The Organization of the Petroleum Exporting Countries and its allies face stiffening competition in 2020, the International Energy Agency said on Friday, adding urgency to the oil producer group's policy meeting next month.
"The OPEC+ countries face a major challenge in 2020 as demand for their crude is expected to fall sharply," the Paris-based agency said in a monthly report.
"Surging non-OPEC supply explains this drop, with growth of 2.3 million barrels per day (bpd) next year versus 1.8 million bpd in 2019," it added, citing production from the United States, Brazil, Norway and Guyana.
Demand for crude oil from OPEC in 2020 will be 28.9 million bpd, the IEA forecast, 1 million bpd below the exporter club's current production.
The agency kept its assessments for growth in global oil demand in 2019 and 2020 at 1 million bpd and 1.2 million bpd respectively, but said its outlook might slightly underestimate the impact of tariffs from the U.S.-China trade war.
Analysts at TD Securities are looking for the US retail sales to register a soft 0.1% gain for October as a decline in auto sales likely kept headline sales subdued.
“We expect a rebound in the control group to be the main driver of headline growth, reflecting still-solid consumer spending. Separately, industrial production likely tumbled -0.4% in October owing to a sharp slide in manufacturing activities, which were impacted by the GM strike. Lastly, the NY Empire manufacturing survey will give us a first indication at the performance of the sector in November. The consensus is looking for a modest increase to 6.0 from 4.0 in October.”
According to the report from Eurostat, the first estimate for euro area (EA19) exports of goods to the rest of the world in September 2019 was €196.2 billion, an increase of 5.2% compared with September 2018 (€186.5 bn). Imports from the rest of the world stood at €177.6 bn, a rise of 2.1% compared with September 2018 (€173.9 bn). As a result, the euro area recorded a €18.7 bn surplus in trade in goods with the rest of the world in September 2019, compared with +€12.6 bn in September 2018. Intra-euro area trade rose to €163.4 bn in September 2019, up by 0.9% compared with September 2018.
In January to September 2019, euro area exports of goods to the rest of the world rose to €1 741.9 bn (an increase of 2.9% compared with January-September 2018), and imports rose to €1 586.3 bn (an increase of 2.7% compared with January-September 2018). As a result the euro area recorded a surplus of €155.5 bn, compared with +€147.3 bn in January-September 2018. Intra-euro area trade rose to €1 470.9 bn in January-September 2019, up by 1.4% compared with January-September 2018.
Figures, published by Eurostat, showed that the euro area annual inflation rate was 0.7% in October 2019, down from 0.8% in September. The slowdown was in line with expectations. A year earlier, the rate was 2.3%. European Union annual inflation was 1.1% in October 2019, down from 1.2% in September. A year earlier, the rate was 2.3%.
The lowest annual rates were registered in Cyprus (-0.5%), Greece (-0.3%) and Portugal (-0.1%). The highest annual rates were recorded in Romania (3.2%), Hungary (3.0%) and Slovakia (2.9%). Compared with September, annual inflation fell in fifteen Member States, remained stable in eight and rose in five.
In October, the highest contribution to the annual euro area inflation rate came from services (+0.69 percentage points, pp), followed by food, alcohol & tobacco (+0.29 pp), non-energy industrial goods (+0.07 pp) and energy (-0.32 pp).
UOB Group’s Economist Ho Woei Chen, CFA and Senior FX Strategist Peter Chia assessed the recently published Chinese data and the impact on GDP figures.
“The bulk of China’s macroeconomic data for October have been released and they have broadly pointed to a weakened outlook in 4Q19 in the key areas of manufacturing, private consumption demand and investment. Despite signs of growth moderation, we do not expect the People’s Bank of China (PBoC) to adopt a significantly more aggressive monetary easing stance ahead. Weighed by trade and economic uncertainties, we maintain our view of a higher USD/CNY, towards 7.30 by 2H next year”.
According to analysts at ANZ, for the Australian economy, the impact of monetary policy on housing is clear, but its effect on consumption has been limited, so far.
