on the downside and raised hope for more monetary easing to come from the Chinese policymakers. Mega-cap internet stocks strongly, Meituan (03690:xhkg) +4.9%, Netease (09999:xhkg) +4.8%, Baidu (09888:xhkg)+3.9%, Alibaba (09988:xhkg) +3.0%, Tencent (00700:xhkg) +1.7%.  One notable underperformance in the internet space was Bilibli (09626:xhkg/BILI:xnas) which plunged 16.3% after reporting a larger than expected loss in 2Q2022 on the deterioration of gross and operating margins.  Chinese property names rallied, Country Garden (02007:xhkg) +16.8%, Longfor (00960:xhkg) +7.4% on market chatters about unconfirmed stimulus measures from policymakers to boost the ailing property sector. CSI 300 climbed 1.4%, led by property, dental services, infrastructure, and digital currency. Ahead of the mid-autumn festival, catering stocks gained, Jiumaojiu (09922:xhkg) +8.9%, Haidilao (06862:xhkg) +2.8%. Lepu Biopharma (02157:xhkg) jumped 284%. After the market closed, the Center for Drug Evaluation posted on their website that a targeted antibody-drug conjugate co-developed by Lepu Biopharma and Keymed Biosciences has obtained breakthrough therapy designation status from the Chinese drug regulator.  Northbound inflows into A shares reached USD2.1billion equivalent last Friday, the largest inflow in a single day since the beginning of the year.  Hong Kong, Shanghai, and Shenzhen are closed today for the mid-autumn festival holiday. EURUSD boosted by Ukraine progress The US dollar ended the week on a backfoot after printing fresh YTD highs earlier in the week. EURUSD took a look above 1.01 once again early on Monday, amid optimism after military progress was made by Ukraine and talks of ECB considering quantitative tightening by year-end (see below). Gains were however reversed later. USDJPY optimism was also braked with the verbal intervention from the authorities getting louder late last week. Crude oil prices (CLU2 & LCOV2) Oil prices are lower to start the week with sentiment somewhat supported by Ukraine recapturing some of the key cities from Russia, and making military progress. Still, concerns on Russia’s war tactics getting bigger will continue to underpin caution, and Biden administration is now mulling whether to stop releasing oil from the US Strategic Reserves. WTI in Asian trading hours is 0.5% lower at $86.34/barrel.     What to consider? Fed speakers stay hawkish before the blackout period begins Fed rate hike expectations have picked up strongly since Jackson Hole, and we have heard an extremely unanimous voice from the Fed speakers since then. Some of them have clearly made the case for a 75bps rate hike in September, with Bullard on Friday even saying that Tuesday’s CPI report is unlikely to alter the incoming 75bps rate hike in September. Governor Waller leaned hawkish as well, but did not specify the size for September’s decision, but a “significant” hike still points to that. Esther George stayed away from guiding for individual meetings, but made the case for sustained rate hikes. EU minsters split on Russian price cap At the EU energy summit that kicked off on Friday, several key issues pertaining to energy supplies and liquidity were discussed, but decisions have been postponed as proposals are only likely to be delivered in the next few weeks. Consensus could not emerge on whether and how to impose a price cap on Russian natural gas, and members differed on whether a price cap should apply only to Russia or to other producers too. Tensions also bristled over proposed mandatory cuts in power demand and German calls for a mechanism to share any excess supply. India’s rice export ban to aid the galloping global food crisis After a wheat ban earlier this year, India has now announced restrictions on rice exports, aggravating concerns of a global food crisis. Bloomberg reported India imposed a 20% duty on white and brown rice exports and banned shipments of broke rice -- parboiled and basmati rice were excluded from the export duty and/or trade restrictions. The new curbs apply to about 60% of India's rice exports and go into effect Friday. India’s rice output has been depressed due to the severe heatwaves, but also possibly to cap domestic price pressures. If these measures are duplicated by other key rice exporting countries like Thailand and Vietnam, there could potentially be a severe grain shortage globally, especially weighing on poor rice importing nations. We continue to see a threat of climate change to global agricultural output, which along with a prolonged energy crisis, suggested price pressure will stay in the medium-to-long term despite some cooling off from the recent highs. Record volumes of Australian wheat go to China Despite trade disputes over other agricultural commodities, data shows China is importing a record amount of Australian wheat, as farmers gear up for a third consecutive bumper grain harvest. Industry sources estimate China will import about 6.3 million tonnes of Australian wheat for the year to September 30, making China by far Australia’s biggest customer. Indonesia is in second place with 3.7 million tonnes. The trade with China is up 186% from 2.2 million tonnes last year. Australian Federal government forecaster, ABARES expects farmers across Australia will have harvested 32.2 million tonnes of wheat, just shy of last year's record, 12.3 million tonnes of barley and a near-record 6.6 million tonnes of canola. Australian Agricultural stocks to watch include Graincorp (GNC), Elders (ELD), which are trading flat this year. China’s medium to long-term corporate loans picked up in growth while mortgages remained sluggish Over the past months, Chinese policymakers instructed policy banks and gave window guidance to commercial banks to extend credits to support infrastructure construction and key industries of the economy.  Some results showed up in the August loan data which recorded a growth of 16% MoM annualized in the outstanding medium to long-term loans to corporate. The amount of new medium to long-term loans to corporate was RMB735 billion in August versus RMB346 billion in July and RMG522 billion in August 2021.  Loans to households however remained sluggish. New medium to long-term loans to households (which were primarily mortgage loans) were RMB 266 billion in August, still much lower than the RMB426 billion level in August 2021.  The outstanding medium to long-term loans to households grew 5.3% MoM annualized in August. Outstanding aggregate financing grew 10.5% YoY in August, slightly below the 10.7% YoY in July. M2 grew 12.2% in August, edging up from July’s 12.0% YoY.  China’s PPI and CPI surprised on the downside China’s PPI slowed to 2.3% YoY (Bloomberg consensus: 3.2% ) in August from 4.2% in July.  The deceleration was largely attributable to the base effect and a decline in energy and material prices. CPI unexpected fell to 2.5% YoY in August from 2.7% in July while economists surveyed by Bloomberg had expected a rise to 2.8%.  Rises in both food prices (down to 6.1% YoY in August from 6.3% YoY in July) and the prices of non-items decelerated (down to 1.7% YoY in August from 1.9% YoY in July).  Excluding food and energy, consumer prices were unchanged at 0.8% YoY and Services inflation was also unchanged at 0.7% YoY in August. China’s central bank and banking regulator issued a list of 19 systemically important banks The People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a list of 19 systematically important banks.  These 19 banks will face between 0.25% and 1% higher minimum capital requirements and additional leverage requirements.  They are also asked to prepare contingency plans for major risk events.  These 19 banks are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, China Minsheng Bank, China Everbright Bank, Ping An Bank, Hua Xia Bank, Ningbo Bank, China Guangfa Bank, Jiangsu Bank, Bank of Shanghai, Bank of Beijing; China CITIC Bank, China Postal Savings Bank, Shanghai Pudong Development Bank, Bank of Communications, China Merchants Bank, and Industrial Bank. The Communist Party of China (CPC) is set to amend the party constitution at its upcoming national congress The Political Bureau of CPC Central Committee said in a readout last Friday that the Communist Party of China (CPC) is set to “work out an amendment to the Party Constitution that facilitates the innovative development of Party theories and practices and meets the need of advancing the great new project of Party building in the new era” at the CCP’s national congress to convene starting on October 16.  It further elaborates that “the latest adaption of Marxism to China's context and new circumstances will be fully epitomized and so will the new ideas, new thinking and new strategies of governance developed by the CPC Central Committee since the Party's 19th National Congress in 2017. The amended Party Constitution will also clarify the new requirements for upholding and strengthening Party's leadership and advancing the Party's full and rigorous self-governance under new circumstances, so as to better navigate the great social revolution with vigorous self-reform”. ECB set to announce Quantitative Tightening by year-end After the European Central Bank’s 75bps rate hike this month, chatter on quantitative tightening to begin by year-end has gathered pace. Wall Street Journal reported that the ECB members agreed to  start discussions on quantitative tightening in early-October at a non-decision meeting in Cyprus on October 5, and will also likely be debated at subsequent meetings. Decision is expected to be made before year's end and will most likely see the beginning of balance sheet run-off in the first quarter of 2023. Whether the move will tighten financial conditions a lot will depend on details, especially pace of reduction in the €5 trillion balance sheet. Interestingly, ECB President Lagarde said last week that now is not the time for such measures to be implemented   For a look ahead at markets – tune into our Saxo Spotlight.For a global look at markets – tune into our Podcast.           Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-12-sept-2022-12092022
The Commodity Sector Has Dropped Significantly

