Slower economic growth in China and Brent continues to gain at an 8 year high

2022-01-17T17:58:47
American Markets Asian markets gold Oil Wall Street
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Slower economic growth in China   and Brent continues to gain at an 8-year high

 

Slower economic growth in China and Brent continues to gain at an 8 year high: Today, Monday, China announced a slowdown in economic growth, affecting today’s trading,
as China is the second-largest economy around the world after the United States. 

Evest follows market developments in the following report.

Topics:

Brent crude is close to an 8 year high

New Fiscal Decisions in China

Mixed trading trends in Wall Street

Asian markets Tracking the American approach

Rising US Treasury yields drive down gold

 

 

Brent crude is close to an 8 year high

Oil prices continue to rise on Monday after a certain increase last week.

Brent crude futures for March rose $0.17 (0.2%) on the London Futures Exchange, to $86.23 per barrel. 

Brent crude rose $1.59 (1.9 percent) to $86.06 per barrel on Friday. On Monday, the futures contract price rose to $86.71 per barrel, approaching the ceiling since October 2014. 

However, futures failed to maintain this level, declining with reports of a slowdown in the Chinese economy in the fourth quarter of 2021.

West Texas Intermediate crude futures’ prices for February in electronic trading on the New York Mercantile Exchange (NYMEX) rose by $0.37 (0.44%), to $84.19 per barrel.

During the previous session, the futures contract rose by $1.7 (2.1%) to $83.82 per barrel.

Over the past week, the price of Brent crude rose by 5.3%, that of West Texas Intermediate – by 6.2%.

New Fiscal Decisions in China

Economic growth in China, one of the world’s largest importers of oil, slowed to 4% on an annual basis in the fourth quarter of 2021 from 4.9% in the third quarter ,
and was the weakest since the second quarter of 2020, according to the Government Statistics Office. 

Oil prices have risen by more than 10% since the beginning of 2022, mainly due to lower supply from individual OPEC + countries, such as Libya.

According to Bloomberg experts: “The oil market has ignored the new wave of Covid-19.”

The People’s Bank of China (PBOC, the country’s central bank) said it had cut two major interest rates to support the Chinese economy, whose growth slowed in the fourth quarter.

The one-year medium-term lending facility (MLF) program was reduced by 10 basis points (bp) to 2.85% per annum from 2.95%,
and the seven-day reverse buyback rate was reduced by 10 basis points, Up to 2.1% from 2.2.

On Monday, the People’s Bank of China put 700 billion yuan ($110.19 billion) into the financial system,
under the Multilateral Fund and 100 billion yuan through seven-day reverse buyback agreements.

MLF is an important lending tool used by the Central Bank of China to provide liquidity to commercial banks and directly affects its main rate (the basic loan rate, LPR),
which became a standard in the summer of 2019.

The medium-term lending facility was launched in China in 2014 to provide liquidity to banks.

Under the Multilateral Fund, banks can receive funds from the main bank of China with a securities guarantee.

 

US stock indices changed in different directions on Friday but fell over the entire week.

Pressure on the market has emerged from predictions of faster-than-expected tightening of Fed policy,
as well as growing investor doubts about the sustainability of US economic recovery against the backdrop of weak statistical data. 

on Friday, New York Fed Chairman, John Williams, said that he expected US economic growth to slow to 3.5% in 2022.

In 2021, Williams estimates that US GDP has increased by 5.5%.

On Friday, the Federal Reserve Board said that US industrial production fell by 0.1% in December from the previous month.

The decline surprised analysts, who predicted an average growth of 0.3%, according to Trading Economics. 

US Department of Commerce report, also released on January 14, showed that retail sales in the country fell by 1.9% in December from the previous month.

Experts did not expect the index to change.

Retail sales rose by 0.2% in November, up from 0.3% previously reported, according to revised data.

Asian markets Tracking the American approach

Asia-Pacific markets were also mixed on Monday morning, with Japan’s Nikkei rising by 0.8%, China’s CSI 300 rising by 0.86%,
Australia’s S&P/ASX 200 rose by 0.37%, and Hong Kong’s Hang Seng fell by 0.8%. 0.6% and South Korea’s Kospi fell by 1.26%. 

In the meantime, US Standard & Poor’s futures are losing 0.12% compared to the previous day’s closing, indicating a continuing instability in the global stock markets.

 

 

Rising US Treasury yields drive down gold

Gold prices declined on Monday, with US Treasury yields rising against the backdrop of hard-line signals from the Federal Reserve Board,
and markets began pricing sooner than expected to reduce the balance sheet.

The spot gold price fell by 0.2٪ to 1814.08 dollars an ounce. US gold futures fell by 0.1 percent to $1815.00.

10-year United States Treasury yields were close to the two-year high recorded the previous week. 

Fed Chairman Jerome Powell said last week that the US economy is ready to start a tighter monetary policy,
while other Fed officials also indicated that the Fed is preparing to start raising interest rates in March.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising American interest rates, increasing the opportunity cost to acquire non-yield alloys.

Policymakers at the Bank of Japan are discussing how to finally start raising the interest rate at this week’s meeting.

The purchase of physical gold faltered in India last week, as prices rose, and coronavirus infections led consumers to postpone purchases,
while demand stabilized in China, the largest consumer, as lunar New Year celebrations approach.

Spot silver fell by 0.3 percent to $22.89 an ounce, platinum fell by 0.3 percent to $967.33, and palladium fell 0.4 percent to $1,871.50.

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