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  1. #21

    US Dollar bond yields drop as oil tumbles on output cut doubts

    The dollar and U.S. bond yields fell on Monday as investors reversed a "Trumpflation" trade that has gripped markets since the U.S. elections, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.



    Brent crude futures last traded at $47.13 per barrel LCOc1, down slightly on the day, after having fallen by as much as 2.0 percent in early Asian trade, following on from a 3.6 percent fall on Friday as doubts arose over whether the Organization of the Petroleum Exporting Countries would reach a deal later this week.

    Prospects of reduced upward pressure on inflation from oil prices, prompted investors to temper expectations for rises in U.S. interest rates, bring down treasury yields and the dollar.
    That gave some relief to Asian shares, which had underperformed on worries about capital flight to higher-yielding U.S markets in the weeks since Donald Trump's Nov.8 election win.
    MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, led by gains in Hong Kong .HSI and Taiwan .TWII.
    In contrast, U.S. stock futures ESc1 slipped 0.2 percent after their stellar performance this month on hopes President-elect Trump's policy of fiscal spending, deregulation and protection of domestic industries will boost U.S. inflation and benefit Corporate America.
    European shares are expected to dip, with spread-betters looking at a fall of 0.2 percent in Germany's DAX .GDAXI and 0.1 percent in Britain's FTSE .FTSE.
    Japan's Nikkei average .N225, which had performed even better than Wall Street thanks to the yen's fall, ended down 0.1 percent.
    "It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
    Wall Street's four main indexes .DJI .SPX .IXIC all hit record highs last week, a feat last achieved in 1999.
    Yet some investors question whether the market may have got carried away with optimism on Trump's policy, given the uncertainty on the political neophyte's presidency, including on how closely he can work together with the Congress.
    But languishing oil prices, giving investors a more immediate reason to have second thoughts about how prospects for inflation and U.S. interest rates.
    Saudi Arabia said on Friday it will not attend talks on Monday with non-OPEC producers to discuss supply cuts.
    "Oil prices have fallen considerably on worries about the deal. That would pressure energy shares, and could hit the entire stock markets. Given their rally in recent days, it's no surprise to see some adjustment," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
    Saudi Arabia's energy minister Khalid al-Falih said on Sunday that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
    His comments raised worries that a preliminary agreement reached in September for OPEC to reduce output to between 32.5 million and 33 million barrels per day may fall apart when OPEC ministers meet on Wednesday to finalize that deal.

    OPEC also wants non-OPEC producers such as Russia to support the intervention by curbing their output and many market players still expect them to reach a deal.
    As lower oil prices reduce inflationary pressure, they sapped momentum for a sell-off in U.S. Treasuries and a rally in the dollar, the market's favorite play since the U.S. election.
    The dollar sank more than 1.6 percent against the yen to as low as 111.355 yen JPY=, down sharply from its eight-month high of 113.90 set just on Friday. It last traded at 111.90 yen.
    "As long as the dollar holds above 111-111.50 yen, I do not judge the (dollar's rising) trend has changed," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered in Tokyo.
    The dollar's index against a basket of six major currencies .DXY =USD stood at 100.88, slipping 0.6 percent on day and off its 13 1/2-year high of 102.05 touched on Thursday.
    ollar shed more than 0.5 percent against many emerging market currencies, including the Mexico peso MXP=, the biggest loser after Trump's election victory, the South African rand ZAR= and the Turkish lira TRY=.
    The euro EUR= gained 0.8 percent to $1.0655, extending its rebound from its near one-year low of $1.0518 touched on Thursday.
    The single currency has so far shown limited reaction to the French conservatives' presidential primaries on Sunday.
    Former Prime Minister Francois Fillon, a socially conservative free-marketeer, won the run-off, setting up a likely showdown next year with far-right leader Marine Le Pen that the pollsters expect him to win.
    Gold XAU= bounced back to $1,192.0 per ounce from Friday's low $1,171.5, which was its lowest level since early February.
    The yield on 10-year U.S. Treasuries US10YT=RR dropped almost 5 basis points to 2.323 percent, off its 16-month high of 2.417 percent touched on Thursday.
    On the other hand, some commodities gained sharply on hopes of strong demand for property and infrastructure investment in China and the United States.
    Chinese steel futures SRBcv1 jumped over 6 percent, while iron ore futures DCIOcv1 also gained about six percent and zinc CMZN3, used to galvanize steel, powered to a nine-year high on the London Metal Exchange.