The Commodity Sector Has Dropped Significantly

Saxo Bank Saxo Bank 12.09.2022 13:14
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, September 6. A week that saw a sharp deterioration in risk appetite with global stock markets responding negatively to concerns about global growth and sharply higher bond yields as central banks signalled willingness to hike rates agressively. The commodity sector dropped by more than 4% in response to these developments, resulting in a broad reduction in hedge funds positions, most notably in crude oil, natural gas, gold and soybeans Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, September 6. A week that saw a sharp deterioration in risk appetite with global stock markets responding negatively to concerns about global growth, not least in China where lockdowns spread again. In addition, the prospect of sharply higher rates by central banks to combat runaway inflation saw US bond yields spike while the Bloomberg Dollar Index hit a fresh record high.  Commodities The commodity sector dropped by more than 4% in response to the deteriorating growth outlook with the stronger dollar adding an additional layer of uncertainty. All sectors suffered losses led by energy and industrial metals and speculators reacted accordingly by cutting bullish bets across 19 out of the 24 major commodity futures markets tracked in this report. The 138k lots reduction was the result of 74k lots of longs being sold and 64k lots of fresh short positions being added. A development that supported the bounce that followed last Tuesday’s reporting deadline when the dollar reversed lower, thereby supporting a general recovery in risk appetite.   Energy:  Funds sold a combined 38k contracts of crude oil and fuel products in a week where China and global demand worries, as well as the stronger dollar helped trigger steep losses across the five crude oil and fuel product futures tracked in this update. In addition, the overall market participation continued to decline with the total open interest falling to 4.8 million contracts, the lowest level of open interest since November 2014.Crude oil drifted lower during the reporting week to last Tuesday and with key support not being challenged until the following day, the main change was a 17.5k lots reduction in the Brent gross longs while the WTI held steady with both and long and short positions seeing small increases. The natural gas net short more than doubled to 49k lots after the notoriously volatile contract slump around 10% below $8 per MMBtu just two weeks after hitting $10 per MMBtu for the first time in 14 years. Metals: The metal sector, led by gold, saw broad selling in response to multiple headwinds, the most important being the stronger dollar, rising treasury yields and China growth worries. The latter hitting copper and with that also silver, the result being additional short selling lifting the silver net short to a 40-month high at 24.6k lots. The overall net reduction of 30k lots was driven by a 4k lots reduction in longs and fresh short selling of 26k lots, a development which just like energy raised the risk of a short-covering rebound should the technical and/or fundamental outlook become more supportive. This is what happened after Thursday’s ECB meeting and verbal intervention by Bank of Japan officials helped weaken the dollar.   Agriculture Funds turned net sellers of the grain and soybean sector for the first time in six weeks. The relatively small 15k lots reduction was driven by reductions across the three soybean contracts. Buying of corn meanwhile extended to a sixth week while speculators maintained an overall short position in CBOT and Kansas wheat futures. In softs, some of the recent strong buying was reversed led by sugar and cocoa.   Forex Speculators responded to continued dollar strength in the week to September 6 by increasing bullish bets via the Dollar index and against nine IMM futures. The 10% jump in the combined dollar long to $20.2 billion, a five-week high, was primarily driven by heavy selling of GBP and JPY. The Sterling net jumped 63% to 50.4k lots ($3.6 bn) while the 3% depreciation of the JPY drove a 52% increase in the net short to 58.2k lots ($5.1 bn). It was however interesting to note that renewed EURUSD selling below parity helped attract the first major round of short covering in four weeks. Fading momentum and negative divergence between the falling price and rising RSI pointed to selling fatigue and traders growing wary ahead of Thursday ECB rate decision.  What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming       Source: https://www.home.saxo/content/articles/commodities/cot-commodity-short-sellers-left-exposed-as-dollar-drops-12092022
Central Banks' Moves And Crude Oil Market | It's Not The Best Moment For Gold Price

Crude Oil Price Can Get Back In The Game, Gold Price May Go Above $1,730 If The US Dollar (USD) Keeps The Downtrend

Craig Erlam Craig Erlam 12.09.2022 15:00
Oil higher despite demand concerns Oil has recovered earlier losses to trade around 1% higher on the day. Crude could extend its winning run to three sessions if it holds on, recovering from the lows which came on the back of lower global growth expectations and Covid lockdowns in China. Those restrictions could see annual Chinese demand fall for the first time in 20 years in a further sign of the struggles facing the world’s second-largest economy. While the focus may be on the demand side at the minute, we can’t ignore OPEC+ and its recent warnings about volatile price action and the disconnect with fundamentals. The group sent a warning shot earlier this month and may be tempted to send another prior to the October meeting. The recovery in the price may be supported by that, alongside a broader improvement in risk appetite in the markets and a weaker dollar. Gold’s cautious recovery Gold is continuing to enjoy a small recovery, albeit one that is not without resistance. Since hitting a bottom earlier this month, it’s been a stuttered rebound in gold which perhaps highlights the hesitance to get behind it in the markets. The dollar has pared gains in recent days which has helped gold to add to those gains but even now it’s seeing strong resistance around $1,730 which was previously a key level of support. We could see it overcome that if the dollar continues to trend lower but that ultimately depends on the US inflation data tomorrow. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Reduction In Demand For Power In UK, Bank of Japan Plans To Maintain Current Policy

Reduction In Demand For Power In UK, Bank of Japan Plans To Maintain Current Policy

