Crude Oil Futures Gain For 9th Straight Session

Trading 10 jan 2019 Commentaire »

Crude oil futures ended higher on Thursday, extending gains to a ninth successive session, the longest winning streak in about nine years, with recent reports showing declines in crude output from OPEC and other major producers.

Besides expectations that the OPEC-led production cut will help ease concerns about a supply glut, hopes that positive developments out of U.S.-China trade talks will help allay fears about energy demand drove oil prices higher in recent sessions.

The three-day trade negotiations between U.S. and Chinese officials at Beijing concluded yesterday, reportedly with no significant breakthroughs, but crude oil futures still managed to extend gains amid hopes the two nations will continue to strive for a trade agreement before the expiry of the 90-day truce agreed to by Donald Trump and Xi Jinping in early December during the G20 Summit. Gains, however, were just modest today.

Crude oil futures ended $0.23, or 0.4%, at $52.59 a barrel, recovering from a low of $51.38.

On Wednesday, crude oil futures ended up $2.58, or 5.2%, at $52.36 a barrel.

The U.S. Trade Representative's office said in a statement that officials from U.S. and China discussed "ways to achieve fairness, reciprocity and balance in trade relations".

China's ministry of commerce said that the negotiations were "extensive, deep and meticulous" without offering specifics.

A report released by the Energy Information Administration on Wednesday showed U.S. crude oil stockpiles fell by 1.7 million barrels in the week to January 4, compared with analysts' expectations for a decrease of 2.8 million barrel. At the same time, gasoline and distillate inventories rose more than expected.

Meanwhile, U.S. bank Morgan Stanley lowered its oil price forecast for 2019, citing weak global economic growth expectations and rising oil supply from the United States.


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Treasuries Close Roughly Flat After Pulling Back Off Early Highs

Trading 10 jan 2019 Commentaire »

After failing to sustain an early move to the upside, treasuries gave back ground over the course of the trading session on Thursday.

Bond prices pulled back well off their highs of the session before ending the day roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.731 percent.

Treasuries initially moved higher as traders went bargain hunting following the pullback seen over the past few sessions.

Assessments indicating the three-day meeting between U.S. and China officials did not result in any significant breakthroughs on trade also increased the appeal of bonds.

Buying interest waned shortly after the open, however, as traders remain optimistic the U.S. and China will eventually reach a long-term trade deal.

Bond prices pulled back further off their highs following the release of the results of the Treasury Department's auction of $16 billion worth of thirty-year bonds, which attracted below average demand.

The thirty-year bond auction drew a high yield of 3.035 percent and a bid-to-cover ratio of 2.19, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.32.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Traders also kept an eye on remarks by Federal Reserve Chairman Jerome Powell, who reiterated the Fed will be patient in raising interest rates further, noting the central bank is "waiting and watching."

Powell also said during a discussion at the Economic Club of Washington that the Fed's balance sheet will be "substantially smaller than it is now."

Trading on Friday may be impacted by reaction to a closely watched report on consumer price inflation in the month of December.


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Gold Fails To Hold Gains, Settles Lower

Trading 10 jan 2019 Commentaire »

Gold futures pared early gains and settled lower on Thursday as the dollar rebounded from earlier weakness.

Traders were looking ahead to the Federal Reserve Chairman Jerome Powell's comments at the Economic Club of Washington, D.C.

Gold held steady earlier in the day, extending gains from the previous session and the greenback was subdued after the minutes of the central bank's December meeting suggested a likely pause in monetary tightening this year. Most of the Fed members were looking for greater clarity on the economic condition before further rate hikes, the minuted said.

Today, the dollar gained in strength after earlier weakness and moved higher against most major currencies. The dollar index recovered from 94.63 and was hovering around 95.10, gaining about 0.3%.

Gold futures for February ended down $4.60, or 0.4%, at $1,287.40 an ounce.

On Wednesday, gold futures ended up $6.10, or 0.5%, at $1,292.00 an ounce.

Silver futures for March ended at $15.643 an ounce, down $0.092 from previous close.

Copper futures for March settled at $2.637 per pound, down $0.020 from Wednesday's close.

In economic news, data released by the Labor Department showed a bigger than expected drop in initial jobless claims in the week ended January 5th. The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000. Economists had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week.

