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MORNING BID - Flying blindly on a doveish wing
Ankur Banerjee gives us a look at what the future holds for European and global markets The risk-on rally that was sparked by the abrupt shift in U.S. interest rate cut bets following dovish policymakers' comments may fail in Europe, while currency markets are still wary of Tokyo intervening to support the yen. The phone-call diplomacy also came under the spotlight. Donald Trump, U.S. president, praised the "extremely solid" relationship between China and the United States on Monday after a phone call with his Chinese counterpart Xi Jinping. In their first telephone call after Tokyo's Prime Minister sparked an important diplomatic spat with China, Trump told Sanae Takaichi to "call me any time" The markets are focused on the rate developments in the United States after Federal Reserve Governor Christopher Waller stated that a quarter-point cut could be justified by the weak labor market. Investors are now expecting a rate reduction next month after Waller's comments. CME FedWatch shows that traders are now pricing an 81% probability of a reduction next month, compared to 42% one week ago. This huge swing highlights the difficulty the market has in pricing near-term rates due to the lack of economic data as a result of the longest U.S. Government shutdown which ended on November 14 The U.S. Dollar has been stable despite the steep rise in bets on rate-cuts. The yen is still near its 10-month-lows, and dangerously close to 160/dollar. There's no relief in sight, as the chatter about Tokyo officials intervening continues. The yen vigil will continue. The traders believe that a holiday-shortened week could provide Tokyo with a perfect opportunity to engage in some yen purchasing, but it may ultimately have limited impact. Shares of Novo Nordisk fell on Monday, after the obesity drugmaker revealed that its Alzheimer's studies for an older oral form of its semaglutide medication failed to slow down the progression of brain-wasting diseases. Analysts noted that investors' expectations were low for the success of the trial. However, they did not expect a prolonged market reaction. The European futures indicate a lower open as the momentum of Asian stocks slows. Investors may still be worried about last week's AI valuations. The following are the key developments that may influence Tuesday's markets: Easyjet earnings, French consumer confidence for November, Germany Q3 GDP data
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Gold reaches a new high after Fed comments renew rate-cutting bets
Gold rose on Tuesday, reaching its highest level in over a week. This was despite a strong dollar after Fed policymakers' dovish remarks revived the prospects of an American rate cut in December. Gold spot rose by 0.1% at $4,140.85 an ounce as of 0457 GMT. This is the highest level since November 14. It follows a 1.8% increase on Monday. U.S. Gold Futures for December Delivery were 1.2% higher, at $4.141.20 an ounce. Kelvin Wong, senior market analyst at OANDA, said that gold prices recovered in the short-term due to expectations of a rate reduction. Market participants will be watching any data related to demand in the U.S. with much greater interest, right now, to see if the Fed's concern about a soft demand situation, which could be the labor market, retail sale, or consumer confidence outweighs the so-called "sticky inflation situation." Fed Governor Christopher Waller stated on Monday that the job market was weak enough to warrant a further quarter-point cut in rates for December. However, any action beyond this depends on a upcoming flood data delayed by government shutdown. Waller's remarks come after New York Fed president John Williams stated on Friday that U.S. rates of interest could fall "in a near term." According to the CME FedWatch tool, investors now price in an 81% probability of a rate reduction in December. This is up from 40% last weekend. Gold that does not yield a return tends to perform well in environments with low interest rates. This week, the Fed will release key economic data that was delayed due to the government shutdown. These include U.S. retail sale figures, unemployment claims and producer prices. Gold priced in dollars has seen gains capped as the dollar remained near its six-month-highs from last week. Other metals rose in price, including spot silver, which rose by 0.2%, to $51.49 an ounce. Platinum rose 1%, to $1.559.61 and palladium rose 0.3%, to $1.399.25. (Reporting and editing by Subhranshu sahu, Ronojoy Mazumdar, and Ishaan arora)
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China launches Shenzhou-22 to Tiangong Space Station