Saxo Bank Saxo Bank 13.09.2022 09:26
Summary:  Equity sentiment remained upbeat and the US dollar weakened further despite a surge higher in US Treasury yields. Globally sustained inflation pressures, such as those in Japan’s producer prices and New Zealand’s food prices, continues to raise concerns. US inflation print for August takes all the attention today with impact likely to reverberate through markets but unlikely to change the Fed’s upcoming rate hike at the September meeting. Precious metals tested key resistance levels and crude oil prices made a recovery as well. The lack of consensus on EU energy proposals may spark some concerns. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) extend their bear market bounce U.S. equities extended the bear market bounce for the fourth day amid a relatively uneventful and light volume day. The S&P 500 rose 1.1%, Nasdaq 100 up 1.2%. It comes despite bond yields rising, with the 30-year yield hitting a new high of 3.53%. Meanwhile the volatility index, the VIX rose for the first time in four days to 23.9, suggesting uncertainty could be brewing. Noteworthy moves in US stocks   Apple (AAPL:xnas) contributed to the days move, accounting for more than 60 points of the 151 points in Nasdaq 100, after the stock surged 3.9% on strong pre-order data of the new iPhone 14. A larger number of call options were traded on Apple shares on Monday. Twitter (TWTR:xnys) lost 1.7% after it sent a letter to Elon Musk and said the company intends to enforce Musk’s agreement to buy the company. Oracle (ORCL:xnys) reported sales growth of 18% to $11.4 billion, with higher contributions from cloud computing and the newly acquired Cerner, a health records provider. Adjusted EPS came in at $1.03, below the analyst consensus of $1.06 as per the Bloomberg survey. Oracle shares gained 1.3% in after-hours trading. Gilead Sciences (GILD:xnas) surged 4.2% following the settlement of an HIV drug intellectual property dispute. Bristol-Myers Squibb (BMY:xnys) gained 3.2% as regulators approved the company’s psoriasis drug.  US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The treasury yield curve bear steepened on Monday, with the 30-year yield finishing the day at 3.51%, a new high just a little above the previous high print in June. The long-end, yields of the 10-years through 30-years jumped 5 to 6 bps after the poor 3-year notes and 10-year notes auctions, in particular the latter. The 10-year auction stopped at a yield of 3.33%, which was 2.7 bps higher than the notes were trading at 1:00 pm New York time when the results were announced. The 10-year notes weakened to finish the day at 3.36%. In addition to the USD41 billion 3-year and USD32 billion 10-year auctions, eight corporate new issues with a total size of about USD12 billion came to the market yesterday. The decline in the inflation expectations print in the New York Fed’s survey of consumer expectations did not move the treasury markets which had the day’s focus on supply. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong and China markets were closed on Monday for a public holiday.  Overnight in U.S. trading, the Nasdaq Golden Dragon China Index bounced by 2.8%.  Chinese EV maker, NIO (NIO:xnys) soared 13.7% following Deutsche Bank and BoA Merrill Lynch analysts reiterating “buy” rating as well as reiterating and raising price targets respectively.  EURUSD recovery extended, but risks ahead EURUSD tested highs of 1.02 on Monday amid some optimism on Ukraine’s military advances and Bundesbank President Joachim Nagel signaling support for further interest-rate hikes in Europe. Gains however cooled later with ECB's Scicluna suggesting the central bank will continue with rate hikes but they are unlikely to be as large as the 75bps hike seen last week. Meanwhile, EUR/GBP printed a fresh YTD high of 0.8722 before unwinding the gains later. Pressure could build on EUR as the EU energy proposals will likely face some opposition, and US CPI data today will also be on watch. Russia may also increase the energy pressure on Europe if Ukraine’s advances stick. Crude oil prices (CLU2 & LCOV2) Crude oil prices saw some recovery on Monday amid a softer USD as well as weaker US inflation expectations from the NY Fed offset some of the weaker dollar concerns. Iran nuclear deal also seems to be making little progress, delaying any possible relief on the supply side. WTI futures rose to $88/barrel while the Brent futures were up at $94/barrel. US CPI data due later today is key to further gauge the path of Fed’s rate hikes from here, and the EU energy proposals will also be a key catalyst. Gold (XAUUSD) and Silver (XAGUSD) Gold rose on Monday as the dollar extended its retreat from a record high ahead of US inflation data due later today, which could potentially slow down the pace of Fed’s rate hikes if the headline print is softer than expected. Gold tested $1734, the 21-day SMA and 38.2% retracement of the August slump, but was rejected and back below $1730 in early Asian trading. Silver also rallied sharply to touch the $20-mark supported by a weaker dollar, higher gold prices and signs of tightness supporting the copper market. Last Tuesday speculators held the largest short position in three years and the continued rally is now forcing broad short covering.   What to consider? US CPI print will point to higher and stickier price pressures With the labor market remaining strong in the U.S. over the last few months, the focus has remained on the inflation data to predict the path of the Fed’s rate hikes. Clearly, all of the Fed’s members have had a unified hawkish stance since the Jackson Hole conference, and many have clearly hinted at a 75bps rate hike for September. Tuesday’s US CPI report is the one to watch, as it can move the market pricing of the Fed’s rate path and is the last key data point scheduled to release ahead of the September 21 Fed meeting. After some softening in July, it can be expected that the headline print may ease further in August as well given the decline in gasoline prices. Still, the inflation print is likely to stay elevated due to the stickier shelter and services costs, as well as still-high energy and food prices. Consensus estimates point to a mild decline of 0.1% MoM while the core remains strong at 0.3% MoM. EU proposes mandatory cuts to power use and profit levies It is expected that the EU draft energy plan will include mandatory power demand cut, an “exception and temporary” levy on oil, gas, coal and refining companies, as well as revenue caps for non-gas fuelled power generators. There is likely to be opposition from some of the member states, as the plan is detailed out tomorrow. Here is another sign inflation is not peaking; New Zealand food inflation hits a 13-year high New Zealand food prices rose 8.3% over the year to August 2022, which is the biggest annual increase since July 2009, according to data from Statistics New Zealand. The surge was mainly driven by a 8.7% increase in grocery food prices compared to a year ago, after fruit and vegetable prices rose 15%. Prices for staples like, eggs, yogurt, and cheddar cheese saw the largest moves in grocery prices. Companies to look at that sell food and dairy products to supermarkets include Costa Group (CGC), as well as A2 Milk (A2M) and Bega Cheese (BGA) and Synlait Milk (SM1). The New Zealand dollar rose to a two-week high against the USD, on expectation the Reserve Bank of New Zealand (RBNZ) will need to keep hiking rates. Japan producer prices remain above expectations Japan’s August PPI was up 9.0% y/y (vs. 8.9% y/y expected) while last month’s was also revised higher to 9.0% y/y from 8.6% y/y previously. The m/m print was slightly softer at 0.2% vs. 0.4% expected, but continued to show rising cost pressures amid the surge in commodity prices and a weaker yen. This suggests more CPI pain is in the pipeline, and the resolve of Bank of Japan to maintain accommodative policy will continue to be tested. New York Fed 1-year consumer inflation expectations at 10-month lows The latest NY Fed consumer inflation expectation gauges declined sharply, suggesting easing price pressures. Expectations for US inflation three-years ahead fell to two-year lows to come in at 2.8% in August, while the one-year ahead gauge was at 5.7%, a 10-month low. Meanwhile, inflation expectations on a five-year horizon fell to 2% from 2.3% previously, suggesting that inflation expectations remain anchored. Gloomy economic outlook for the United Kingdom According to the Office of National Statistics, UK GDP grew only 0.2% month-over-month in July. This is less than expected (0.4 % month-over-month). The weakness is mostly centered on the industry and the construction sector. This is worrying. There is no big bank holiday effect. However, there is anecdotal evidence of a reduction in demand for power because of cost, but it was also a hot month. In addition, the UK July industrial production fell 0.3% month-over-month versus expected +0.3%. Expect negative print in the eurozone for the same period too. California’s electricity infrastructure is under severe tension According to data released over the weekend by California Independent System Operator, demand on California’s power grid hit an all-time high on 6 September above 50,000 MW. The last two times it was close to this threshold was in 2007 and in 2017. The situation is getting worse and worse. Oracle reported sales in line with expectations but missed EPS estimates Oracle (ORCL:xnys) reported sales growth of 18% to $11.4 billion, in line with expectations. The sales growth was largely attributable to contributions from cloud computing and the newly acquired Cerner, a health records provider. Adjusted income came in at USD1.68 billion, a 33% drop from last year quarter and missing analyst estimates.  Adjusted EPS was $1.03, below the analyst consensus of $1.06 as per the Bloomberg survey. The earnings miss was partly due to FX losses which were results of a stronger dollar. Banking job cuts? Goldman Sachs is getting ready for jobs cuts. Who’s next? Goldman to report a 40% drop in earnings, which will foreshadow job cuts. However, there could be a lot of stake; in July Goldman said it planned to slow hiring and reinstate performance reviews. There is a huge question looming about how banks will get work with global deal volumes having dropped by about $1 trillion from a year ago. Investment banks are reliant on equity capital markets and IPOs and our sense is that more job cuts could be coming with inflation set to continue to rise, and push up the yield curve, and official interest rates into next year. For investors the takeaway here is that while markets remain uncertainty and rates are rising, investment banks will likely continue to face pressure. Banking ETFs, such as Vanguard Financials ETF (VFH) and Financial Select Sector SPDR ETF (XLF) are both down about 13% from their October 2021 peaks. Although they are both rallying amid the bear market bounce lately, we think the sector is likely to pair back again once stronger US data comes out and Fed suggests more rate hikes are coming.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-13-sept-2022-13092022
USD/JPY: Would Japanese MoF Conduct A Forex Intervention Again?