  2. #22

    Oil prices fall over doubts of planned crude output cut

    Oil prices fell on Monday, adding to Friday's steep losses as doubts re-emerged over the ability of major producers to agree output cuts at a planned meeting on Wednesday aimed at reining in global oversupply.

    Brent crude futures LCOc1 fell 2 percent at one point, but regained ground to trade down 35 cents, or 0.74 percent, at $46.89 per barrel at 0749 GMT.

    U.S. West Texas Intermediate (WTI) crude futures CLc1 also retraced early losses and was trading down 38 cents, or 0.78 percent, at $45.70 a barrel.
    Monday's fall came amid choppy trading and after prices tumbled more than 3 percent on Friday on disagreement between OPEC and non-OPEC crude exporters like Russia over who should cut production by how much in order to curb a global supply overhang that has more than halved prices since 2014.
    Despite the wrangling, traders said they still expected some form of an output restriction to be agreed this week.
    "An agreement is needed to avoid (price) downside. So, the question is what kind of agreement will they do? The market is clearly very nervous... We shall see. I think they will reach some form of agreement," said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.
    The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on Wednesday to decide on the details of a cut, potentially including non-OPEC members like Russia. A meeting between OPEC and non-OPEC producers that was to be held on Monday was called off after Saudi Arabia declined to attend.
    Saudi Arabia's energy minister Khalid al-Falih said on Sunday that Saudi representatives would not attend the talks originally scheduled for Monday because no agreement within OPEC had been reached so far.
    Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
    Despite the disagreements among producers, Morgan Stanley said it still expected "at least a paper deal agreement".

    Even if a cut is agreed, oversupply may not end soon.
    In the United States, the oil rig count exploring for new production rose by three last week, and Goldman Sachs said that "since its trough on May 27, 2016, producers have added 158 oil rigs (+50 percent) in the U.S."
    Eiichiro Kitahara, Executive Officer of Japanese refiner TonenGeneral Sekiyu K.K said that "once oil prices reach above $60/barrel, (U.S.) shale oil producers are likely to resume operations, which will weigh on the market."

    [Only registered and activated users can see links. ]Important Forex News Daily

  3. #23

    OPEC’s Last Cut Shows Oil Market Could Get a Whole Lot Messier

    Last OPEC accord to cut production in 2008 lacked details
    Cuts with unclear quotas most likely result: Capital Economics

    Anyone planning to trade the outcome of this week’s OPEC meeting might consider the lessons of the group’s last production cut. Then take a deep breath.

    In December 2008, as oil demand and prices slumped during the global financial crisis, the Organization of Petroleum Exporting Countries, announced a record output reduction. What was supposed to stabilize the market initially sowed more confusion as the group’s statement bundled together previously announced supply curbs and omitted a breakdown of how much each member would cut -- details of which leaked out days later.

    While the deal did eventually halt the slide in prices, the Chicago Board Options Exchange Crude Oil Volatility Index, a common measure of market turbulence, stayed near a record over the following two months amid doubts that OPEC members would comply with their new targets.

    “OPEC meetings can be messy, and the outcomes can also be messy,” said Mike Wittner, global head of oil research at Societe Generale SA. “If there is a deal, the question for the markets will be whether it is a strong deal or a weak deal, and this will be determined by the level of detail announced by OPEC.”

    In the two-month run-up to this week’s meeting in Vienna, oil has swung between $44 and $53 a barrel amid investor skepticism that OPEC can deliver on its Sept. 28 pledge in Algiers to cut output to the 32.5 million to 33 million barrels a day. A deal founded on a group target would see crude trade around $45 a barrel, preceded by some price volatility, according to Thomas Pugh, a commodities economist at Capital Economics. He assigns a 60 percent probability to that outcome.
    Technical Committee

    A technical committee of OPEC delegates last week sent a proposal to the organization’s oil ministers, recommending that most members cut output by 4 to 5 percent from the October level estimated by independent sources. Yet, it was unclear whether Iraq and Iran -- OPEC’s second and third-largest producers -- accepted such reductions and what level they would be asked to cut from, forcing the committee to tackle the issue again on Monday.

    With Iran and Iraq proving difficult to persuade, OPEC “may have to opt for an opaque statement about burden sharing in order to get an agreement inked,” Helima Croft, head of commodity strategy at RBC Capital Markets, said by e-mail.