“The housing market recovery will lift retail. Rising housing prices and turnover tend to support non-food retail sales, and we are already seeing the first signs of that. But the lag between housing strength and a full recovery in retail can be long, and challenges, such as high debt and economic uncertainty, may soften the effect. Retail sales volumes fell in the year to September for the first time since 1991. Non-food sales, in particular household goods, have been struggling in the last couple of years, as housing prices fell. Improvements in the housing market are boosting non-food retail, which grew 0.5% q/q in September, the best result since mid-2018. Households however are using the recent tax and rate cuts to pay down debt, which may delay improvements in household spending.”
The conflict between the two countries could expand beyond trade and technology, Bridgewater Associates founder Ray Dalio said.
“There is a trade war, there is a technology war, there is a geopolitical war, and there could be a capital war. How that is approached is going to determine our futures,” said Dalio. “I hope that it is done with mutual understanding instead of wars -- a win-win relationship rather than a lose-lose relationship.”
Dalio’s comments come as lawmakers in the U.S. are ratcheting up the pressure to slow the spigot of money that has flowed from U.S. pension and investment funds into Chinese companies. The U.S. and China are trying to reach a trade deal, aimed at reducing tariffs on goods that are hurting both economies and bringing an end to a year-long trade war.
The board that oversees retirement savings for U.S. government employees said on Thursday that it would allow one of its funds to invest in an international index that includes Chinese companies. That’s in spite of the threat of legislation from lawmakers who say the investments will undermine national security and contribute to China’s economic and corporate growth.
Mortgage arrears rate at 1%, low by historical, international standards.
Mortgage arrears rates have been increasing in recent years, highest for around a decade.
Unlikely that national arrears rate will increase substantially from here.
Tighter lending standards placed downward pressure on arrears.
Non-performing loans currently pose little risk to health of financial institutions.
The White House is working on a tax cut package for implementation in a second term of U.S. President Donald Trump, White House economic adviser Larry Kudlow said.
Kudlow said the tax cuts would be aimed at bolstering growth and providing tax relief to middle-income families. He said it was in the very early stages, but details would be released next year as part of the 2020 presidential campaign.
China's strongest consumer inflation in nearly eight years won't deter the central bank from cutting a key interest rate next week, as slowing economic growth is a bigger concern for policymakers, traders and fund managers said.
The People's Bank of China (PBOC) will likely lower the Loan Prime Rate (LPR) next Wednesday, for the third time since it introduced the benchmark in August. The rate on the one-year fixing now stands at 4.2% while the five-year is at 4.85%.
Driven by soaring pork prices from the spread of African Swine Fever, China's consumer inflation rose past the government's target of around 3% in October to its fastest pace in almost eight years, posing a dilemma for the PBOC. China's economic growth slipped to its slowest pace in nearly three decades in the third quarter, pressured by slowing global demand and a bruising trade war with the US.
Eleven traders and bond fund managers, and about a dozen analysts and economists, told they expected the LPR to be lowered this month.
A majority of them believe the cut will be a marginal 5 basis points, in line with a 5 basis point cut in a medium-term lending facility (MLF) last week and in keeping with a gradual rather than aggressive loosening.
China's central bank extended 200 billion yuan through its medium-term lending facility on Friday, the second time it has done so this month, while keeping the lending rate unchanged.
The move to add long-term funds caught the market off guard as the central bank had already injected funds last week. Several traders said the cash injection was likely a response to tighter liquidity in the interbank market from late Thursday, which pushed up borrowing costs.
Nie Wen, economist at Hwabao Trust in Shanghai, said the fund injection via MLF loans was to make up for the shortfall in liquidity even after multiple reserve requirement ratio (RRR) cuts so far this year. In the short term, high consumer inflation was keeping policymakers from immediately cutting interest rates, he said.
"But at least it has to release liquidity to support economic growth, especially after October's sluggish credit lending data," Nie added.
The People's Bank of China (PBOC) said on its website on Friday the interest rate on one-year MLF loans remained at 3.25%, the same as previous operation. Last week, the central bank cut the interest rate on MLF loans for the first time since February 2016, but only by a marginal 5 basis points. It also injected 400 billion yuan into financial institutions via the liquidity tool.