Nintendo And Sales Success, Natural Gas Prices In Europe Trade At Their Lowest

Saxo Bank Saxo Bank 13.09.2022 09:35
Summary:  The equity market rally extended further yesterday, in part on hopes that Ukrainian battleground successes bring the chance of the war ending sooner rather than later and as natural gas prices in Europe trade at their lowest in more than a month. Today’s August US CPI release will be the critical event risk for whether the improvement in sentiment can extend. A hot core CPI number could yet spoil the party, while another soft number like July’s could boost the “peak Fed” narrative for a while and see the rally extend if treasury yields also drop in response.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities extended their gains yesterday with S&P 500 futures rallying another 1.5% closing at 4,130. This morning the index futures are continuing higher as the market is clearly positioning itself for a positive US August inflation figure later today which could see S&P 500 futures extend to 4,200. It is worth keeping in mind that the medium-term outlook has not changed much on inflation and a significant slowdown in the US releasing its oil reserves could quickly add renewed pressure on energy prices. But the key event to watch today is the US August CPI report out at 12:30 GMT. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong, Shanghai, and Shenzhen returned from a long weekend and traded moderately higher, Hang Seng Index +0.4%, CSI 300 +0.7%. HSBC (00005:xhkg) climbed 1.8% after its CFO said the bank was considering resuming share buybacks in the second half of next year and raising staff pay in 2023. Alibaba (09988:xhkg) gained 2.4%. NIO (09866:xhkg) jumped 17.2% following analysts reiterating “buy” on the EV maker.  Chinese biotech stocks traded in Hong Kong fell after US President Biden signed an executive order to develop a strategy to “mitigate risks posed by foreign adversary involvement in the biomanufacturing supply chain”, Wuxi Biologics -18.4%, Wuxi AppTec (02359:xhkg) – 14.4%, Genscript Biotech (01548:xhkg) -8.4%.  USD status, please European currencies surged yesterday on hopes that Ukrainian battlefield successes will compound and bring peace sooner rather than later. EURUSD rose up through key local resistance at 1.0100, but the move didn’t well, with plenty of backfilling. Elsewhere, the USD is in technical limbo in pairs like USDCAD (the 1.3000 area refusing to completely let go) and AUDUSD (a strong sense that the choppy bearish trend is ending would be a solid surge-and-hold above 0.7000.) Today’s US CPI release could give us a firmer sense of USD direction, with weaker inflation across the board relative to expectations and an easing back lower of treasury yields likely required to take the USD firmly lower. JPY crosses back higher as yields rise Expect JPY crosses to the be the most sensitive to any sharp move in US treasury yields off the back of the US August CPI data today. After surging to new local highs yesterday, the JPY bounced back a bit. The focus in USDJPY is on the cycle top near 145.00, a break of which likely sets the clock ticking for actual market intervention from Japan’s ministry of finance. Gold (XAUUSD) and Silver (XAGUSD) Gold rose on Monday as the dollar extended its retreat from a record high ahead of US inflation data due later today, which could potentially slow down the pace of Fed’s rate hikes if the headline print is softer than expected. Gold tested $1734, the 21-day SMA and 38.2% retracement of the August slump, and after getting rejected it retraced to $1720 during Asian trading. Silver meanwhile jumped 5% before running into profit taking around $20 with the added support from signs of a tightening copper market and short covering from speculators who in the week to September 6 raised their short bets to a three-year high. Focus on US CPI and its impact on the dollar and future rate hike expectations. Crude oil (CLV2 & LCOX2) Crude oil continues to trade above levels that otherwise could signal additional weakness amid worries about demand from China due to harsh anti-virus restrictions and the world in general as central banks attempt to dampen inflation by lowering economic activity through aggressive rate hikes. Instead, the oil market, just like most other commodities, has received support from a weaker dollar and fading prospect of an Iran nuclear deal anytime soon. However, the potential for a fresh and strong upside push in crude oil has faded as the world is going through a period of lower growth. Focus being the collapse of Russian defenses in Ukraine and the response from Moscow, the impact of a potential price cap on Russian oil, and monthly oil market reports from OPEC today and IEA tomorrow. US Treasuries (TLT, IEF) The 10-year US Treasury benchmark traded steady near the highs for the recent cycle above 3.30% after an auction of 10-year T-notes yesterday saw demand near the lower end of the range of recent months. A 3-year treasury auction yesterday saw better demand metrics. Treasury traders are watching today’s important US CPI release for clues on whether yields will continue to rise toward the cycle top at 3.50% or ease back again. A 30-year T-bond auction is up after the CPI release today. What is going on? Gloomy economic outlook for the United Kingdom According to the Office of National Statistics, UK GDP grew only 0.2 % month-over-month in July. This is less than expected (0.4 % month-over-month). The weakness is mostly centered on the industry and the construction sector. This is worrying. There is no big bank holiday effect. However, there is anecdotal evidence of a reduction in demand for power because of cost, but it was also a hot month. In addition, the UK July industrial production fell 0.3 % month-over-month versus expected +0.3 %. Expect negative print in the eurozone for the same period too. Ocado sees big miss in Q3 on revenue The UK online grocery retailer reports revenue of £532mn vs est. £557mn as the cost-of-living crisis bites the UK consumer. Ocado sees the value of the average basket down by 6% and energy costs are putting pressure on the operating margin. Nintendo shares surge 5% on game launch record The Japanese game developer announced its biggest Switch console game launch success Splatoon 3 with 3.45mn sold units in Japan in its opening weekend. The success is building on the previous years of strong sales figures for its Switch console and games sold on the console. Shares are up 745% over the past 10 years excluding dividends. Oracle hit expectations in Q1 results The software maker was solid in its performance in its FY23 Q1 results (ending 31 August) delivering $11.4bn in revenue up 18% y/y. The 15-17% revenue growth guidance for the current quarter is also in line with estimates and Oracle indicated that the acquisition of Cerner was going according to plan providing the company with more strengths in its cloud offering. California’s electricity infrastructure is under severe tension According to data released over the weekend by California Independent System Operator, demand on California’s power grid hit an all-time high on 6 September above 50,000 MW. The last two times it was close to this threshold was in 2007 and in 2017. The situation is getting worse and worse. EU proposes mandatory cuts to power use and profit levies It is expected that the EU draft energy plan will include mandatory power demand cut, an “exception and temporary” levy on oil, gas, coal and refining companies, as well as revenue caps for non-gas fuelled power generators. There is likely to be opposition from some of the member states, as the plan is detailed out tomorrow. A rare “triple-dip” La Ninã spanning three northern hemisphere winters is coming Changing temperatures around the world have led to several climate emergencies so far in 2022, from historic flooding, above average temperatures and drought. Parts of the world are expected to experience severe weather for the rest of the year and into 2023, as part of a rare "triple dip La Niña" event according to the World Meteorological Organization (WMO). In Australia it may lead to heavy rain and flooding in the coming months while South America and equatorial Africa could see a repeat of the droughts experienced during the past couple of years. A development that could strengthen concerns about a global food crisis with inventories of several key food items falling to a multi-year lows. Japan producer prices remain above expectations Japan’s August PPI was up 9.0% y/y (vs. 8.9% y/y expected) while last month’s figure was also revised higher to 9.0% y/y from 8.6% y/y previously. The m/m print was slightly softer than expected at 0.2% vs. 0.4% but continued to show rising cost pressures amid the surge in commodity prices and a weaker yen. This suggests more CPI pain is in the pipeline, and the resolve of Bank of Japan to maintain accommodative policy will continue to be tested. New York Fed 1-year consumer inflation expectations at 10-month lows The latest NY Fed consumer inflation expectation gauges declined sharply, suggesting easing price pressures. Expectations for US inflation over three years annualised fell to a two-year low at 2.8% in August, while the one-year ahead gauge was at 5.7%, a 10-month low. Meanwhile, inflation expectations on the five-year horizon fell to 2% annualised from 2.3% previously, suggesting that inflation expectations remain anchored. What are we watching next? U.S. August CPI is out today This is a first estimate and the latest release before the Federal Reserve’s September 20-21 meeting. In July, CPI rose 8.5 % on a yearly basis (much slower than the 9.1 % increase in June). The economist consensus expects inflation to continue decelerating at 8.1 % in August. But core CPI will likely be up. This shows that inflation is broad-based and also expanding into the services sector, for instance. At Saxo Bank, we believe the peak in inflation has passed in the United States in June. But this should not influence the path of monetary policy tightening in the short-term. Shanghai Cooperation Organization meeting on 15-16 September This the first time since 2019 that Asian leaders are meeting in person in a bigger strategic forum. Xi Jinping and Vladimir Putin are officially joining the summit and India’s Modi is expected to join as well. Given the recent military success in Ukraine, the pressures are mounting on Russia and Putin Earnings to watch The next important earnings release to watch is Inditex, one of Europe’s largest fashion retailers, which is expected to report revenue growth of 12% y/y in FY23 Q2 (ending 31 July) but with the operating margin expected to show downside pressure. Wednesday: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0800 – Norway Aug. Region Survey 0900 – Germany Sep. ZEW Survey 1000 – US Aug. NFIB Small Business Optimism 1230 – US Aug. CPI 1700 – US 30-year T-bond Auction 2030 – API's Weekly Report on US Oil and Fuel Inventories During the day: OPEC’s Monthly Oil Market Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-13-2022-13092022
PBoC Talks CNY And Forex Market. Check How Have US Stocks, EURUSD And Other Assets Been Performing Recently