Meanwhile, trade talks between the U.S. and China concluded yesterday with no significant breakthroughs. A statement from the office of U.S. Trade Representative Robert Lighthizer said the talks included discussions on China's pledge to purchase a substantial amount of U.S. goods and services but did not provide details about the tone or outcome of the meetings.

A statement from China's Commerce Ministry described the talks as "extensive, in-depth and detailed" and said the meetings "laid a foundation for the resolution of each others' concerns."


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Thirty-Year Bond Auction Attracts Below Average Demand

Trading 10 jan 2019 Commentaire »

The Treasury Department finished off this week's series of long-term securities auctions with the sale of $16 billion worth of thirty-year bonds on Thursday, attracting below average demand.

The thirty-year bond auction drew a high yield of 3.035 percent and a bid-to-cover ratio of 2.19.

Last month, the Treasury also sold $16 billion worth of thirty-year bonds, drawing a high yield of 3.165 percent and a bid-to-cover ratio of 2.31.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.32.

Today's thirty-year bond auction came after the Treasury sold $38 billion worth of three-year notes on Tuesday and $24 billion worth of ten-year notes on Wednesday.


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ECB To Explore Cheap Loans Amid 'Fragile And Fluid' Economic Outlook: Minutes

Trading 10 jan 2019 Commentaire »

European Central Bank policymakers are likely to explore the unconventional policy of granting cheap long-term loans to banks in the coming months as they chose to adopt a cautious stance towards terming the risks to the euro area economic outlook as "downside", minutes from December policy session showed on Thursday.

Following the December 12-13 Governing Council session, the ECB confirmed that it is ending its massive EUR 2.3 trillion asset purchase programme in December and trimmed the growth and inflation projections for this year.

ECB President Mario Draghi said the risks surrounding the euro area growth outlook were still "broadly balanced", but "the balance of risks is moving to the downside", owing to geopolitical uncertainties, protectionist threats, emerging market vulnerabilities and financial market volatility.

"It was underlined that the situation remained fragile and fluid, as risks could quickly regain prominence or new uncertainties could emerge," the minutes said.

However, some members cited the emergence of new upside risks and said the recent negative news have been factored into the downward revision of the staff projection.

"Against this background, caution was expressed against moving the balance of risks to the downside," the minutes said.

Members agreed that the current assessment of risks being "broadly balanced" struck the necessary balance between confidence in the medium-term outlook and acknowledgment of the recent weakness in data and indicators.

"Looking ahead, the suggestion was made to revisit the contribution of targeted longer-term refinancing operations to the monetary policy stance," the minutes said.

Under TLTRO, the ECB gives longer-term loans to financial institutions at attractive rates to boost lending in the real economy.


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Euro Mixed After ECB Minutes

Trading 10 jan 2019 Commentaire »

The euro came in mixed against its major opponents in the European session on Thursday, after the release of the European Central Bank's minutes from the latest meeting that showed that members broadly assessed that the risks surrounding the growth outlook was broadly balanced, with the balance of risks was moving to the downside driven by geopolitical uncertainties, financial market volatility and protectionist threats.

Members widely believed that risks to the euro area growth outlook persisted or had increased, with risks to activity moving to the downside, the minutes from the December 12-13 meeting showed.

Longer term inflation expectations had fallen somewhat from their levels at the time of the Governing Council's previous monetary policy meeting due to the recent fall in oil prices, the minutes showed.

All members agreed to conclude net asset purchases under the APP at the end of December, keep the forward guidance on the path of the key ECB interest rates unchanged, and enhance the forward guidance on reinvestment, the minutes said.

"Looking ahead, the suggestion was made to revisit the contribution of targeted longer-term refinancing operations to the monetary policy stance."

The currency traded mixed against its major counterparts in the Asian session. While it rose against the greenback and the pound, it held steady against the franc. Against the yen, it declined.

The euro held steady against the greenback, after having retreated from near a 3-month high of 1.1570 hit at 10:30 pm ET. The pair was valued at 1.1542 when it ended deals on Wednesday.

Data from the Labor Department showed that U.S. weekly jobless claims dropped more than expected in the week ended January 5.

The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000. Economists had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week.

The euro fell to 124.46 against the yen, from an early high of 125.07, and held steady thereafter. At yesterday's close, the pair was worth 124.85.