Nomura Research discusses a quant insight on the cyclicality of global equity sentiment to make its forecasts for cases of risk-off moves.
"We found that global equity sentiment tends to revert to the mean in roughly 22 trading days on average, while US equity sentiment tends to take around 20 trading days. For example, if global sentiment were to fall below the one-year average today (14 November), we would expect risk-off moves to accelerate through 29 November, followed by a reversal of this pessimism through 16 December (this assumes that the deterioration and recovery processes take 11 trading days each). If conditions were to change, these cyclicality forecast results would also change, of course. But the pattern of sentiment swings thus far shows that 2019 was typified by a repeated cycle of risk-on and risk-off phases lasting about a month," Nomura adds.
Germany's federal budget will rise to about 362 billion euros next year, a draft budget passed by a parliament committee showed, representing an increase of 1.1% from 2019 and sticking to a balanced budget. The amount is 1.7 billion euros higher than proposed by Finance Minister Olaf Scholz.
The centre-left Social Democrat, who is junior partner of Chancellor Angela Merkel, can only keep the budget balanced by tapping a reserve that was meant to be used for the integration of migrants. That set-aside has grown to more than 35 billion euros, of which 10.6 billion euros will be redirected to the regular budget next year, the draft showed. About 7 billion euros are earmarked for incentives to cut carbon emissions, through measures such as insulating buildings, replacing ageing oil heating systems, and higher subsidies for buyers of electric cars.
The budget must still be passed by the full assembly of the lower house of parliament, the Bundestag. The decision is expected at the end of the month.
According to the report from National Bureau of Statistics, China's house prices logged a moderate growth in October.
In 70 major cities, house prices increased 0.5 percent in October from the previous month. Among 70 cities surveyed by the NBS, prices increased in 50 cities compared to 53 in September.
On a monthly basis, house prices fell 0.2 percent in Beijing and by 0.1 percent in Guangzhou. Meanwhile, house prices rose 0.4 percent each in Shanghai and Shenzhen, data showed.
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1022
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date December, 6 is 98645 contracts (according to data from November, 14) with the maximum number of contracts with strike price $1,1200 (5533);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2878
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date December, 6 is 30434 contracts, with the maximum number of contracts with strike price $1,3000 (5262);
- Overall open interest on the PUT options with the expiration date December, 6 is 32016 contracts, with the maximum number of contracts with strike price $1,2200 (2301);
- The ratio of PUT/CALL was 1.05 versus 1.05 from the previous trading day according to data from November, 14
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
|Raw materials||Closed||Change, %|
|Index||Change, points||Closed||Change, %|
|02:15||Australia||RBA Assist Gov Debelle Speaks|
|02:45||Canada||BOC Gov Stephen Poloz Speaks|
|04:30||Japan||Industrial Production (YoY)||September||-4.7%||1.1%|
|04:30||Japan||Industrial Production (MoM)||September||-1.2%||1.4%|
|08:00||Eurozone||ECB's Yves Mersch Speaks|
|10:00||Eurozone||Trade balance unadjusted||September||14.7||17.5|
|10:00||Eurozone||Harmonized CPI ex EFAT, Y/Y||October||1%||1.1%|
|10:00||Eurozone||Harmonized CPI, Y/Y||October||0.8%||0.7%|
|13:30||Canada||Foreign Securities Purchases||September||4.99|
|13:30||U.S.||NY Fed Empire State manufacturing index||November||4||5|
|13:30||Canada||Gov Council Member Lane Speaks|
|13:30||U.S.||Retail sales excluding auto||October||-0.1%||0.4%|
|13:30||U.S.||Retail Sales YoY||October||4.1%|
|13:30||U.S.||Import Price Index||October||0.2%||-0.2%|
|14:15||U.S.||Industrial Production (MoM)||October||-0.4%||-0.4%|
|14:15||U.S.||Industrial Production YoY||October||-0.1%|
|18:00||U.S.||Baker Hughes Oil Rig Count||November||684|
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