Weaker USD (US Dollar) Has Affected Base Metals And Crude Oil Prices

ING Economics ING Economics 13.09.2022 13:17
Your daily roundup of commodities news and ING views Energy - oil bounces The retreat in the USD has provided a boost to oil prices, with ICE Brent briefly trading back above US$95/bbl at one stage yesterday. Despite this rebound, there are still some clear downside risks for the market. The most important continues to be China’s zero covid policy. The latest data from the US Department of Energy (DOE) shows that US strategic petroleum reserves (SPR) fell by 8.4MMbbls over the last week to 434.1MMbbls, the lowest level that the SPR has seen since October 1984. The current releases are set to come to an end in October. However, there are reports that the US is looking to potentially extend SPR releases. Clearly, the US administration is concerned about what happens to oil prices once the current releases come to an end. EU ministers continue to work towards coming up with a plan to intervene in European energy markets. A draft proposal suggests that the EU will look to enforce mandatory demand cuts for power- overall demand cuts as well as during peak hours. In addition, the EU is also proposing a levy on energy companies’ extra/abnormal profits. Finally, the EU also wants to cap revenues for power generators, with the exception of gas fired power capacity. This is still a proposal, but the hope is that a deal is finalised before the end of September.   Metals - weaker dollar boosts prices Base metals prices started the week higher, boosted by the weaker dollar as the US currency retreated from a record high it reached last week. Aluminium supply risks were exacerbated amid talks of potential power cuts to smelters in China’s Yunnan province. The province, which accounts for more than 12% of the country’s production, may begin reducing operating rates by 20-30% this month amid a drought-induced shortage of hydropower. Meanwhile, the European Union said it will outline this week concrete measures to address the worsening energy crisis, including a proposal for targets to reduce electricity demand as well as aiming to cap excessive revenues of companies producing power from sources other than gas, through a limit on the price of electricity generated from technologies such as renewables, lignite or nuclear energy. Agriculture - USDA revisions push soybeans higher The latest USDA WASDE report shows expectations of further tightening in US corn and soybean supply.  For corn, the USDA has revised its 2022/23 ending stocks to 1.22bn bushels a previous estimate of 1.39b bushels. This was still somewhat higher than the 1.19bn bushels the market was expecting. US corn output was revised down from 14.36b bushels to 13.94bn bushels. This lower output was partly offset by lower domestic demand as well as exports. US soybean production estimates were revised down, from 4.53b bushels to 4.38b bushels, due to lower acreage and yield estimates. As a result, US ending stocks for soybeans were lowered from 245m bushels to 200m bushels for 2022/23, some distance from the 246m bushels the market was expecting. The USDA left US wheat supply and consumption unchanged. For the global market, the USDA estimates corn ending stocks to fall from 306.7mt to 304.5mt for 2022/23, still above the 301.7mt the market was expecting. Global corn production estimates were lowered by 7mt to 1,172.6mt due to supply losses from the US (-10.5mt) and the EU (-1.2mt). Similarly, soybean global ending stocks were lowered from 101.4mt to 98.9mt, lower than market expectations of a little over 101mt. Finally, global wheat ending stocks were increased from 267.3mt to 268.6mt, largely on the back of an increase in production estimates for 2022/23. Read this article on THINK TagsWASDE Oil Energy crisis Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Yen (JPY) Takes A Stab At Resilience, The Grains Sector Has Survived Well

