Oil prices are declining. Investors buy Asian shares on expectations of stimulus from the People’s Bank of China

By JustForex

US stock indexes were trading up yesterday. By Monday’s close of trading, the Dow Jones (US30) gained 0.45%, and the S&P 500 (US500) added 0.40%. The NASDAQ Technology Index (US100) jumped by 0.62%. Investors are still focused on signals of weakening inflation in the US and an improvement in the country’s economic assessment. However, the Fed is only 60-70% of the way through its interest rate hike cycle and will begin trimming the balance sheet starting in September.

The focus for traders this week remains the FOMC minutes, data on US industrial production and retail sales for July, and quarterly reports from US retailers Walmart Inc, Target Corp, and Home Depot Inc, which should show how the US retail sector and consumers are holding up amid high inflation.

Stock markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.74% on Monday, France’s CAC 40 (FR40) added 0.25%, Spain’s IBEX 35 Index (ES35) increased by 0.32%, Britain’s FTSE 100 (UK100) closed up by 0.11%.

Europe is facing rising energy bills this year, driven by global increases in wholesale electricity and gas prices. European gas prices have more than tripled this year, partly after supply disruptions related to Russia’s invasion of Ukraine.

Oil prices hit six-month lows Monday after China released weak July data on industrial production and retail sales. As a result, the People’s Bank of China poured 400 billion yuan (nearly $60 billion) into the financial system to bolster the Chinese economy to revive demand in an economy slowed by Beijing’s ongoing Covid restrictions.

Iran is due this week to finally answer the remaining three outstanding questions on the nuclear deal. If Tehran reaches an agreement with Europe and the United States, oil supplies may rise sharply soon, putting even more downward pressure on oil quotes.

The head of Saudi Aramco, the world’s largest oil exporter, unexpectedly said yesterday that the company is ready to increase production to 12 million barrels per day despite signs of a global economic slowdown. This came as a surprise to analysts, especially after the recent OPEC+ meeting, as the state-owned company rarely makes such a comment without permission from Energy Minister Abdulaziz bin Salman or his half-brother, Crown Prince Mohammed bin Salman. In the United States, the peak summer driving season is winding down, and fuel demand is expected to decline further in the next two weeks.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 1.14%, Hong Kong’s Hang Seng (HK50) decreased by 0.67%, and Australia’s S&P/ASX 200 (AU200) was up by 0.45%. At the market’s opening, Asian shares started to show gains on expectations that China would deploy more stimulus measures to improve economic growth.

ING Bank cut its 2022 GDP growth forecast for China to 4%, down from the previous forecast of 4.4%, and said a further downgrade is possible. The Chinese yuan fell the most among Asian currencies on Tuesday, hitting a three-month low, as the central bank’s unexpected rate cut raised fears of a slowdown in economic growth.

S&P 500 (F) (US500) 4,297.14 +16.99 (+0.40%)

Dow Jones (US30) 33,912.44 +151.39 (+0.45%)

DAX (DE40) 13,816.61 +20.76 (+0.15%)

FTSE 100 (UK100) 7,509.15 +8.26 (+0.11%)

USD Index 106.51 +0.88 (+0.83%)

• – Australia RBA Meeting Minutes at 04:30 (GMT+3);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• – Eurozone German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – US Building Permits (m/m) at 15:30 (GMT+3);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.