Macroeconomics

Oil Falls as U.S. Drillers Replace Barrels Lost in OPEC-Led Cuts
Oil dropped from a three-week high amid speculation that increased U.S. drilling will boost output, offsetting cuts by OPEC and other producers.

Futures fell 1.1 percent in New York after failing to extend Thursday’s 2 percent rally. Rigs targeting crude in the U.S. rose this week by 15 to 566, the highest since November 2015, according to Baker Hughes Inc. data reported Friday. American crude output is the highest level since April, government data show. Oil supplies from OPEC are plunging this month, according to tanker-tracker Petro-Logistics SA.Last month’s pact between the Organization of Petroleum Exporting Countries and 11 other nations gave hope to a market stuck in a 2 1/2 year slump. While Saudi Arabia says more than 80 percent of the agreed cuts have been implemented, analysts and investors are waiting for data to gauge the extent of the decrease. The International Energy Agency says rising prices will spur U.S. shale output, and drillers are adding more rigs.

West Texas Intermediate for March delivery fell 61 cents to $53.17 a barrel on the New York Mercantile Exchange on Friday. Total volume traded was about 25 percent below the 100-day average.Brent for March settlement dropped 72 cents, or 1.3 percent, to $55.52 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.35 premium to WTI.

Energy shares slipped after Chevron Corp. posted its first annual loss since at least 1980, signaling the difficulties faced by the world’s biggest oil companies as they struggle to emerge from the worst collapse in a generation. The S&P Oil & Gas Exploration and Production Select Industry index fell 1 percent.U.S. crude output climbed by 17,000 barrels a day to 8.96 million in the week ended Jan. 20, according to an Energy Information Administration report on Wednesday. Rigs targeting crude have risen by 250 to 566 since touching a seven-year low in May, according to Baker Hughes data. Read more.

Rural Wage Growth Defies Demonetisation, Rises To 7.3%: Nomura
Defying demonetisation, nominal rural agricultural wages growth rose to 7.3 percent in November on year-on-year basis, largely owing to hike in minimum wages announced by the government in September last year, financial services major Nomura said in a report.
Interestingly, the report said that the steady wage growth suggests a likely release of pent up demand after remonetisation.

“Nominal rural agricultural wages growth rose to 7.3 percent year-on-year in November 2016 (the month demonetisation was announced) from 6.9 percent in October, remaining well above the previous 12-month average of 4.8 percent,” Nomura said in the report.
Demonetisation of Rs 500 and Rs 1,000 currency notes came into effect from November 9, 2016.

According to the financial services major, rural wages may have defied this demonetisation effect because of the hike in minimum wages announced by the government in September 2016.

“The resilience of nominal rural wage growth, despite demonetisation and amid lower inflation ( that is higher real wages), suggests that the current slowdown in rural demand is transitory and could give way to a sharp release of pent up demand once the economy is sufficiently remonetised, which we expect by end-March,” the report said.
Rural wage growth has only recently started to trend higher, after almost two years of stabilisation, it noted. Continue reading.

Abe Open to Bilateral Trade Deal With U.S. After Trump Exits TPP
Japanese Prime Minister Shinzo Abe signalled that he’s open to a bilateral trade deal with the U.S. after Donald Trump formally withdrew from a 12-nation Asia-Pacific accord this week in one of his first acts as president.

One-on-one talks with the U.S. on a trade deal are “not absolutely impossible,” Abe told lawmakers on Thursday in Tokyo, adding that he’s finalizing negotiations for a summit with Trump. The leaders are set to have a phone conversation in the coming days before meeting in Washington on Feb. 10, the Yomiuri newspaper reported on Thursday.
Abe, a key proponent of the Trans-Pacific Partnership regional trade agreement, is seeking ways to boost economic relations with Japan’s only military ally. Trump prefers to negotiate bilateral trade deals and has warned that he might withdraw U.S. troops from South Korea and Japan if allies did not pay more for their services.

Asked in parliament about the potential fate of Japan’s sensitive agricultural sector in any bilateral talks, Abe vowed to “protect what must be protected.”

Abe said he wanted the Washington summit to show that the alliance between the two nations is “unshakable,” adding that he planned to discuss the East China Sea and the South China Sea. Japan relies on the U.S. for a “nuclear umbrella” to protect against regional threats including North Korea and China.

Asked by his former Defense Minister Itsunori Onodera to comment on bolstering Japan’s own defenses to enable pre-emptive strikes on missile bases, Abe said this was legally possible, but there was no plan to gain such capabilities.

“I want to strengthen the deterrent power of the entire U.S.-Japan alliance,” Abe said. “We must think about our own deterrence in the context of our defense-only policy and within the framework of the alliance.”

The first visit to Japan by a Trump administration official will be made by U.S. Defense Secretary James Mattis on Feb. 3. Defense Minister Tomomi Inada told parliament she welcomed the visit as a sign of America’s interest in Asia. Continue reading.

Lagarde Says Trump’s Fiscal Plans Likely to Boost U.S. Economy
President Donald Trump’s plans to overhaul the U.S. tax system and increase infrastructure spending should accelerate growth in the world’s biggest economy over the next two years, said International Monetary Fund Managing Director Christine Lagarde.

In an economic update last week, the IMF bumped up its forecast for U.S. growth by 0.1 percentage point this year and 0.4 point for 2018. The U.S. economy will expand by 2.3 percent in 2017 before accelerating to a 2.5 percent rate in 2018, the fund said.

While Trump has promised to cut taxes and boost infrastructure spending, he’s also threatened to impose tariffs on trade partners such as China and Mexico. Lagarde said it’s too early to predict how Trump’s other policies may impact the economy. More here.

Compiled by Sharayu S Pawar

Finance

Nifty50 is overbought, expect volatility in a wide range; protect profit at higher levels 

The Nifty50 is overbought by now, but it continued to post gains for the fourth day in a row and ended the week with a gain of 290 points, or 3.50 per cent. The ending of the week threw up extremely divergent signals on the daily and weekly charts.

We expect a modest opening for the market on Monday. Not only is the Nifty50 showing overbought conditions on the daily charts, it faces pressure from external technical factors like a  potential rise in the US Dollar Index and a spike in US bond yields. Continue reading here.

 

Sensex up 10% from December lows; investors should stay put despite B-Day volatility 

The market began the week with a gap down reacting to Trump’s ‘Make in USA and hire in USA’ rhetoric after the inauguration, but the inherent strength of the market was so strong that such noise was shrugged off immediately and market bounced back quickly thus setting tone of bullish outlook for the whole week ahead.

Not surprisingly, in such bullish undertones, the negatives quarterly results were disregarded and stock prices defied all logic to inch higher. More here.

 

Oil prices fall as data suggests drill ramp up in US

Oil prices slipped on Friday, extending losses after data suggested drilling is ramping up in the United States, prompting investor concern about how effective the Organisation of the Petroleum Exporting Countries (Opec) and other producers will be at supporting prices by cutting supplies.

US crude futures for March delivery settled down 61 cents, or 1.1 per cent, at $53.17 a barrel.

Brent was down 72 cents at $55.52 a barrel.The US weekly oil and gas rig count from Baker Hughes showed that US drillers added 15 oil rigs in the week, the 12th gain in 13 weeks. That brought the total count to 566, the most since November 2015.Prices had risen during Asian trading, though activity was thin due to the start of the Lunar New Year holiday in much of that region, including China and Singapore.

Compiled by Beverley Dias

Comments

comments