Yen (JPY) Takes A Stab At Resilience, The Grains Sector Has Survived Well

Saxo Bank Saxo Bank 14.09.2022 08:55
Summary:  Equity markets were slammed for their worst losses in more than two years yesterday on a shocking August US CPI print, which showed core inflation rising at twice the anticipated pace for the month. This was a rude shock after a recent strong rally in equities, and US treasury yields jumped, and the US dollar soared as the market rushed to price in the risk that the Fed might hike 100 basis points next week.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities erased most of the gains since 6 September as the market’s positioning ahead of the US August CPI report was completely wrong. Not only did the headline inflation figures not fall m/m, but the core figure is up 0.6% m/m and has been fluctuating around 0.5% m/m for a year suggesting that inflation is getting entrenched at a level suggesting 5-6% annualised inflation in the US. The Fed Funds futures curve immediately shifted downwards lifting peak Fed funds rate at close to 4.5% from around 4% the day before the inflation report. S&P 500 futures tumbled 5.4% from its intraday peak and Nasdaq 100 futures plunged 6.7% from its intraday high. The 3,900 and 12,000 levels are the key levels to watch on the downside in S&P 500 futures and Nasdaq 100 futures respectively. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Shares traded in Hong Kong, Shanghai, and Shenzhen declined on the back of the worst day in more than two years last night in US equities, with Hang Seng Index at -2.6% and CSI 300 -1.2%. Among the top losers, Techtronic Industries (00669:xhkg) plunged 10.6%, Hua Hong Semiconductor (01347:xhkg), Bilibili (09626:xhkg) and Baidu (09888:xhkg) dropped more than 5%, JD.COM (09618:xhkg) and Alibaba (09988:xhkg) slid about 4%. Tencent (000700:xhkg), -1.4%, had an educational game being approved under a company controlled by Tencent’s executives including co-founder Pony Ma. This is the first time Tencent got a game approval this year though being an educational game, it will unlikely be a significant money-making title. CNOOC (00883:xhkg) and COSCO Shipping Energy outperformed, rising 2%-3%. A typhoon is approaching Shanghai and Ningbo causing major container ports in Shanghai and Ningbo to suspend operations. USD rips back higher – suddenly threatening cycle top after CPI data After the shocking August CPI number from the US yesterday, the US dollar soared higher, taking EURUSD all the way back below parity after nearly trading 1.0200 earlier this week. Elsewhere, the USD was universally higher, with a pair like AUDUSD slamming all the way to the low 0.6700's and therefore not far from the cycle low, while NZDUSD actually posted a cycle low, and GBPUSD trading south of 1.1500 after trading north of 1.1700. Moves by the Bank of Japan and verbal intervention from the Japanese Ministry of Finance helped temper the USD move this morning (more below). Now the focus shifts to next week's FOMC meeting, where the market is now pricing the rising risk that the FOMC could hike 100 basis points. JPY takes a stab at resilience on the anticipation of intervention The Bank of Japan carried out a “rate check” in the FX market, which is widely seen as a precursor for actual market intervention. This tamed the USDJPY move higher from sub-142.00 levels to nearly 145, as the gains were pared back to 144.00, with the JPY also firmer broadly. Finance Minister Suzuki said nothing could be ruled out in response to the weakening JPY and that if the current trend persisted, stepping into markets is an option. But as past experience has shown, intervention often only creates temporary volatility if the underlying issue is not addressed - in this case, the Bank of Japan's insistence on maintaining very low rates and controlling yields out to 10 years. If yields continue to rise globally, Japanese officialdom will have an enormous and likely unwinnable fight on its hands if the Bank of Japan fails to change its policy. Gold (XAUUSD), Silver (XAGUSD) and copper (COPPERUSDEC22) ... all tumbled following the stronger than expected US CPI print, thereby reversing some of the recent weak dollar-led gains. Prior to the release copper had been on a tear reaching $3.7/lb as the LME market continued to signal the tightest market conditions since November on increased demand from China. Gold trades near $1700 and close to the current floor around $1680 after the CPI print strengthened the view the FOMC will have to remain hawkish and continue to aggressively hike rates. However, the risk to economic growth while inflation remains stubbornly high may bring back worries about stagflation, a development that may lend support to investment metals. Continued focus on the dollar and the markets pricing of future inflation expectations. Crude oil (CLV2 & LCOX2) Crude oil traded higher on Tuesday before the hotter-than-expected US CPI print helped send most commodity prices, including oil, lower on fears aggressive rate hikes could curb demand. Earlier the market traded up after OPEC maintained their 2023 outlook for a 2.7 million barrel per day increase in global demand. The EIA delivered the same message last week and the IEA is likely to do the same today when their monthly oil market report is released. Developments that highlight the current discrepancy between the (lower) price action and what these major forecasters are seeing. A recovery later in the day was supported by the Biden admin saying it will consider starting refilling strategic reserves when WTI falls below $80. Ahead of today’s EIA stock report, the API reported a 6m bbl crude stock build, a 3.2m bbl drop in gasoline and 1.8m bbl build in distillates. US Treasuries (TLT, IEF) Treasury yields jumped yesterday on the shocking August US CPI data, with the yield curve flattening aggressively as the hot data point saw the market rushing to price in the risk of more aggressive moves to counter inflation at coming meetings. The 10-year yield was taken back toward the cycle top from mid-June at 3.50%. A further rise above this yield level will continue to drive the risk of weaker sentiment and USD strength. What is going on? US August CPI shocks with high core inflation reading The headline US CPI data came in slightly above expectations, with a year-on-year reading of 8.3% vs. 8.1% expected and a month-on-month reading of +0.1% vs. -0.1% expected, a real surprise given sharp drops of late in gasoline prices. But the real shock was the core Ex Food and Energy inflation reading of +0.6% month-on-month, twice what was expected. This triggered an enormous slide in risk sentiment as the market rushed to price the risk that the FOMC might hike as much as 100 basis points next week. As of this morning, about 85 basis points is priced for the meeting. The grains sector maintained a bid on Tuesday ... while most other commodities took a tumble after the US CPI print once again raised concerns about aggressive growth and demand killing rate hikes. With demand being relatively constant the grains sector held up well as the sector continued to focus on supply risks and dwindling inventories. The US Department of Agriculture this week slashed its estimates for soybean supplies from the US, the second-largest producer after Brazil where a lingering “triple-dip” La Nina repeat could bring dry conditions in the coming months. In addition, wheat exports have been cut because of the war in Ukraine, and there’s uncertainty over Ukraine’s grain export corridor after criticism from Putin. Inditex 1H revenue beats estimate The Spanish fashion retailer delivered first-half revenue of €14.9bn vs est. €14.6bn on top of delivering EBITDA margin of 27.1% vs est. 26.8%. Inditex reiterates guidance of online sales exceeding 30% of revenue by 2024. New lockdowns in China Two cities around Beijing announced lockdowns due to Covid risks. Shijiazhuang (over 2.3 million inhabitants) asked all residents of Yuhua district to work from home for a period of three days (expected to end on Friday morning). Sanhe (around 440,000 inhabitants) implemented a full lockdown of its entire population at least until Saturday morning. This underscores the supply chain risks during the winter period in the event China experiences a bigger Covid outbreak. UK August CPI comes in slightly above expectations at core UK inflation came in at 9.9% on the headline versus a slightly higher print expected, but the core inflation level rose to a new cycle high of 6.3%, just above the 6.2% expected. Price pressures are likely to remain elevated this month as well, despite some softening in fuel prices, as food and services costs continue to rise. Further gains in inflation can be expected in October, but the capping of household energy bills may help to soothe inflationary pressures thereafter. Cheniere was the one shining light on Wall Street overnight Cheniere, the US’ biggest LNG exporter, saw its shares rise 3.1% yesterday while markets saw a sea of red when US inflation data came out higher than expected. The highlights the fact that energy companies can and have been able to outperform the market. The largest US exporter of liquefied natural gas boosted its full-year 2022 profit forecast beyond analysts’ expectations as shipments are already set to depart their dock sooner than anticipated. What are we watching next? Shanghai Cooperation Organization meeting on 15-16 September This the first time since 2019 that Asian leaders are meeting in person in a bigger strategic forum. Xi Jinping and Vladimir Putin are officially joining the summit and India’s Modi is expected to join as well. Given the recent military success in Ukraine, the pressures are mounting on Russia and Putin Ethereum merger will draw attention The Ethereum blockchain’s much-anticipated software upgrade, the so-called Merge, is expected to take place tomorrow morning, according to its core developers. The new system, known as "proof-of-stake", will slash the Ethereum blockchain's energy consumption by 99.9%, developers say. Most blockchains, including Bitcoin's, devour large amounts of energy, sparking criticism from some investors and environmentalists. The merge could make Ethereum more favourable to pension funds and other institutional investors that are under the scanner for environmental concerns, but there is also come skepticism on how scalable Ethereum could become and if it becomes more susceptible to attacks by hackers. France is expected to enter a recession next year Barclays is the first major international bank to forecast a recession in France next year (2023 GDP growth at minus 0.7 %). This is highly likely, in our view. But it is certainly too early to assess the depth of the recession at this stage. It will depend on the evolution of the energy crisis and the risk of energy rationing. Forecasting is always a complicated task. This is even more complicated now due to the elevated level of uncertainty regarding the short-term economic path. Expect other European countries to enter a recession next year (the United Kingdom, Germany, Hungary etc.). Earnings to watch Inditex has already reported before the European equity market opens (read earnings review above), so the next earnings release in focus is Adobe tomorrow. Analysts expect revenue growth of 12.6% y/y with operating margin jumping back again following cost reduction exercises. The key risks for Adobe are the strong USD, falling technology spending, and lower advertising growth lowering demand for content creation. Today: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0800 – IEA's monthly Oil Market Report 0900 - Eurozone Jul. Industrial Production 1230 - US Aug. PPI 1230 - Canada Jul. Manufacturing Sales 1430 - US DoE Weekly Crude Oil and Product Inventories 1430 - ECB's Villeroy to speak 2245 - New Zealand Q2 GDP 2350 - Japan Aug. Trade Balance 0120 - China Rate Announcement 0130 - Australia Aug. Employment Data  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher     Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-14-2022-14092022
If OPEC+ Doesn't Apply A Significant Supply Cut, Crude Oil Prices Could Go Down

Crude Oi: It's Good To Have A Look At What We Learn From The IEA Report

Craig Erlam Craig Erlam 14.09.2022 20:37
A still uncertain outlook for oil demand Oil prices suffered alongside risk assets on Tuesday, albeit to a much lesser extent, with the threat to the US economy of much higher interest rates a downside risk. Of course, it’s yet another risk that I’m sure OPEC+ will be keen to stress it would adapt to in its desperation to ease market volatility and keep prices high. The oil price is a little higher after the IEA monthly report which claimed oil use for power generation will hit 700,000 barrels per day, while at the same time indicating that demand growth will halt in the fourth quarter before rising by 2.1 million barrels per day next year. It, therefore, lowered its forecast for world oil demand growth this year by 110,000 BPD to two million while warning of downside risks including the faltering Chinese economy and a slowdown in OECD countries. Ultimately, the outlook is heavily subject to revisions given the still rapidly evolving environment. A nervy week ahead It won’t come as a surprise to anyone that gold went into freefall following the US inflation report as it became clear that the Fed is in no position yet to ease its foot off the brake. Suddenly the yellow metal is looking down rather than up, with $1,730 remaining strong resistance to the upside but $1,680 now very vulnerable. It’s going to be a nervy week for gold bulls. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Oil outlook uncertain, gold under pressure - MarketPulseMarketPulse
Chengdu Returns To Normal Life, The Entry Of Genting Group Into The Competition

Yen's (JPY) Lack Of Conviction For Strength, Meeting Of President Xi And President Putin, Australia’s Employment Data