China launched its Shenzhou-22 space mission on Tuesday to address safety concerns for the crewed spaceflight and space station program after an orbital vessel was damaged earlier this month. According to CCTV's livestream, the Shenzhou-22 took off at 12:11 pm (0411 GMT) from Jiuquan Satellite Launch Center. The spacecraft is headed to China's permanently-inhabited Tiangong station where three astronauts are currently residing. They do not have a flightworthy vessel to return them to Earth if an emergency occurs. The Shenzhou-20 was supposed to bring back three Chinese astronauts to Earth on November 5. However, it was declared unfit for flight after being docked in Tiangong and sustaining suspected debris damages. The only flight-capable vessel left, Shenzhou-21 (which had just arrived in the station late October), was deployed by the Chinese space authorities. Shenzhou-21 left Tiangong without a spacecraft six months earlier than scheduled, creating a safety concern. Shenzhou-22's arrival will eliminate this risk. China's rapid and methodical response contrasts with the United States which was forced to deal with two NASA Astronauts who were stuck on the International Space Station in the United States for nine months because of problems with the propulsion systems of the vessel that carried them. Both countries are studying each other's space technology and operational protocols as they race to land astronauts on the moon by 2030. (Reporting and editing by Jacqueline Wong, Saad Sayeed and Eduardo Baptista)
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Oil prices drop on concerns about oversupply while investors focus on Ukraine talks
The oil prices fell on Tuesday, as fears that Russian shipments would remain under sanctions despite the inconclusiveness of talks to end Ukraine's war outweighed concerns about supply exceeding demand. Brent futures dropped 27 cents or 0.4% to $63.10 per barrel at 0500 GMT. West Texas Intermediate crude (WTI), which is a blend of crude oil from Texas, fell 23 cents or 0.4% to $58.61. The two crude benchmarks both gained 1.3% Monday, as rising doubts over a peace agreement to end the Russia/Ukraine conflict reduced expectations of an unrestricted flow of Russian fuel and crude oil supplies. These are currently under sanctions by Western nations. While market participants are concerned about Russian crude oil shipments, there is a more relaxed outlook for the supply and demand balances of crude oil in 2026. This is because many forecasts predict that supply will grow faster than demand next year. In a Tuesday note, Priyanka Sackdeva, senior analyst at Phillip Nova said that the main risk in the short term is an oversupply. The current prices levels also seem vulnerable. Some Indian refiners, especially private companies, have reduced their purchases of Russian crude oil due to new sanctions against Russian oil giants Rosneft, Lukoil, and rules prohibiting the sale of oil products refined from Russian raw oil to Europe. Reliance Russia wants to increase its exports to China because it has limited sales options. Alexander Novak, the Russian deputy prime minister, spoke at a China-Russia Business Forum in Beijing on Tuesday. Beijing and Moscow have been discussing ways of Expand your mind with this: Exports of Russian oil to China Market analysts continue to focus on the possibility of wider imbalances in supply and demand. In a Monday note, Deutsche Bank said it sees an oil surplus in 2026 of at least two million barrels per a day. It also stated that there is no clear way to return to deficits by 2027. Analyst Michael Hsueh stated that "the path forward to 2026 remains bearish." Prices were supported by the expectation of softer markets in 2019. This outweighed the absence of a resolution to a Ukraine-Russian peace deal. The deal could result in the lifting of sanctions on Moscow and the release of previously restricted oil supply into market. Oil markets still find some support in the expectation that U.S. interest rates will be cut at their policy meeting on December 9-10, as Federal Reserve members have indicated support for a reduction. Lower interest rates can stimulate economic growth, and increase oil demand. Sachdeva stated that "the oil market is caught in a tug of war between a cautious supply overhang, and the demand expectations based on a looser monetary policy."
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Binh Son refinery in Vietnam increases US oil imports
Two sources familiar with the matter on Tuesday said that Binh Son refinery in Vietnam is expected to purchase 1 million barrels West Texas Intermediate crude oil in January. This will be its second purchase within three months, as it increases imports from the United States. Since Trump threatened to impose tariffs against Vietnamese products in April, Vietnam has sought to purchase more U.S. products to close the trade gap. Vietnam wants to import a variety of U.S. products, including farm produce, liquefied gas, aircraft, and crude oil. Sources said that Swiss trader Mercuria had sold the cargo of 1 million barrels, which is due to be delivered between 7-11 January. Companies don't usually comment on commercial transactions. BSR received 700,000 WTI barrels on November 14. This was the first import for BSR since December 2024. Data from shipping analytics company Kpler revealed this. The refiner announced on Sunday that it had exceeded its target by producing more refined products than expected in the first eleven months of 2018. BSR is operating at 120% designed capacity and will ramp up to 123%-125% in the next year.
