WORLDWIDE: HEADLINES
China studies measures to manage capital inflows amid global financial risk
BEIJING – China’s top banking and insurance regulator expressed wariness of the risk of bubbles bursting in foreign markets, and said China is studying effective measures to manage capital inflows to prevent turbulence in the domestic market.
Global markets are starting to see side effects of fiscal and monetary policy steps in response to the COVID-19 pandemic, said Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, at a news conference on Tuesday.
“Financial markets are trading at high levels in Europe, the U.S. and other developed countries, which runs counter to the real economy,” Guo added.
As the economy has become highly globalised, foreign capital flowing into China will increase significantly due to economic recovery and attractive asset prices, said Guo, and China is studying plans to manage the inflows to prevent turbulence in the domestic market.
Full coverage: REUTERS
Oil optimism unwinding market’s mad dash for storage
LONDON/NEW YORK/SINGAPORE – When the world economy slammed on the brakes last year, there was a rush to store a wave of unwanted crude and products, but rising prices and optimism about demand is spurring a swift unwinding of storage contracts.
At the end of February, the volume of refined products held on stationary tankers for over 10 days stood at 19.2 million barrels, down 77% from a peak of 84 million last May, IHS Markit estimates show.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, closely monitors global inventories, and the rate of drawdowns will be a major factor discussed when it meets on output policy on Thursday.
A year ago, traders were struggling to find storage capacity, and prices for it surged as fuel consumption plummeted. Earnings for product tankers surged to record highs above $100,000 a day last May versus less than $10,000 currently.
Remote salt caverns in Scandinavia and unused U.S. pipelines and railcars were pressed into service.
But now, capacity is again becoming available, in Northwestern Europe, the Mediterranean, Middle East and North America, brokers said.
“Parties are giving notice to terminate contracts by April-May,” said Krien van Beek, a broker at ODIN-RVB Tank Storage Solutions in Rotterdam.
Brokers in the United States are also seeing lower prices offered for storage of crude and products.
“In January the unrelenting price run-up (in oil futures) commenced, and that scared people away who had been considering taking on storage positions,” Ernie Barsamian, chief executive of the Tank Tiger, a U.S. terminal storage clearinghouse.
Full coverage: REUTERS
WORLDWIDE: FINANCE / MARKETS
Asian shares perk up as calmer bonds ease jitters
HONG KONG/NEW YORK – Asia extended the global rally in stocks on Tuesday as a halt in a recent bond markets sell-off eased investor nerves and lifted riskier assets, although oil prices were on the defensive on fears of slowing Chinese energy consumption.
MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.97% while Japan’s Nikkei was slightly down 0.12%.
Australian shares continued their climb on Tuesday, with S&P/ASX 200 index rising as much as 1.05%, its highest since Feb. 19, as a rollout of another vaccine in the United States and optimism over a coronavirus relief package boosted hopes of a quicker global economic recovery.
Chinese blue-chips gained 0.58% in early trade while Hong Kong’s Hang Seng advanced 0.9%, helped by steady and robust demand from investors in mainland China for shares in the Asian financial hub.
China will begin its annual session of parliament on Friday in Beijing, which is expected to chart a course for economic recovery and unveil a five-year plan to fend off stagnation.
U.S. stocks [.N] rallied overnight, with the S&P 500 posting its best day in nearly nine months, as bond markets calmed after a month-long selloff.
“There’s everything to like about the rally in EU and U.S. equity markets,” said Chris Weston, the head of research at Pepperstone Group Ltd in Australia.
“Financials outperformed, with 95% of stocks in the S&P 500 gaining on the day,” he said, adding that “clearly investors are seeing the world in a new light”.
U.S. stocks were roiled last week when a sell-off in Treasuries pushed the 10-year Treasury yield to a one-year high of 1.614%. The 10-year yield was edging lower in early trade at 1.4204%. [US/]
Full coverage: REUTERS
Oil extends losses on worry over possible supply increase from OPEC
TOKYO – Oil prices fell more than 1% on Tuesday, extending losses that began last week, as investors unwound long positions on concern that OPEC may agree to increase global supply in a meeting this week and Chinese demand may be slipping.
Brent crude dropped 78 cents, or 1.2%, to $62.91 a barrel by 0138 GMT, after losing 1.1% the previous day. U.S. West Texas Intermediate (WTI) crude slid 74 cents, or 1.2%, to $59.90 a barrel, having lost 1.4% on Monday.
Investors are worried the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, will boost oil output, said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“Oil prices remained under pressure as investors were making position adjustments ahead of the OPEC meeting,” he said.
The group meets on Thursday and could discuss allowing as much as 1.5 million barrels per day (bpd) of crude back into the market.
OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to reductions agreed to under the previous OPEC+ pact, a Reuters survey found, ending a run of seven consecutive monthly increases.
Market sentiment was also dampened by weak manufacturing data out of China, Nissan Securities’ Kikukawa said.
China’s factory activity growth slipped to a nine-month low in February, which may curtail Chinese crude demand and pressure oil prices.
Full coverage: REUTERS
Dollar holds advantage over low-yielders, A$ looks to RBA
TOKYO – The dollar stood firm against its low-yielding peers on Tuesday on bets of a faster economic recovery and greater tolerance of higher U.S. bond yields, while the Australian dollar looked to guidance from the country’s central bank.
The dollar index last stood at 91.014, having hit a three-week high of 91.139 overnight, with its February peak of 91.600 seen as a possible next target.
The U.S. currency rose to 106.89 yen on Monday, its highest since late August, and last stood at 106.84 yen while the euro dipped to $1.2049, near its lowest level in almost two weeks.
The common currency was under pressure as top officials from the European Central Bank sounded alarm over rises in bond yields.
President Christine Lagarde said on Monday the ECB will prevent a premature increase in borrowing costs for firms and households.
Policymaker Francois Villeroy de Galhau was even more explicit, saying some of the recent rises in bond yields were unwarranted and that the ECB must push back using the flexibility embedded in its bond purchase programme.
Traders were quick to sense the marked difference in tone between the ECB and the Federal Reserve.
Richmond Federal Reserve President Thomas Barkin said on Monday the uptick in long-term bond yields so far seems to suggest an adjustment to stronger growth and inflation outlook.
Atlanta Fed President Raphael Bostic said last week that bond yields remain comparatively low, while Federal Reserve Chair Jerome Powell has also shown no undue concerns about rising bond yields.
Against the euro, the franc changed hands at 1.1023 to the euro, not far from a 1-1/2-year low of 1.1098 touched last week.
Full coverage: REUTERS
