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PlusMarkets Analysis • 22/10/2021
The Market data was collected on 22nd October 2021 at 10:35 am and might have changed since then. Kindly refer to the listed sources for the most recent and updated information
Oil was down Friday morning in Asia as U.S. supplies continue to tighten. The black liquid was set for a flat finish to the week, with easing coal and gas prices curbing the fuel-switching that had increased demand for oil products.
Brent oil futures fell 0.53% to $84.16 by 12:38 AM ET (4:38 AM GMT) and WTI futures were down 0.44% to $82.14.
The market hit multi-year highs earlier in the week as concerns about coal and gas shortages in China, India and Europe led to power providers switching to diesel and fuel oil.
“Weaker natural gas and coal prices would have taken away some of the support for the oil market,” ING commodities strategists said in a note.
Meanwhile, Wednesday’s data from the U.S. Energy Information Administration showed crude stocks at Cushing fell to 31.2 million barrels, their lowest level since October 2018. Despite the low levels, U.S. crude was set for a 0.5% rise for the week, not far off a seven-year high hit earlier in the week.
European stock markets are expected to open higher Friday, helped by gains in Asia on reports that embattled property group China Evergrande was set to pay interest on a dollar bond, just in time to avoid a formal default.
At 2:10 AM ET (0610 GMT), the DAX futures contract in Germany traded largely flat, CAC 40 futures in France climbed 0.5% and the FTSE 100 futures contract in the U.K. rose 0.3%.
China Evergrande Group (HK:3333) remitted $83.5 million in coupon payments to a trustee account at Citibank on Thursday, according to a report from Reuters, meaning the deeply indebted company will be able to pay interest to all bondholders before the expiry of a 30-day grace period on Oct. 23.
Back in Europe, U.K. retail sales fell by 0.2% on the month in September, dropping 1.3% on the year, a weaker result than expected, with the country seeing a surging number of Covid infections, including a slowly increasing number of hospitalizations and deaths.
Also of interest later Friday will be the release of October PMI data for Germany, France, the U.K. and the European Union.
The dollar was heading for a second week of declines on Friday as sentiment stayed tilted towards riskier assets, while an intervention by the Australian central bank put a halt to the Aussie dollar’s recent surge.
The dollar index was last at 93.733, little changed in Asian hours but off 0.24% on the week, as it continues its fall from a 12-month high of 94.565 hit in earlier this month.
It had managed to stem losses on Thursday, bouncing on better U.S. jobs and housing data, but the rally petered out on Friday morning in Asia, where risk sentiment was boosted news that beleaguered developer China Evergrande Group has supplied funds to pay interest on a U.S. dollar bond, averting a default.
But traders are still trying to assess whether the dollar has scope to fall further, or if this is a temporary blip on a march higher.
“People are wondering whether we are at an inflection point, as the dollar has been weakening and that doesn’t really fit with the broader narrative that global growth is cooling and the Fed is on the path to tapering, which should be supportive for the dollar,” said Paul Mackel, global head of FX research at HSBC.
On Friday, benchmark 10-year U.S. Treasury yields were at 1.6872%, slightly off from Thursday’s multi-month high of 1.7%, as markets continue to prepare themselves for an announcement by the Federal Reserve that it will start to wind down its massive bond buying programme, which is widely expected for November.
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