    Iraq has argued it should be exempted from cuts as it’s fighting Islamic State militants. Its position softened last week after Prime Minister Haider Al-Abadi said his country would share the burden of cutting production along with the rest of OPEC.
    Clear Quotas

    OPEC’s crude production was 33.64 million barrels a day in October, according to its independent estimates. That means the group would need to cut by 640,000 to 1.1 million barrels a day to comply with the Algiers target range.

    Most analysts expect OPEC to sign an accord to reduce output, but only seven out of 20 expect it to specify how much each member should cut, complicating the task of investors assessing the impact on markets.

    An OPEC deal with clear quotas would boost prices to $55 a barrel, said Pugh of Capital Economics, with investors switching their focus to the issue of compliance. He assigns that outcome a 25 percent probability, while seeing a 15 percent chance of there being no deal at all, a scenario that would trigger a crash in prices to below $40.

    OPEC’s output cut on Dec. 17, 2008, following a slump in prices from a record $147.27 a barrel five months earlier, didn’t initially convince the market. Prices on the New York Mercantile Exchange dropped a further $9 over the three days following the deal, before rebounding to almost $50 a barrel early in 2009. Two months later, crude was still trading below pre-OPEC meeting levels and only made a sustained break above $50 in May.

    “The messaging is going to be a huge challenge,” said Croft of RBC Capital Markets. “A statement that is super short on details about the allocation of the cut could be dismissed as a non-event despite key members -- such as the Saudis and the Gulf Countries -- being committed to making the math work.”

  4. #24

    OPEC’s output cut on Dec

    Oil prices are correlated to the US dollar, but correlations also break, especially with bigger events. The team at Goldman Sachs casts doubt about the correlation.

    Historically, the Dollar has been negatively correlated with oil prices, meaning low oil prices have coincided with a strong Dollar, while high oil prices have typically come when the Dollar has been weak.

    We argue that the importance of this empirical relationship is overstated for two reasons.

    First, many of the counterpart currencies in broad Dollar indices belong to commodity exporting countries, so that falling (rising) oil prices push down (up) their terms of trade, which weakens (strengthens) their currencies. The negative correlation thus exists almost by construction, i.e. is a bit like looking at the correlation of oil prices with their reciprocal (commodity exporters’ terms of trade). In short, the correlation isn’t really about the Dollar per se, but about commodity exporters.
    [Only registered and activated users can see links. ]Important Forex News Daily

    Second, fluctuations in oil prices often coincide with other developments that have effects on the Dollar, including global demand shocks or monetary policy changes. Both of these are present in Exhibit 1, which shows the drop in oil prices during the global financial crisis, which – being a negative demand shock originating in the US – moved rate differentials against the Dollar, and the pronounced drop in oil prices in 2014, which coincided with the BoJ and ECB increasing monetary stimulus, moving rate differentials in favor of the Dollar. This is perhaps one reason why the correlation of the Dollar with oil prices is less pronounced in changes than in levels

    We examine the correlation of the Dollar with oil prices using daily data, controlling for interest differentials, risk appetite and other factors. It concludes that rate differentials are the most important driver behind recent Dollar moves, followed by oil prices.

    We conclude that it is primarily the forces of economic divergence that are driving recent Dollar direction, in line with our forecasts which anticipate more Dollar appreciation (around 7 percent) on these grounds.

  5. #25

    Crude dips on skepticism ahead of OPEC meeting

    On Tuesday, crude prices sagged on doubts that crude producer cartel OPEC will be able to hammer out a meaningful production cut during a gathering on Wednesday aimed at suppressing a global supply overhang and also propping up crude prices.
    International Brent crude oil futures were worth $47.99 per barrel, tumbling 0.5%, from their last close. American West Texas Intermediate crude futures sank 0.5% too, hitting $46.85 a barrel.
    On Wednesday, the Organization of the Petroleum Exporting Countries will have a meeting in Vienna to discuss a planned output cut in an effort to tame overproduction, which has dogged markets and more than halved crude prices since 2014.
    With a relatively high degree of uncertainty going into the last 24 hours before the long-awaited meeting, crude price volatility is supposed to be high enough.
    There remains disagreement among OPEC-participants as for which producers need to cut and how much, and also a plan for non-OPEC oil giant Russia to participate has failed too.

    [Only registered and activated users can see links. ]Important Forex News Daily

  6. #26

    Oil prices fall as nervous market eyes OPEC meeting

    Oil prices fell on Tuesday on market jitters over whether producer cartel OPEC will be able to hammer out a meaningful output cut during a meeting on Wednesday aimed at reining in a global supply overhang and propping up prices.