Saxo Bank Saxo Bank 15.09.2022 10:00
Summary:  Some respite in US equities last night, amid bottom hunting and a cooler US PPI report. UK CPI also eased from record highs, but there is nothing that could change the downtrend that remains in place globally. The USD remained steady despite threats of direct intervention by the Bank of Japan and downplaying of the 7-handle by Chinese authorities. Oil prices jumped on hopes of easing restrictions in parts of China. Focus today on Australia’s jobs report which could guide the path of rate hikes from here, but also key to watch will be the Xi-Putin meeting and how the geopolitical situation develops. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) clawed back from an intraday sell off on Wednesday US equity markets rebounded in late trade on Wednesday after an intraday sell off. The S&P 500 ended up 0.3%, Nasdaq 100 up 0.8%. Hedge funds did some buying in the technology space, but it wasn’t enough the significantly move the needle. The most gains were seen in the Oil and Gas sector with Energy stocks rising the most after the crude oil price rebounded 2%. The Consumer discretionary followed higher. The bearish tone remains in equities with the market toying with the idea that the Fed will raise rates by 100bps (1%). In fact there is a 25% chance the Fed will raise rates by 1% at their meeting next week. Regardless of how high they hike, 0.75% or 1%, the technical picture looks bearish as well. The S&P 500 may head back to test support at around 3,738 and June lows at 3,636. Noteworthy US market moves Moderna (MRNA:xnas) gained 6.2% after the company said it is open to selling Covid vaccines to China. Starbucks (SBUX:xnas) rose 5.5% after the company raised its sales and profit outlook, expecting 7%-9% p.a. comparable sales growth and 15-20% earnings growth over the next three years. Twilio (TWLO:xnys) jumped 10% after announcing a plan to cut 11% of its workforce. Shares of railroad operators dropped on probable labor strike, Union Pacific (UNP:xnys) -3.7%, CSX (CSX:xnas) -1%. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The flattening went on for a second day in a row as traders took to their hearts that the Fed would be hawkish for the rest of the year and the odds for cracking the economy down the road increased. While 2-year to 10-year yields climbed 2 to 4 basis points, the yield of the 30-year long bond continued to slide and finished the session 6bps lower at 3.45%.  Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Shares traded in Hong Kong, Shanghai, and Shenzhen declined on the back of the U.S. stocks’ worst day in more than two years, Hang Seng Index -2.5%, CSI 300 -1.1%. Industrials, semiconductors, and healthcare were among the top losers, Techtronic Industries (00669:xhkg) -10.0%, Hua Hong Semiconductor (01347:xhkg) -5.7%, Wuxi Biologics (02269:xhkg) -4.9%, BeiGene (06160:xhkg) -4.5%. Tech hardware stocks declined following a 31.2% YoY falls in China’s smartphone shipments in July, Sunny Optical (02382:xhkg) -4.2%, Xiaomi (01810:xhkg) -3.3%. China internet stocks traded weak, Hang Seng Tech Index (HSTECH.I) -2.8%, Bilibili (09626:xhkg) -5.2%, Baidu (09888:xhkg) -5.7%, JD.COM (09618:xhkg) -4.2%, Alibaba (09988:xhkg) -4.1%. Fosun (00656:xhkg) tumbled 6.9% on unconfirmed reports claiming that a couple of Chinese regulators had told investors to review their equity and credit exposures to Fosun.  Bank of Japan’s rate-checking: a precursor to direct intervention or just more of verbal intervention? Even as the USD stayed firm overnight, USDJPY retreated from near-145 levels to 143 amid fears of potential FX intervention by Japanese authorities. On Wednesday, the BOJ conducted a so-called rate check in the market, asking for an indicative price at which it could buy yen, a move widely seen as a precursor to intervention. Both the finance minister and the nation’s top currency official also warned that all options were on the table. Japan last intervened to buy the yen in 1998.The 145-level is becoming the tolerance limit for Japanese authorities, but real intervention lack so far and only volatility goes up as threats ramp up. Yen lacks conviction for strength due to fundamental weakness stemming from yield differential with the US. Crude oil (CLU2 & LCOV2) Crude oil prices gained momentum overnight and remained steady in early Asian hours amid reports of the White House looking at refilling its strategic reserves at around $80/barrel. EIA’s weekly inventory report was mixed, with a large build in crude oil and a fall in gasoline. WTI futures rose above $88/barrel while Brent was above $94. Demand side factors also saw a modest improvement with Chinese city of Chengdu looking at easing restrictions from today. However, a looming rail strike in the US is likely to cause some disruption in the commodity markets.   What to consider? US core PPI hotter-than-expected US August PPI relieved some of the pressures seen from the CPI report a day earlier with the headline still in negative territory at -0.1% m/m (exp. -0.1%; prev. -0.4%) and slightly softer on a y/y basis at 8.7% (exp. +8.8%; prev. +9.8%). Core measure however beat expectations at 0.4% m/m (exp. +0.3%; prev. +0.3%) and 7.3% y/y (exp. +7.1%; prev. +7.7%). Lower energy prices helped to cool the headline print, and this may mean somewhat softer CPI prints in the coming months, but still inflation remains uncomfortably higher than the Fed’s 2% target. UK CPI cools but no relief for BOE UK inflation eased slightly to come in at 9.9% y/y (prev. 10.1%, exp. 10.0%) and 0.5% m/m (prev. 0.6%, exp. 0.6%), but it isn’t enough to call for a peak in inflation yet. Prime Minister Liz Truss announced plans to freeze an increase in energy bills due to hit in October, a move economists say will reduce the severity of a further spike in prices this winter. Even with those measures, inflation will remain above the BOE’s 2% goal well into next year. President Xi and President Putin are expected to meet in person for first time since February On the sidelines of the Shanghai Cooperation Organization summit held in Uzbekistan today and tomorrow, President Xi and President Putin are expected to meet up for the first time after Russia’s invasion of Ukraine. Analysts are expecting the two leaders to discuss the sale of Russian oil and natural gas to China and the use of the rubble and the renminbi to settle bilateral trade, in addition to their positions regarding the respective core interest of each side, i.e. Ukraine and Taiwan.  Newswires suggest that the US is considering sanctions on China A Reuters story citing an anonymous source suggests that the U.S. is considering options for a sanctions package against China as part of its attempts to deter China from taking military actions against Taiwan. The story further says that the European Union is under pressure to follow suit.  China’s state-owned media downplayed the importance of the 7-handle in the Yuan State-owned China Securities Journal downplayed the importance of whether the renminbi breaks 7 the figure or not and says that there is no basis for the renminbi to depreciate in the long run. Australia’s jobs data out today will be watched closely by the RBA, when determining how much to rise rates by in October Today’s employment data is expected to show Australia’s unemployment rate remained at 50-year lows, at 3.4% in August. The RBA will also be watching to see how much employment changed in August. In July employment fell from its record high, with 41,000 jobs lost. As for today’s figures to watch; Bloomberg’s survey of economists expect 35,000 jobs to have been added last month. If more jobs are added than expected, you may see a selloff in growth sectors, such as technology, consumer discretionary and property as the RBA will have more room to hike rates. Inversely, employment falls and or unemployment rises, the RBA will have less room to hike and as such you may see an equity rally. Currently RBA interest rate futures expect rates to rise by 0.25% next month. For those watching currency markets, keep in mind the AUDUSD is being pressured to 2-year lows. However if data is stronger than expected, you may see a short lived-knee jerk rally the AUDUSD.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-15-sept-2022-15092022
Important Speeches Of The Day And A Few Data From Canada

Energy Prices Remain Very Volatile, Activities In The Markets

Swissquote Bank Swissquote Bank 15.09.2022 10:31
US equities eked out small gains yesterday as dip buyers timidly came in, but risks remain tilted to the downside with the disappointing inflation figures, and the risk of the largest rail strike in the US since 1992. Crude Oil Prices Released yesterday, the US producer price data didn’t enchant investors. The headline figure fell for the second consecutive month but the core PPI strengthened, hinting that most of the easing in producer inflation was due to cheaper energy prices – which however remain very volatile, and which, more importantly carries a decent upside risk. The barrel of American crude flirted with the $90 mark yesterday, without however being able to clear resistance at this level. Energy companies gained despite news that Europeans are looking to raise $140 billion euros from energy companies to help households and businesses survive through winter. The situation on the stock market The S&P500 recover a part of losses yesterday, as Nasdaq gained 0.84%. But the risks remain clearly tilted to the downside. The US dollar remains relatively strong near the 20-year highs, the EURUSD consolidates below parity as gold slipped back below $1700 per ounce. The USDJPY retreated on expectation that the Bank of Japan (BoJ) could intervene to stop the yen’s depreciation. Ethereum trades around $1600 as Merger Upgrade is now imminent! Watch the full episode to find out more! 0:00 Intro0:24 Dip buyers return to a risky market2:31 US crude flirts with $90pb3:41 US rail strike risk weighs on sentiment4:55 Energy stocks rally despite EU measures to cope with crisis7:07 Gold under pressure7:50 BoJ could intervene to strengthen the yen8:52 Ethereum Merges today! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #PPI #inflation #rail #strike #USD #EUR #JPY #BoJ #rate #check #Gold #XAU #crude #oil #BP #XOM #Chevron #Coterra #windfall #taxes #energy #crisis #Bitcoin #Ethereum #Merge #update #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Ethereum Is Expected Merge, Local Governments In China Are Supporting The Demand For Real Estate

Ethereum Is Waiting For Merge, Local Governments In China Are Supporting The Demand For Real Estate

