Asia Mixed…Europe RED
- Hong Kong: Hang Seng closed down -1.65%
- China CSI 300 -0.35%
- Taiwan KOSPI -2.33%
- India Nifty 50 +0.03%
- Australia ASX +0.28%
- Japan Nikkei -1.02%
- European bourses in negative territory so far this morning
- USD +0.46%
TOP STORIES OVERNIGHT
Oil prices at 2-1/2 month lows as China data offset supply cuts-Reuters
Oil prices hit fresh 2-1/2-month lows on Tuesday as mixed economic data from China offset the impact of Saudi Arabia and Russia extending output cuts.
While China’s crude oil imports in October showed robust growth both year on year and month on month, its total exports contracted at a quicker pace than expected.
Expectations of crude run reductions by China-based refiners between November and December could also limit oil demand and exacerbate price declines.
World shares (.MIWD00000PUS), which often trade in tandem with oil, lost steam on Tuesday as investor enthusiasm about a peak in global interest rates faded. In addition, the U.S. dollar (.DXY) has ticked up from recent lows, making oil more expensive for holders of other currencies.
Stocks Fall as Fed Rate-Cut Doubts Creep In-BBG
Stocks declined and dollar rose after comments by Minneapolis Fed President Neel Kashkari dampened hopes of speedy interest rate cuts from the US central bank.
S&P 500 futures lost 0.3%, indicating that the US equity benchmark will snap a six-day winning streak, while Europe’s Stoxx 600 index was little changed. West Texas Intermediate crude dropped below $80 a barrel for the first time in more than two months. The dollar strengthened.
COMMENTS: It is all about USD today imho, its strength is weighing on commodities and equities heavily…Kashkari speaking again this morning at 7:30AM ET
IMF upgrades China’s 2023, 2024 GDP growth forecasts-Reuters
China’s economy is set to grow 5.4% this year, having made a “strong” post-COVID recovery, the International Monetary Fund said on Tuesday, making an upward revision to its earlier forecast of 5% growth, while expecting slower growth next year.
The IMF said continued weakness in the property sector and subdued external demand could restrict gross domestic product growth to 4.6% in 2024, which was still better than the 4.2% forecast contained in its World Economic Outlook (WEO), published in October.
The upward revision followed a decision by China to approve a 1 trillion yuan ($137 billion) sovereign bond issue and allow local governments to frontload part of their 2024 bond quotas, in a move to support the economy.
“We have revised up growth by 0.4 percentage points in both years relative to our October WEO projections, reflecting stronger than expected growth in the third quarter and the new policy support that was recently announced,” IMF’s First Deputy Managing Director Gita Gopinath said in Beijing.
Over the medium term, growth is projected to gradually slow to about 3.5% by 2028 amid headwinds from weak productivity and population aging, Gopinath told a news conference to mark the release of the fund’s “Article IV” review of China’s economic policies.
China has introduced numerous measures to support the property market, but more is needed to secure a quicker recovery and lower economic costs to bring it down to a more sustainable size, she said.
COMMENTS: This could not lift China markets today
Leveraged funds record short Treasuries bet may be vulnerable-Reuters
Hedge funds ended October holding a record net short position in U.S. Treasuries futures, signaling their persistence with the so-called ‘basis trade’, although the steep plunge in yields since then may force a substantial reversal in the coming weeks.
The latest Commodity Futures Trading Commission (CFTC) figures show that speculators, especially leveraged funds, ramped up their short Treasuries positions in the week ending Oct. 31, most notably at the short end of the curve.
This fits with the ‘basis trade’, a leveraged arbitrage play profiting from price differences between cash bonds and futures that speculators have been doing for much of this year.
Regulators have expressed concern about the financial stability risks a sharp and disorderly unwind of these bets could pose in an adverse bond market scenario.
That trade may be running out of steam. Its profitability has been dented recently by rising borrowing costs in the repo market, according to Javier Corominas at Oxford Economics.
On top of that, the sharp rally in bonds, on growing hopes of a U.S. economic ‘soft landing’ and less onerous borrowing needs for the Treasury, will almost certainly be shaking out some of these short positions.
COMMENTS: Possible short squeeze may be larger than anticipated
OPEC+ Remains Positive on Oil Demand Growth Before Meeting-BBG
OPEC+ still has a positive outlook for growth in oil demand, despite the headwinds faced by the global economy, as it prepares for its next ministerial meeting.
“The economy, despite the challenges, is still doing quite well,” OPEC Secretary-General Haitham Al-Ghais said at the Argus European Crude Conference in London on Tuesday. “We are positive on demand, we’re still quite robust on demand.”
The top official at the Organization of Petroleum Exporting Countries said he couldn’t preempt the outcome of the group’s next ministerial meeting in the final weekend of November.
“All I can say for now is we continue to monitor supply and demand fundamentals on a daily basis,” Al-Ghais said. “When the ministers meeting in Vienna at the end of this month they will review all of this and take appropriate measures.”
The next OPEC+ meeting could see Russia and Saudi Arabia decide whether to continue their extra voluntary supply curbs into 2024.
COMMENTS: This is not helping oil this morning, but notable if you listened to our space for the oil challenge last week, we hit 79.50 that Bob Iaccino was looking for to cover his shorts and look to get long.
US DATA TODAY
