2023-08-11 21:58:00
Financial Breakfast on August 12: Gold prices fell for the third consecutive week, dragged down by rising dollar and U.S. bond yields
Beijing time on Saturday (August 12), the dollar rose on Friday following a slight increase in U.S. producer prices in July, and bond yields rose accordingly, even as speculation intensified that the Fed was regarding to end its rate hike. Hovering near a one-month low, the weekly line was set for a third straight weekly decline.
Commodity closing: U.S. gold futures closed down 0.1 percent at $1,946.60. Brent crude futures rose 0.5% to settle at $86.81 a barrel, while U.S. crude futures rose 0.5% to settle at $83.19 a barrel.
U.S. stocks closed: the Dow Jones index closed up 0.30% at 35281.40 points; the S&P 500 index closed down 0.09% at 4464.73 points; the Nasdaq composite index closed down 0.56% at 13644.85 points.
precious metal
Gold hovered near one-month lows on Friday and was on track for a third straight weekly loss, with the dollar and U.S. Treasury yields climbing following data showed U.S. producer prices rose in July.
“The Producer Price Index (PPI) was slightly higher than expected, which pushed U.S. Treasury yields higher and lifted the U.S. dollar index a little bit. So that puts a little pressure on the gold market,” said Kitco senior market analyst Jim Wyckoff.
The U.S. Labor Department said U.S. final demand PPI rose 0.3% in July. In the 12 months to July, the PPI increased 0.8%. Economists polled by Archyde.com had expected PPI to rise 0.2% month-on-month and 0.7% year-on-year in July.
The U.S. dollar index rose 0.3 percent, its fourth straight week of gains, as did the benchmark 10-year U.S. Treasury yield.
Spot silver fell 0.1% to $22.66 an ounce, while platinum rose 0.4% to $910.06. Both balances were set for a fourth straight week of losses.
Oil prices climbed on Friday following the International Energy Agency (IEA) forecast record global demand and tighter supplies, pushing prices up for a seventh straight week, the longest weekly winning streak since 2022.The IEA estimates that global oil demand hit a record 103 million bpd in June and might hit another record high this month. At the same time, production cuts by Saudi Arabia and Russia are set to lead to a sharp draw in inventories for the rest of 2023, which the IEA said might push prices higher.
On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) said it expects global oil demand to rise by 2.44 million bpd this year, unchanged from its previous forecast. OPEC said the outlook for the oil market was healthy in the second half of the year.
This week’s U.S. economic data also lifted market sentiment, fueling speculation that the Federal Reserve is nearing an end to its aggressive rate hikes.
Supply cuts and an improving economic outlook have made oil investors more optimistic, said OANDA analyst Craig Erlam. However, he noted that following a sustained rally, there are signs that momentum is fading. On Thursday, Brent hit its highest level since January, while U.S. crude hit its highest level this year on Wednesday. The last time Brent rose for seven weeks in a row was in January-February 2022, before Russia invaded Ukraine.
The U.S. oil rig count, an early indicator of future output, held steady at 525 this week following eight straight weeks of declines, energy services firm Baker Hughes said.
foreign exchange
The dollar rose on Friday following U.S. producer prices rose slightly in July and bond yields moved higher, even as speculation grew that the Federal Reserve was nearing an end to raising interest rates.
The rebound in service costs at the fastest pace in almost a year pushed producer prices higher and rattled traders, who also saw the yen slip below the 145-yen threshold to the dollar, which was set in September 2022. triggering Japanese intervention.
Producer prices on final demand rose 0.3 percent, the Labor Department said, with data for June revised down to show no change in PPI, rather than a previously reported 0.1 percent rise.
In the 12 months through July, the PPI rose 0.8% following rising 0.2% in the previous month. According to the survey of economists, the PPI is expected to increase by 0.2% month-on-month and 0.7% year-on-year.
Thierry Wizman, global FX and currency strategist at Macquarie, said the services PPI rose 0.5 percent, the biggest gain since last August, as it included the volatile retailer and wholesaler profits.
Wizman said the market was also worried that rising energy costs would push up the consumer price index (CPI), but such fears were misplaced because energy PPI was flat month-on-month.
“Right now everyone is worried regarding headline CPI going up because of energy prices, (but) if final demand PPI is up 0.8%, you don’t really worry too much regarding that, do you?”
Consumer inflation rose 0.2% last month, unchanged from June’s gain, and rose 3.2% in the 12 months through July, CPI data showed on Thursday.
The U.S. dollar index , which measures the greenback once morest a basket of six currencies, rose 0.21%, on track for a fourth straight weekly gain; it has risen regarding 2.9% since mid-July from a 15-month low on signs that the U.S. The labor market is resilient.
Data since then have suggested that the pace of inflation is slowing, raising bets that the Fed will not raise rates further. But yields moved higher following the Treasury raised its borrowing forecast for the third quarter.