    Brent crude futures LCOc1 were trading at $47.80 per barrel at 0546 GMT, down 44 cents, or 0.9 percent, from their last close.

    U.S. West Texas Intermediate crude futures CLc1 were down 42 cents, or 0.9 percent, at $46.66 a barrel.
    The Organization of the Petroleum Exporting Countries (OPEC) is meeting officially in Vienna on Wednesday to discuss a planned production cut in an effort to curb overproduction that has dogged markets and more than halved prices since 2014.
    With a high degree of uncertainty going into the last 24 hours before the meeting, traders said there was a high chance of sudden price swings based on news headlines coming out of Vienna.
    "I still think they need to do a deal even though my confidence has dropped back to coin toss levels," said Greg McKenna, chief market strategist at Australian brokerage AxiTrader.
    Intense negotiations would be needed on Wednesday to cement a deal, Goldman Sachs (GS.N) said in a note to clients.
    "The latest headlines suggest that while there is a broad agreement on the rationale for a cut, political considerations and country level quota negotiations are so far preventing a deal from being reached," the note said
    There remains disagreement among OPEC members over which producers should cut by how much, and a plan for non-OPEC oil giant Russia to participate has so far also failed.
    If OPEC agreed a production cut to 32.5 million barrels per day (bpd), down from 33.82 million bpd in October, crude prices would likely rise to the low $50s per barrel, Goldman said.
    "If no deal is reached, our expectation of rising (crude) inventories through 1H2017 would warrant prices averaging $45 per barrel through next summer," the bank said.

    However, the "price risk is likely skewed to the upside heading into Wednesday," it added, saying a move to below $40 per barrel would be difficult to sustain.
    On the demand side, South Korea's crude imports rose 3.9 percent in the third quarter of 2016 from a year earlier, as oil consumption climbed thanks to low oil prices.
    The world's fifth-largest crude importer shipped in 270.4 million barrels of crude oil in the July-September period, compared with 260.3 million barrels in the same period in 2015, its energy ministry said on Tuesday.

  7. #27

    Australian stocks dip at close of trade

    On Tuesday, Australian stocks descended after the close, as losses in the Gold, Telecoms Services and also Metals & Mining sectors brought stocks down.
    The S&P/ASX 200 sank 0.13%.
    Pact Group Holdings, Inertia Group Ltd and Primary Health Care Ltd turned to be the best performers of the session on the S&P/ASX 200. They leapt 5.52%, 5.14% and 3.90% respectively.
    As for the worst performers, Vocus Fpo, Syrah Res F and TPG Telecom Ltd sagged 27.26%,7.95% and 7.15% respectively.
    Descending shares outnumbered surging ones on the Australia Stock Exchange by 576 to 469, while 346 remained intact.
    Stocks in Vocus Fpo edged down to 52-week minimums, sinking 27.26% or 1.570 to 4.190. Stocks in Syrah Res F dropped to 52-week minimums, descending 7.95% or 0.240 to 2.780.
    The S&P/ASX 200 VIX, gauging the implied volatility of S&P/ASX 200 options, ascended 3.29%, reaching 12.758.
    The currency pair AUD/USD dropped 0.04%, hitting 0.7478, while AUD/JPY leaped 0.08%, reaching 83.81.