Saxo Bank Saxo Bank 15.09.2022 10:14
Summary:  Yesterday’s session was a muted affair as the market picked up the pieces in the wake of Tuesday’s huge slide in the market after a hot US August CPI number. Tomorrow sees the expiry of options on trillions of notional value in equities and futures, which may have added to the volatility this week. The US dollar remains strong as surging US treasury yields threaten new multi-year highs ahead of the US August Retail Sales release later today.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are scratching around after the enormous sell-off triggered by the hot US CPI release on Tuesday. Some of the scale of the volatility on Tuesday could be due to options exposures, as options of trillions of dollars on notional equities and futures expire on Friday. If the US August Retail Sales release today leads to even higher yields, stocks could find themselves under renewed pressure. The technical focus is on the recent pivot lower just below 3,900 in the S&P 500 and the 12,000 area low in the Nasdaq 100 index.  USD strength continues, threatens cycle highs A bit of consolidation yesterday in USD pairs after the huge comeback strengthening move in the US dollar in the wake of the Tuesday US August CPI release, but the USD rallied anew from late yesterday and overnight, with the action pinned near the cycle highs in some USD pairs, such as USDSEK, USDNOK and NZDUSD, but elsewhere with a bit of range left to play with. The August Retail Sales release today should garner attention as a strong number could underline the risk of higher US yields and a Fed tightening cycle that extends longer and higher than currently expected if US consumers are getting a second wind after the shock of higher gasoline prices has eased notably since the beginning of the summer. USDJPY has rebounded from yesterday’s lows as traders treat JPY crosses with care, knowing that new highs in the key USDJPY pair are likely to bring actual market intervention from the Bank of Japan/Ministry of Finance. Gold (XAUUSD) Gold trades below $1700 and close to an area around $1680 that has provided support on several occasions during the past two years. The yellow metal turned lower after Tuesday’s CPI shocker raised the prospect of a one percent rate hike next week and a terminal Fed Funds target rate around 4.5% (up 2% from the current level) before March next year. Developments and speculation that continue to underpin the dollar while undermining dollar denominated commodities, such as precious and industrial metals. Crude oil (CLV2 & LCOX2) Crude oil trades sideways with the stronger dollar and expectations for higher US rates hurting the prospect for future demand being offset by news that China’s Chengdu, locked down for weeks, plans to ease measures. The impact of China’s zero-Covid tolerance strategy this year has led to the biggest drop in oil demand in more than three decades according to the IEA. In their latest monthly oil market report, they predicted a continued slowdown in global demand ahead of year-end before accelerating to rise by 2.7 million barrels a day in 2023. Oil market tightness at the beginning of 2023 would be led by a potential 1.9 million barrels Year on year drop in Russian production by February due to sanctions. US natural gas US natural gas trades back above $9 per MMBtu and up 13% on the week as a looming rail strike (see below) would reduce supplies of coal, forcing power generators to rely more heavily on natural gas at a time where demand for cooling remains elevated due to expectations for hotter-than-normal weather across the Midwest and Eastern parts of the US. US Treasuries (TLT, IEF) US 10-year yields are now pinned at the highs for the cycle near 3.50% ahead of today’s US August Retail Sales release. Interesting to see how the market treats a strong data point – with a deepening inversion as the market prices a more aggressive Fed (as happened on the surprisingly strong CPI release Tuesday) or with the entire curve lifting. Exceptionally weak data would also be interesting as it would challenge the rising yields trend/narrative. What is going on? U.S. inflation remains broad-based The producer price index (PPI) dipped 0.1 % month-over-month in August. This reflects cheaper gasoline prices (minus 13 % in August compared to July) and to a lesser extent lower freight costs. However, less volatile elements of the index rose more than expected. The core price index was up 0.4 % on a monthly basis. The numbers like those seen in Tuesday’s US CPI report confirm that U.S. inflation is still broad-based and inflation pressures are unbroken. This opens the door to a new interest rate hike by the U.S. Federal Reserve next week. The majority of the market expects a 75 basis point hike but a minority (between 10 % and 20 % of market participants depending on which indicators we monitor) bet on a 100 basis point hike in the cards. Chinese cities move to boost housing demand Local governments across China have moved to encourage property demand after the Chinese central government called for measures to ease the crisis. Some 120 have loosened restrictions on funds for property purchases. This news supported beleaguered Chinese developers’ stocks in trading on Thursday. Ethereum Merge The second-largest cryptocurrency, Ethereum, is very close to its expected Merge, scheduled to be within the next hour. Ethereum will go through a major upgrade which fundamentally changes the way that transactions are validated on the blockchain, and it will reduce the energy consumption for running the network with around 99.95%. What are we watching next? Looming rail worker strike in the United States The two largest railroad trade unions said they will strike if the ongoing negotiations with employers about higher salaries and better work conditions fail. The strike could start as early as tomorrow and could have a very negative impact on the U.S. economy. Estimates suggest this could cost the economy nearly $2bn per day. In the United States, rail freight represents almost a third of the total domestic freight. Shanghai Cooperation Organization meeting today and tomorrow This is the first time since 2019 that Asian leaders are meeting in person in a bigger strategic forum. Xi Jinping and Vladimir Putin are officially joining the summit in Samarkand, Uzbekistan and India’s Modi is expected to join as well. Given the recent Ukrainian military success against Russia, the pressures are mounting on Russia and Putin, which will test a Russian-China "friendship” that at a meeting of Xi and Putin during the Beijing Olympics and just ahead of Russia’s invasion of Ukraine was declared to be “entering a new era” and “without limits”.  Earnings to watch Today, focus is firmly on Adobe’s earnings report today after the close. The company has seen a wild ride in recent years, pumped to remarkable heights by late 2021 due to its steady solid growth and high profitability with a backdrop of seemingly ever falling yields, only to see the share price crushed in half since its 2021 peak, first due to the seismic shift higher in yields, but compounded by faltering growth rates for the company starting two quarters ago. Today: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0900 – Eurozone Jul. Trade Balance 0915 – ECB's Guindos to speak 1230 – US Weekly Initial Jobless Claims 1230 – US Sep. Empire Manufacturing 1230 – US Aug. Retail Sales 1430 – EIA's Natural Gas Storage Change  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-15-2022-15092022
China May Need Less Crude Oil - IEA Report Finds. The European Union Considers Limitations On Power Demand

China May Need Less Crude Oil - IEA Report Finds. The European Union Considers Limitations On Power Demand

ING Economics ING Economics 15.09.2022 12:56
Sentiment in the oil market remains fairly negative due to continued concerns over Chinese demand Energy - China demand drop Despite concerns over demand, the oil market is holding up relatively well. In its latest monthly market report, the IEA estimates that Chinese oil demand will fall by 420Mbbls/d this year, which would be the first annual decline since 1990. Chinese demand has clearly suffered due to the zero covid policy that China continues to follow. Weaker Chinese demand was partly offset by the expectation that we will see a significant amount of gas to oil switching, given the high gas price environment. As a result, the IEA estimates that global oil demand will grow by 2MMbbls/d this year and by 2.1MMbbls/d in 2023, slightly below their previous forecasts.  With Russian oil flows holding up better than expected, the IEA expects that the global market will be in surplus of close to 1MMbbls/d in 2H22 and then more balanced over 2023 as the EU ban on Russian oil comes into full effect. Weekly EIA data shows that US commercial crude oil inventories increased by 2.44MMbbls over the last week. When SPR releases are taken into consideration, total US crude oil inventories declined by 5.97MMbbls. Gasoline inventories declined by 1.77MMbbls, whilst distillate fuel oil stocks increased by 4.22MMbbls. This is the largest weekly increase in distillate stocks so far this year, which would be welcome to the market given the tightness in middle distillates. Despite the increase, inventories are still around 30MMbbls below the 5-year average. The EU’s final proposal for intervention in the European energy markets was broadly in line with the draft proposal. First, the EU proposes that power demand should be cut, including a mandatory cut of 5% from selected peak hours, as well as aiming to reduce overall power demand by 10% until the end of March next year. Secondly, the EU wants to impose a temporary revenue cap on some power generators (renewables, nuclear and lignite) at EUR180/MWh. Finally, the EU also proposes a levy on excess profits from the oil, gas coal and refining sector. Metals – risk-off sentiment weighs on the complex Copper and aluminium prices fell yesterday as investors continue to digest the high CPI print from the US earlier this week, and what it