Preliminary data from the Cabinet Office showed that Japan's leading economic index dropped to a two-year low in November.

The composite leading index fell to 99.3 in November from 99.6 in October. Economists had expected the index to remain unchanged. The euro appreciated to a weekly high of 1.1278 against the Swiss franc from yesterday's closing value of 1.1247. Next key resistance for the euro is likely seen around the 1.14 level.

The single currency climbed to a weekly high of 0.9059 against the pound at 6:30 am ET and moved sideways in subsequent deals. The pair was worth 0.9026 at yesterday's close.


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U.S. Jobless Claims Drop More Than Expected To 216,000

Trading 10 jan 2019 Commentaire »

Adding to the positive picture of the labor market painted by last week's monthly jobs report, the Labor Department released a report on Thursday showing a bigger than expected drop in first-time claims for U.S. unemployment benefits in the week ended January 5th.

The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000.

Economists had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average rose to 221,750, an increase of 2,500 from the previous week's revised average of 219,250.

The report also said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, slid by 28,000 to 1.722 million in the week ended December 29th.

The four-week moving average of continuing claims still climbed to 1,721,250, an increase of 15,250 from the previous week's revised average of 1,706,000.

Last Friday, the Labor Department released a separate showing employment in the U.S. spiked by much more than anticipated in the month of December.

The Labor Department said non-farm payroll employment soared by 312,000 jobs in December after climbing by an upwardly revised 176,000 jobs in November.

Economists had expected employment to increase by about 177,000 jobs compared to the addition of 155,000 jobs originally reported for the previous month.

The report also said the unemployment rate rose to 3.9 percent in December from 3.7 percent in November, while economists had expected the unemployment rate to come in unchanged.

However, the unexpected uptick by the unemployment rate came as the labor force jumped by 419,000 people compared to a much more modest 142,000-person increase in the household survey measure of employment.

The Labor Department also said average hourly employee earnings climbed by 11 cents to $27.48 in December, reflecting a 3.2 percent increase compared to the same month a year ago.

The annual rate of growth in average hourly employee earnings in December accelerated from the 3.1 percent increase seen in November, reaching its highest level since April of 2009.


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A dollar out of trend, investors have announced a fashion for Asian currencies

Trading 10 jan 2019 Commentaire »

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The US currency in the new year will lose all previously collected positions. If last year the dollar index gained about 4%, now, due to the expected deterioration in the country's economic growth and the display of patience by Fed officials in the process of tightening policies, the indicator will be forced to show a downward trend.

According to Reuters respondents, the dominance of the dollar has been left behind. The overwhelming majority of those who still believe in the further growth of the US currency (85% of the respondents) believe that it will exhaust itself in the next six months. Only 3 out of 75 analysts expect an uptrend of the dollar for a year or more.

Recall, a year ago, a Reuters poll showed similar results, experts almost unitedly predicted a decline in the dollar. Despite erroneous estimates, analysts continue to insist on their opinion this year.

Fed Protocol

The protocol showed the willingness of financiers to completely abandon the wording on the further gradual rate increase. Stock indices increased, while the yield of US government bonds and the dollar fell. Meanwhile, in December there was a completely different reaction: shares, after a 13% drop from the end of September, lost another 1.5%. Perhaps this is due to the inattention of the market or the incorrect construction of the text of Jerome Powell's speech. Thus, the head of the Central Bank announced too early that low inflation allows the regulator to be "patient." In January, instead of this, another word appeared, "flexibility", which helped the stock indices soar. Apparently, investors need to repeat the same thing several times so that they choose the direction of movement.

The monetary inaction of the Fed is a strong argument for the gradual closing of long positions on the dollar. In the meantime, the euro has noticeably quickened, the EUR / USD pair finally went to conquer the previously set goals.

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The pigeon comments of the hawks by Charles Evans and Eric Rosengren and the reduction of unemployment in the region to 8% also helped the Euro-currency. This, together with the acceleration of wage growth, increases the chances of an increase in ECB rates in September and contributes to the strengthening of the euro.

Asian currencies

For the first time since the beginning of 2018, investors looked at Asian currencies with optimism. They called Asian assets promising. According to Reuters, the rate on the reduction of the yuan fell to its lowest level since last February. Improving the mood is due to expectations of a speedy normalization of relations in the field of trade between Washington and Beijing. Recall that on Wednesday there was some progress regarding China's purchases of American agricultural products and energy.