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Wild spring storm brings huge hail to parts of Australia's eastern coast
As a powerful springstorm swept across Australia's east coast, giant hailstones rained down on Queensland and more than 95,000 houses were left without electricity. The Bureau of Meteorology in Australia reported hail as big as 14 cm (5 inches), damaging solar panels, roofs, and cars. Energex, an energy distributor, said that the wild weather produced wind gusts up to 100 km/h (62mph) and over 800,000 lighting strikes. These caused power lines to be downed and cut off electricity for 95,000 customers. The weather bureau has forecast more severe storms for Tuesday in south-east Queensland, north-east New South Wales and the surrounding areas as the high humidity and hot temperatures persist. Miriam Bradbury, Senior Meteorologist at ABC, told the national broadcaster that severe storms were still expected across most of the South-east today. We're seeing today a similar setup to yesterday. Bradbury said that the weather will not be as "intense" as it was on Tuesday. This means the risk of "giant hail is slightly reduced in comparison to yesterday". The Bureau of Meteorology also issued a heatwave alert for the northern parts of Queensland. Maximum temperatures are expected to exceed 40 degrees Celsius. Queenslanders shared images of huge hailstones on social media. One Reddit user posted a photo of a large hailstone that measured 10 cm in diameter and weighed 188.8 g (6.66 ounces). Reporting by Christine Chen, Sydney; Editing and proofreading by SonaliPaul)
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Honeywell is chosen by Nigerian Dangote to support ambitious capacity expansion
Honeywell has been contracted by Nigerian oil refinery Dangote to help double the capacity of its refinery to 1.4million barrels per day in 2028. This is the clearest sign yet that the company's plans to become the largest refinery in the world are taking shape. Honeywell's equipment and catalysts will help Dangote process a wider range of crude grades, which is needed to support their planned expansion of output. Dangote also plans to license Honeywell's Oleflex Technology to increase its polypropylene production - a material used in plastic containers and auto parts. The financial terms of the agreement were not revealed. Contracts of this nature vary depending on the complexity of the project, but a source with knowledge of the situation estimated that the deal could be worth over $250 million. Nigeria, Africa's biggest crude oil producer, imported almost all of its refined fuel for decades due to the non-functioning state-owned refining facilities, resulting in chronic fuel shortages and subsidy scandals. This put heavy pressure on the foreign exchange reserves. The Dangote Refinery, Africa's and the World's Largest Single-Train Facility at 650,000 Barrels Per Day, is designed in order to reverse this paradox, by meeting Nigeria's entire domestic fuel requirements and creating surpluses for export. Dangote, who spent $20 billion to build the refinery at Lekki in Lagos, announced last month plans to double plant capacity by adding a single-train unit to the facility over the next three year. Dangote's capacity would allow him to process all of Nigeria’s crude oil production, which is currently around 1,5 million barrels per day. Honeywell is in the process to split itself into two companies. The aerospace division, Honeywell's biggest source of revenue, will be separated out. (Reporting and editing by Daniel Wallis in Dubai, Utkarsh shetti from Dubai)
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Asian stocks rise as US interest rate cuts are expected
Asian shares rallied Tuesday, as investors bet on a Federal Reserve rate cut in December. They also piled into technology stocks around the world, despite concerns that the sector is becoming overheated. MSCI's broadest Asia-Pacific share index outside Japan gained 1%, led by tech stocks. This is a partial recovery of last week's 4% drop. The index is expected to drop 3.8% in the month. This will be its first monthly decrease since March. Japan's Nikkei rose 0.8% at the start of trading on Tuesday, after returning to work on Monday from a long holiday. Last week, the index fell 3.5% as risk-off sentiment swept markets. In a note, Charlie Aitken said, "It's nice to see a lot of green across asset classes this morning, as volatility has eased a bit and the Fed puts comes back into play." This is a classic bull equity market behavior. The market is experiencing a short, sharp drop in the stocks and sectors which have been leading the market. There