Marvin Loh, senior global macro strategist at State Street Securities, said the inflation data was encouraging, but achieving the Fed’s 2 percent sustainable inflation target would require a less robust labor market.
“The Fed’s job is not done until the CPI data stabilizes around 2% and the labor market balances out,” Loh said, during which time the dollar “might be range-bound.”
Futures traders are currently pricing in an 88.5% chance that the Fed will keep its benchmark interest rate in its current range of 5.25-5.5% when policymakers meet in September. Ahead of the inflation data, the odds had risen to more than 85%.
The stronger dollar sent the yen briefly touching 145.03 in followingnoon trade, its highest since June 30. The dollar was last at 144.95 yen, up 0.15% on the day.
“Once the yen gets to 145, you can expect some (intervention) rhetoric, and I think the market will become more cautious when we get to that level,” said Moh Siong Sim, currency strategist at Bank of Singapore.
Japan intervened in currency markets last September when the dollar rose above 145 yen, prompting Japan’s finance ministry to buy yen, pushing the pair back to around 140 yen. The yen has fallen more than 10 percent once morest the dollar this year.
Meanwhile, sterling rose for the first time in four days following data showed Britain’s economy grew more than expected in June, easing some concerns regarding the impact of high inflation and interest rates on economic activity. Sterling was last at $1.2694, up 0.15% on the day but still on track for a fourth straight weekly loss.
On Friday, the euro was down 0.3% at $1.0946 and the dollar was down 0.06% once morest the Swiss franc.
market news
India bulks up Russia’s low-quality fuel amid dwindling crude supplies
India is preparing to buy the most low-quality fuel from Russia in years as falling crude flows from key producers and upcoming refinery maintenance threaten supply. Preliminary data from analytics firm Kpler showed that India’s imports of low-quality Russian products in August are expected to double from the previous month to regarding 269,000 bpd. That would be the highest level since at least early 2017. These products mainly include high-sulfur fuel oil and vacuum gasoline, which can be used in secondary refining units to increase the production of high-value products such as diesel and gasoline. After Russia’s production cut, India imported less crude oil from Russia, which meant that Indian refineries ran out of raw materials and therefore needed to import more raw materials from Russia. Also, upcoming maintenance work at Indian refineries might also have an impact on its production of lower-quality fuels, another reason for the rise in imports.
Bank of America: Inflows into U.S. Treasuries are expected to hit record highs this year
U.S. Treasuries are on track for record inflows this year as yield-chasing investors pile into cash and bond markets, strategists at Bank of America said. Cash funds attracted $20.5 billion in inflows in the week ended Aug. 9, while investors put $6.9 billion into bonds, BofA strategists led by Michael Hartnett said in a note, citing data from EPFR Global. Meanwhile, U.S. stocks saw their first outflows in three weeks, amounting to $1.6 billion. Bank of America said inflows into U.S. Treasuries have reached $127 billion this year and are expected to hit a record annualized rate of $206 billion.
Russian Prime Minister: Russia’s GDP will grow by 1.5% in the first half of 2023
On August 11 local time, Russian Prime Minister Mishustin stated that Russia’s GDP will grow by 1.5% in the first half of 2023. According to reports, Russia’s total industrial production value increased by 2.5%, non-oil and natural gas revenue increased by nearly 20%, and oil and natural gas revenue increased by nearly 5% compared with the same period last year. Russian oil and gas revenues will continue to grow in the coming months.
Last issue of energy: container shipping index (European line) futures is my country’s first index-type and cash-delivered futures variety listed on the commodity futures exchange
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IEA: Russia’s oil export revenue in July is the highest since November last year
The latest report released by the International Energy Agency (IEA) shows that Russia’s oil exports in July remained at 7.3 million barrels per day, and the exported petroleum products increased by 200,000 barrels per day from the previous month to 2.7 million barrels per day. While overall export volumes were flat, its revenue was the highest since November 2022. In addition, the report said Russia cut oil production to 9.4 million barrels per day in July, meaning Moscow was complying with a previously announced voluntary cut of 500,000 barrels per day.
The People’s Bank of China: RMB loans increased by 16.08 trillion yuan in the first seven months, an increase of 1.67 trillion yuan year-on-year
According to data from the central bank, RMB loans in the first seven months increased by 16.08 trillion yuan, an increase of 1.67 trillion yuan year-on-year. In July, RMB loans increased by 345.9 billion yuan, a year-on-year decrease of 349.8 billion yuan. In terms of sectors, household loans decreased by 200.7 billion yuan, of which short-term loans decreased by 133.5 billion yuan, medium and long-term loans decreased by 67.2 billion yuan; loans to enterprises (institutions) increased by 237.8 billion yuan, of which short-term loans decreased by 378.5 billion yuan, and medium-term loans decreased by 378.5 billion yuan. Long-term loans increased by 271.2 billion yuan, and bill financing increased by 359.7 billion yuan; loans from non-banking financial institutions increased by 217 billion yuan.
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