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January 19th - On January 15th, Dai Houliang, Chairman of China National Petroleum Corporation (CNPC), met with Canadian Prime Minister Mark Carney in Beijing. The two sides exchanged views on promoting and expanding Sino-gas cooperation.The yield on Japans 40-year government bonds rose to 3.895%, a record high.On January 19th, Peng Yongtao, Director of the Service Industry Survey Center of the National Bureau of Statistics, stated that the service sector contributed 61.4% to national economic growth, an increase of 3.7 percentage points from the previous year; the service sector boosted GDP growth by 3.0 percentage points, an increase of 0.1 percentage points from the previous year; and the service sectors added value accounted for 57.7% of GDP, an increase of 0.9 percentage points from the previous year. In the fourth quarter, the added value of the service sector reached 21,594.8 billion yuan, a year-on-year increase of 5.2%, contributing 63.2% to economic growth and boosting GDP growth by 2.8 percentage points. The service sectors added value accounted for 55.7% of GDP. In December, the service sector production index increased by 5.0% year-on-year, 0.8 percentage points faster than in November.On January 19th, BetaShares Chief Economist David Barsanese stated that Trumps threats against Europe regarding Greenland could ultimately backfire. He pointed out that no self-respecting European country is likely to relinquish Greenland simply because of tariff threats. Furthermore, imposing higher tariffs on major trading partners will only exacerbate the risks facing the US economy, especially if Europe ultimately retaliates with trade measures. Barsanese added that if Trump is ultimately forced to concede and fails to obtain Greenland, it will once again expose the hollow nature of these threats and undermine all future negotiations.On January 19th, Nomura issued a research report stating that it expects Tencents (00700.HK) revenue to grow 12% year-on-year to RMB 193.5 billion in the last quarter, largely in line with market expectations. Nomura also expects Tencents non-IFRS net profit to increase 15% year-on-year to RMB 63.9 billion, 3% lower than the latest market forecast; due to a 4.2 percentage point increase in gross margin, the non-IFRS operating profit margin is expected to rise 0.7 percentage points to 35.2%. The bank also expects the operating profit margin to remain around 37.2% in fiscal year 2026. The report suggests that Tencent may follow ByteDances lead and more actively utilize GPU resources in third-party data centers to train its Tencent Mixed-Model to address the shortage of advanced chips, and believes the company will increase its investment in AI. Nomura maintains its "Buy" rating on Tencent and continues to give it a target price of HKD 775.

WTI crude oil climbs above $80.00 as NFP and recession fears contend with an OPEC+ surprise

Daniel Rogers

Apr 07, 2023 11:36

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As energy markets celebrate the Good Friday holiday, WTI crude oil prices remain stable around $80.50, poised for a three-week uptrend. In doing so, black gold defends the week-beginning gains provided by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, headed by Russia, known as OPEC+, who announced a surprise output cut. However, concerns of a recession and a cautious disposition ahead of the March US employment report have recently posed a challenge to the energy benchmark.

 

The OPEC+ group startled the market with a voluntary output decline of nearly 1.66 million barrels per day. The International Energy Agency (IEA) stated, in response to the OPEC+ announcements, that the OPEC+ decision to reduce oil output risks aggravating a stressed market by driving up oil prices in response to inflationary pressures.

 

On the other hand, the US Dollar's weakness, bolstered by disappointing US data, supported the recovery of the black gold.

 

In spite of this, the US Dollar Index (DXY) has a four-day losing streak and is currently trading around 102.000.

 

Initial Jobless Claims for the week ending March 31 increased to 228K from 200K expected and an upwardly revised 246K the previous week. Notable is that the Challenger Job Cuts for the given month increased from 77,77K to 89,703K. Previously, US JOLTS Job Openings fell to a 19-month low in February, and March's ADP Employment Change figures of 145K also disappointed markets. In addition, the US ISM Services PMI for March decreased to 51.2 compared to 54.5 anticipated and 55.1 previously.

 

China's optimism for economic development and optimistic activity data from the dragon nation could also support the oil price. Pan Gongsheng, the director of China's State Administration of Foreign Exchange (SAFE), stated on Friday that Beijing "will defend itself against external financial market shocks and risks."

 

It should be noted, however, that recent calls for a recession pose a challenge to WTI crude oil purchasers, and more signs of economic decline should be monitored for direction, particularly when commodity prices trade near the key short-term resistance line.

 

In addition to the news about the recession, the March US employment report will be crucial to monitor for direction. Analysts anticipate a decline in headline Nonfarm Payrolls (NFP) to 240K from 311K previously, with the unemployment rate remaining unchanged at 3.6%. However, the contradictory forecasts for Average Hourly Wages make the outcome even more intriguing.


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