    [Only registered and activated users can see links. ]Important Forex News Daily

  8. #28

    China forex regulator tightens controls to stem capital outflows: sources

    [Only registered and activated users can see links. ]Important Forex News Daily

    China is stepping up measures to stem capital outflows after the yuan currency skidded to more than eight-year lows, sources said on Tuesday, taking aim at outbound investments that have soared to a record high.
    The State Administration of Foreign Exchange (SAFE) has begun vetting transfers abroad worth $5 million or more and is stepping up scrutiny of major outbound deals, including those with prior approval, sources with knowledge of the new rules told Reuters.
    Capital outflows through both legal and illegal channels have added pressure on the yuan CNY=CFXS. The Chinese currency has depreciated nearly 6 percent against a strong dollar so far this year and many traders are betting on further losses, raising the specter of more capital flight.
    The new rules would apply to transfers abroad under the capital account for transactions such as portfolio or foreign direct investment, and could knock some momentum from China's overseas asset shopping spree, analysts say.
    Chinese outbound investment deals totaled $530.9 billion in the first nine months of 2016, surpassing 2015's record volume and helping China outstrip the United States as the top acquirer for foreign companies, according to Thomson Reuters data.
    "The new rules will have a very big impact on outbound deals," said Luke Zhang, a partner at Zhong Lun Law Firm, who expects the number of deals to go down "quite a lot".
    SAFE did not respond to a Reuters request for comment.
    "Previously, only forex transfers worth $50 million or more needed to be reported to SAFE. Now, the threshold has been drastically lowered to $5 million, and covers both foreign currency and yuan," said one of the sources with direct knowledge of the rules.
    "All we can do is to ask clients to be patient, and tell them that the transaction is being vetted by SAFE for authenticity and may not be approved."
    One of the sources said that even if an outbound investment had already obtained approval to buy foreign exchange, but the money had not been fully transferred, the remainder of the quota was now subject to further approval if it exceeds $50 million, which is regarded as a "large sum".
    Two other sources confirmed the new rules.
    The sources said the forex regulator told banks about the new rules on Monday, the same day the government said it would stick to its "going out" strategy of encouraging outbound investment.
    DEFENDING THE YUAN
    To prevent the yuan from falling too rapidly against the dollar, China has been using its foreign currency reserves to defend the currency's value, managing expectations in the market, and restricting money outflows into overseas securities.
    Wang Zhenying, a senior Chinese central bank researcher, said in a recent interview that Beijing needs to stem outflows which risk putting the yuan into a potentially destructive feedback loop.
    "At the moment, the fall in the yuan's exchange rate is shaping market expectations. Depreciation triggers capital flight, and capital flight exerts even bigger pressure on the yuan," Wang said.

    "Therefore, it's necessary to break this feedback loop... for example, by slowing capital outflows," he said.
    Chinese state-owned banks were seen selling dollars in the onshore foreign exchange market for a second straight day on Tuesday, in what traders said appeared to be a bid to support the yuan.
    The yuan has rebounded around 0.5 percent in the past few sessions. [CNY/]
    While still the largest in the world, China’s foreign currency reserves CNFXM=ECI have fallen to $3.17 trillion at the end of September from a $3.99 trillion peak in June 2014, indicating that Chinese authorities sold dollars to prop up the yuan's value.
    Selling of the yuan and other emerging market currencies has intensified since Donald Trump's upset presidential victory on Nov. 8. Expectations of higher fiscal spending and interest rates under a Trump administration have boosted U.S. bond yields and the attractiveness of the dollar.

  9. #29

    Chance of Italy abandoning euro zone hits four-year peak

    An investor poll demonstrated the chance of Italy abandoning the euro zone for the next 12 months at 19.3%on Tuesday, the highest outcome since the survey broke out in June 2012.

    The survey conducted by Frankfurt-based Sentix comes ahead of the country's upcoming referendum on constitutional change on Sunday. The given poll can potentially unseat the government of Prime Minister Matteo Renzi. Aside from that it can also drive a nascent banking crisis.

    More than 1,000 institutional as well as retail investors were surveyed between 24-26 November. Besides this, the previous month's survey demonstrated that Italy for the first time overtook Greece as the country most probably to break up with the euro zone, with a 9.9% likelihood seen.

    The chance of any country escaping from the euro zone stood at about 24.1%, quite below a high of over 70% observed at the height of the euro zone debt crisis of 2012.

    [Only registered and activated users can see links. ]Important Forex News Daily

  10. #30

    Trump rally shows signs of hesitation, US indices and USD take a breather

    Markets seemingly paused, with the major US equity indices closing in the red yesterday as performances showed some hesitation in taking the Trump election rally forward. Even the US Dollar index (DXY), an index that measures the of the USD relative to a basket of foreign currencies, has showed some signs of consolidation after hitting highs of 102.05 last Friday – levels we had last seen in March 2003.

    The euro’s attempt to take an advantage as the USD starts to show some signs of hesitation after its massive rally, failed to take the EURUSD any higher than 1.0685 yesterday and the currency pair is currently re-testing 1.0600 levels again.

    Oil has been tampering investor mood as volatility kicks in ahead of an upcoming meeting next Wednesday, were the major producers will try to reach an agreement on the output cuts.

    On today’s economic docket the high impact data starts early afternoon with the German CPI for November and later in the afternoon we also have US consumer confidence for the same period.

    Remember we’re up for some headwinds as we approach the 4th December referendum in Italy in which PM Renzi risks having to lose his seat and create further instability in the EZ. Later this week we have the NFP data out of the US were one can also expect range trading and volatility ahead of these major events

    [Only registered and activated users can see links. ]Important Forex News Daily

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