It sounds rather strange, but for the first time since February, market participants are betting on the growth of the Indian rupee, which last year was among the main outsiders of the foreign exchange market. Bearish rupee rates have fallen to a minimum since the beginning of 2018.

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Three drivers of growth of oil prices

Trading 10 jan 2019 Commentaire »

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Currently, experts point out three factors pushing up oil quotes. These include positive sentiment regarding negotiations between the United States and the People's Republic of China, a decline in production by leading oil producers, as well as positive statistics on black gold reserves in America.

Brent crude oil has completed the current session growth, rising above $ 60 a barrel. On Thursday, January 10, it was trading at $ 60.79.

The growth of quotations was promoted by the next round of talks between the United States and China on trade issues held the day before. Market participants expect the head of the White House to be able to negotiate with the Chinese leader and a lengthy trade conflict will be resolved. According to analysts, this would support financial markets, sagging at the end of 2018.

A positive impact on oil quotes also had statements by the authorities of Saudi Arabia about the readiness for an additional reduction in oil production.

The data from the US Energy Information Administration (EIA) has become another key driver for black gold prices. According to the report of the department, oil reserves in the United States during the week ended January 4, 2019, decreased by 1.7 million barrels. This surpassed analysts' forecasts, expecting a decline of 1.4 million barrels. Earlier, the American Petroleum Institute (API) announced a reduction in reserves of 6.1 million barrels.

Experts believe that the potential for short-term oil price growth has not yet been exhausted. In this regard, some departments have revised the previous forecasts for black gold prices for the current year. These institutions include the largest American investment bank, Morgan Stanley. Regarding the cost of Brent crude, the bank's experts predicted that in the first quarter of 2019 it would be $ 58 per barrel, although they previously counted on $ 65 per barrel. It should be noted that many analysts are sure that the previously high level of $ 65 per barrel is quite achievable. In the second quarter of this year, the price of Brent will rise to $ 60 per barrel, according to Morgan Stanley. The forecast of the value of the reference mark for the third quarter suggests an increase to $ 62.5 per barrel, and in the fourth - to $ 65 per barrel, summarize the bank's experts.

As for the cost of WTI light oil, in the first quarter of 2019, Morgan Stanley predicts its rise to $ 49 per barrel. In the second quarter of this year, the price of WTI will be about $ 52 per barrel, and in the third, no more than $ 55 per barrel. According to the calculations of bank specialists, in the fourth quarter of 2019, the cost of WTI will reach $ 58 per barrel. In 2020, a number of experts predict the average price of Brent oil at $ 65 per barrel, and the cost of WTI, about $ 58 per barrel.

A number of experts believe that the black gold market is far from a glut. They are confident in its balance, which is expected to continue throughout the current year. Such an assessment of the situation implies a further increase in oil prices. However, the recovery of the market will be limited to the mark of $ 65 per barrel, including due to the decline in oil imports to the PRC and the reduction in the share of OPEC in the global market, experts are sure.

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In 2019, gold could rise in price to $ 1,350 per ounce

Trading 10 jan 2019 Commentaire »

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For most of last year, the gold rate was under pressure due to the strengthening of the US currency and the increase in the interest rate of the Fed. Only in December, amid falling stock indices, investors in the precious metal could breathe a sigh of relief.

According to some data, last month, stocks of "gold" ETF-funds increased by 2.25 million ounces, which probably was one of the drivers of growth in the value of the precious metal, which has already managed to rise above $ 1,290 for 1 ounce.

"Investors in gold have hope for a recovery in the market after reaching its lowest level in November 2018. This means that the uptrend should continue. In the near future, quotes can test a mark of $ 1,300 per ounce," experts said.

"As the experience of past years shows, this mark is a very serious level of resistance for the precious metal. If quotes will be able to overcome it, then, apparently, we should expect an influx of new investors into the gold market, who will buy precious metal at a price increase," they added.

According to the forecast of the investment bank Goldman Sachs, this year gold could rise in price to $ 1,350.

"If the growth of the US economy in 2019 and the rate of an interest rate increase by the Fed slows down, then the demand for precious metals will be high," the financial institution said.

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