Oil rises as the dollar rises and the Nikkei index rises by 0.54%

Oil rose on Wednesday morning, a day after prices fell to $100 per barrel for the first time since April
and the benchmark Nikkei rose during early trading, as the greenback rose as the euro held steady.

Evest follows market developments in the following report.

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Oil rises on concern about US inflation data

Japan’s Nikkei index rises as chip and airline stocks boost

The dollar rises and the euro holds to parity ahead of the US CPI

Oil rises on concern about US inflation data

Gains were cautiously limited ahead of US inflation data that could weaken the market.

Brent crude futures rose by 45 cents, 0.5 percent to $99.97 per barrel at 0630 GMT.

US West Texas Intermediate (WTI) crude rose by 44 cents, or 0.5 percent, to $95.27.

Investors sold their oil positions with concern that sharp increases in interest rates to stop inflation
would lead to a sharp slowdown in economic activity and hurt oil demand.

The rise in US interest rates, which will push the dollar higher and also undermine oil prices, is another concern.

In the analysts’ view

concern over the ongoing recession will continue to hurt the market
while the strength of the US dollar and the outbreak of Covid cases in parts of China are certainly not helping.

Oil is generally priced in US dollars, so the dollar’s rise increases the cost of the commodity to other currency holders
resulting in downward pressure on demand.

Economists say the figures show US inflation accelerating to 1.1 percent monthly and at 8.8 percent annually.

China’s renewed COVID-19 travel restrictions have also affected the market
with a number of cities in the world’s second-largest economy adopting new restrictions
from closing businesses to wider lockdowns
in an effort to curb new infections from one of the highly contagious variants of the virus.

US crude inventories rose by 4.8 million barrels for the week ending July 8
gasoline inventories rose by 3 million barrels, while distillate inventories rose by 3.3 million barrels
citing American Petroleum Institute figures on Tuesday.

In the meantime

the market is also closely watching US President Joe Biden‘s visit to the Middle East
where he is expected to ask Saudi Arabia and other Gulf producers to increase oil production to help stabilize prices.

In a monthly report released on Tuesday, OPEC predicted that global oil demand would rise in 2023 and that the market would remain tight
and estimated that an additional 900 thousand barrels of oil would be needed from its members in 2023 to balance the market.

Japan’s Nikkei index rises as chip and airline stocks boost

Japan’s Nikkei stock average rebounded on Wednesday morning, boosted by chip-linked stocks and airlines
although losses in energy stocks and concerns about a slowing global economy limited gains.

The Nikkei closed 0.54 percent higher at 26478.77
while it fell by 1.77 percent in the previous session and recorded its worst day in a month.

Of the 225 stocks that make up the index, 147 rose, 69 fell, and nine were flat.

The broader Topix index also rose by 0.29 percent to 1888.85
offsetting some of Tuesday’s 1.64 percent decline.

However, concern remained over the global growth outlook with growing uncertainty over Europe’s energy crisis
and China’s renewed struggle to control the COVID-19 outbreak through its stringent COVID-free policies.

The immediate market focus is on US consumer price data due out later Wednesday
which will show how effective the Fed’s tightening has been so far, and more are likely to be needed.

One market participant said it appeared that the Nikkei had become cheap
but with so much uncertainty about the global economic outlook, it was very difficult to go hard on buying stocks.

Petrochemical companies Inpex JGC Holdings were among the biggest losers on the benchmark index
declining by 1.66 percent and 1.46 percent, respectively.

SoftBank Group’s start-up investor stock, on the other hand, jumped 2.4 percent, adding 26 points to the index.

American Airlines’ strong gains on the basis of adjusted projections of second-quarter revenue
supported its Japanese counterpart ANA Holdings and Japan Airlines
which rose by 1.08 percent and 1.43 percent, respectively.

The dollar rises and the euro holds to parity ahead of the US CPI

The US dollar rose early in European trading on Wednesday
while the euro weakened near parity ahead of the release of major US inflation data.

On Wednesday morning, the dollar index, which measures the greenback against a basket of six other currencies
traded 0.1 percent higher to 107.977, remaining near the peak of two decades at 108.560 earlier this week.

The EUR/USD pair traded largely unchanged at 1.0038
slightly higher than the 20-year low above the parity to which the pair fell on Tuesday.

Today’s focus is directly on releasing the latest US consumer price data later in the session
which is expected to show that major US inflation accelerated to 8.8 percent year-on-year in June.

On the other hand, the single currency is affected by concern over a potential energy supply crisis
if Russia imposes further restrictions on gas exports to Europe, dampening growth expectations in the eurozone
and potentially causing the ECB to retreat after suggesting interest rate hikes in the summer.

Oil rises as the dollar rises

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