will be a release of those who are over-leveraged and then a start to a recovery, led by growth stocks and cyclicals. After Fed Governor Christopher Waller stated that available data indicated the U.S. employment market is still weak enough to warrant a further quarter-point reduction in interest rates, it's likely we will see a rate cut. According to CME's FedWatch Tool the markets are now pricing in a 85.1% probability of a 25 basis point cut at the December meeting. This is up from 42.4% one week ago. The U.S. central bank will be meeting on December 9-10. Mary Daly, president of the San Francisco Federal Reserve Bank, told the Wall Street Journal that she supports lowering interest rates during the central bank meeting next month because she sees an improvement in the job market. The yield on 10-year Treasury bills was unchanged at 4.0344% during the Asian trading session. The two-year rate, which increases when traders expect a higher Fed Funds rate, was flat at 3.4872% during Asian trading hours, after falling 2.5 basis points the previous session. Dollar has been impacted by the sudden change in bets on rate cuts. After a small overnight gain, the euro bought $1.1522 at last. Early trading saw the dollar index at 100.2. The Japanese yen, despite the slight dollar weakness this week has remained vulnerable. It traded at 156.95 to the dollar in the early Asian hours. This is not far off the 10-month-low of 157.90 that it reached last week. The ongoing dispute between Tokyo and Beijing continues to be in the spotlight. It is over a comment made by Japan's prime minister Sanae Takaichi in November, stating that a Chinese invasion of Taiwan would trigger a Japanese response. Takaichi spoke with Donald Trump on Tuesday after his Monday call with Chinese President Xi Jinping. She claimed that Trump had explained U.S. China relations to her. Trump announced on Monday that he will travel to Beijing, China in April. This is at the invitation from the Chinese government. The meeting proposal was seen as another sign that diplomatic and political ties between China and the United States are improving after their truce in their trade war. Wall Street saw the Dow Jones Industrial Average rise 0.44%. The S&P 500 rose 1.55% and the Nasdaq composite rose 2.69%, boosted by tech stocks. This was the Nasdaq’s best two-day performance since November 2024 and its biggest daily percentage increase since May 12. The U.S. stock and bond market will be closed Thursday, November 22, for Thanksgiving. Trading will resume on Friday for a half-day. Brent crude futures fell 0.2% to $63,16 per barrel. U.S. crude was also down 0.2%, at $58,70. Spot gold fell 0.2% to $4,130 per ounce. (Reporting and editing by Sonali Paul; Scott Murdoch)
Gold reaches a new high after Fed comments renew rate-cut bets
The gold price rose on Tuesday, reaching its highest level in over a week. This was despite a strong dollar. Fed policymakers' dovish remarks revived the prospects of an American rate cut in December.
As of 0303 GMT the spot gold price rose by 0.2%, to $4147.51 an ounce. This is the highest level since November 14. It follows a 1.8% increase on Monday.
U.S. Gold Futures for December Delivery were 1.2% higher, at $4.144.70 an ounce.
Kelvin Wong, senior market analyst at OANDA, said that gold prices recovered in the short-term due to expectations of a rate reduction.
Wong said that "market participants will be watching any data related to demand in the U.S. economy with much greater interest at this time."
Fed Governor Christopher Waller stated on Monday that the job market was weak enough to warrant a further quarter-point cut in rates for December. However, any action beyond this depends on a upcoming flood data that has been delayed due to the government shutdown.
Waller's remarks come after New York Fed president John Williams stated on Friday that U.S. rates of interest could fall "in a near term."
According to the CME FedWatch Tool, investors now price in an 81% probability of a Fed Rate Cut in December. This is up from 40% last Monday.
Gold that does not yield a return tends to perform well in environments with low interest rates. This week, the Fed will release key economic data that was delayed due to the government shutdown. These include U.S. retail sale figures, unemployment claims and producer prices.
Gold priced in dollars has seen gains capped as the dollar remained near its six-month-highs from last week.
The price of spot silver was unchanged at $51.42, platinum increased 1.1% to 1,560.60 and palladium rose 0.2% to 1 398.88. (Reporting and editing by Subhranshu sahu, Ronojojo Mazumdar, and Ishaan arora)
(source: Reuters)