Oil prices won't top $100 in the next decade, OPEC predicts

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Crude will stay below the $100-a-barrel (bbl) level for at least the next 10 years, according to the Organization of Petroleum Exporting Countries (OPEC). Read More

Market buzz: Vlieghe adds to May rate hike expectations
Friday 23 Mar 2018

(ShareCast News) - 1700:Close The top flight index went into the holiday-shortened Easter week nursing a greater than 3% fall and firmly in 'correction' territory, having retreated by more than 10% from the record highs it hit earlier in the year. Life insurers and Financials fared worst, weighed down by the retreat in longer-term government yields the day before and overnight on both sides of the Atlantic. Also weighing on financials more generally perhaps, earlier in the session strategists at BoA-Merrill Lynch cautioned clients against being overly confident, as many investors appeared to be according to the results of their most recent survey of fund managers and the asset allocations of its clients. In their opinion, where investors were most vulnerable to downward surprises was: "lower stocks, higher Chinese yuan, lower bond yields on peaking PMI/EPS [...] financials, tech, EAFE most vulnerable." 1610: External MPC member Gertjan Vlieghe told an audience of businesses in Birmingham earlier that the current outlook for interest rates is "consistent with one or two quarter point rate increases per year over the forecast period". Vlieghe said that this was provided the balance between global tailwinds and Brexit headwinds remains where it is now. Oxford Economics said: "This is consistent with our expectation that the MPC will hike rates when it meets next in May, with another rise likely in November. Granted, Mr Vligehe was careful to emphasise that his view was "a forecast, not a promise". And in our view, the economic rationale for a tighter monetary policy still looks weak. But it continues to appear that the era of ultra-low interest rates will soon be coming to pass." 1540: London Capital Group analyst Jasper Lawler reckons China's tariff response could have been a lot more severe. "Three billion dollars is a splash of the ocean of US/China trade. If your glass is half full, China's measured response opens the door to negotiations. If you glass is half empty, it opens the door escalation," he says. 1430: In its second instalment of the day, Melrose Industries says a story by Mergermarket on Thursday - it said the turnaround specialist was confident of meeting the 50.1% minimum threshold for shareholder acceptances for its GKN bid - should be "disregarded". Earlier, it said it was prepared to waive CFIUS clearance, which was one of the self-imposed conditions involved in its hostile £8.1bn bid. 1400: US new home sales decline by 0.6% month-on-month in February to reach an annualised pace of 618,000 (consensus: 620,000), but the 'miss' has been more than offset by upwards revisions to figures for January. As an aside, BoA-Merrill's commodity strategy team led by Francisco Blanch continues to see the near-term upside for Brent crude oil futures capped at $80 a barrel. 1236: BoA Merrill's Bear&Bull indicator drops to 5.8 in latest week. However, strategists at Merrill caution that the results of its Fund Manager Survey, equity inflows year-to-date, and GWIM equity allocations all show just minimal 'bull' capitulation. "[...] pain trade still lower stocks, higher CNY, lower bond yields on peaking PMI/EPS... financials, tech, EAFE most vulnerable. "[...] and no positioning for "trade war": more inflows to Japan & EM equities despite woeful technical position of NKY, KOSPI, DAX...the "kings of exports"; EAFE now #1 GWIM ETF holding (Chart 1 - shows fascinating ETF evolution since Lehman)." 1230: Orders for US durable goods jump by 3.1% on the month in February (consensus: 1.6%), led by demand for civilian and military jets together with that for cars. "[...] but the key story here is the 1.8% jump in orders for core capital goods orders. "We remain very bullish on capex this year, given strong earnings growth, easy credit, and the impact of the tax cut, but the data are volatile and very short runs of numbers need to be viewed with skepticism," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. 1134: Here's Stephen Roach's (ex-chief economist at Morgan Stanley) take on Beijing's response to the new US tariffs: "China's response is surprisingly modest in light of the US actions, suggesting there could be a good deal more to come. "As America's third largest and most rapidly growing export market and as the largest foreign owner of Treasuries, China has considerably more leverage over the U.S. than Washington politicians care to admit." 1055: The threat of a trade war between the world's two biggest economies did not have as big an effect on Chinese stocks after Beijing intervened to support its stock market on Friday. There is a Bloomberg report of stock purchases by state-backed funds in the CSI 300 index of blue chip Shanghai and Shenzhen stocks, which erased some of its earlier losses, closing the session with a 2.9% fall having been down 4.6% earlier. 1043: Three-month LME copper futures declining from $6,850 per metric tonne at yesterday's close to $6,659 per tonne today. 0959: UBS says the US tariffs "appear much smaller with negligible macro effects" compared to what was feared. The wording of the presidential order, of 25% on $50bn worth of Chinese imports, suggests a total of $12.5bn, which is roughly 20% of what was implied in earlier reports. UBS remained confident of its base case of there being no full-scale trade war. "Our base case has always been that trade policy would not have a measurable effect on the US economy, but the risks of a trade war were material. The initially discussed size of tariffs increased the risk, but the ultimately announced size suggests that our base case continues to be correct. The US actions provoked a Chinese response, but that response is small." 0950: China has announced tariffs on $3bn of US exports to China. 0944: TD Waterhouse, commenting on the tariffs, said initial market reaction has seen risk assets sell off and safe havens rally. "We are of the view that this is only the opening salvo in the US administration's efforts to reduce the record bilateral trade deficit with China." TD says although China's retaliation to the announcement has been "restrained", as the country has most to lose in the event of any escalation of trade tensions, "this will be insufficient to dampen market fears", with any recovery in risk assets in Asia "likely to be shallow, as the makeup of the US administration has shifted towards an incrementally more hawkish and interventionist line up, pointing to more tariffs and protectionist measures in the months ahead". 0853: Comment from Nomura economists on the US tariffs said the level was below expectations. Furthermore, Nomura notes that the US recently dropped one of the more contentious demands in the NAFTA renegotiations and has provided temporary steel and aluminum tariff relief to a large set of countries. "Taken together, and although the Trump administration may still become aggressive on trade, the actions in the past week have reduced overall US trade policy risks." 0845: Friday's London open market report sees stocks down in early trade on following heavy losses in the US and Asia as financial markets were hit by fresh worries about a trade war after China promised immediate retaliation to the hefty import tariffs levied by US President Donald Trump. The FTSE 100 is down 0.7% to 6,907.34, having tumbled to its lowest finish in over 15 months the day before at 6,952.59. Meanwhile, the pound was down 0.2% against the euro at 1.1442 and up 0.1% versus the greenback at 1.4110. 0755: The commerce ministry in Beijing said in a statement earlier morning said the higher US tariffs "seriously undermine" the global trading system. "China doesn't hope to be in a trade war, but is not afraid of engaging in one. China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place," the statement said. 0801: Detail on the Trump's presidential order. The US Trade Representative will produce a list of products within 15 days, after which a 30-day comment period will begin, before tariffs of 25% will be imposed on a basket of Chinese imports totaling $50bn. The President also instructed USTR to take action via the World Trade Organisation to address China's "discriminatory licensing practices" and to report on this progress within 60 days. Third, White House treasury chief Steve Mnuchin will compile a list of possible actions to limit Chinese investment in the US, also due to report back in 60 days. 0741: Overnight, President Donald Trump signed off on 25% tariffs on $50bn worth of Chinese imports in a bid to punish the People's Republic for intellectual property infringements. China's retaliation was immediate as it drew up a list of 128 products as potential retaliation targets for higher duties, aiming its sights at US goods such as pork, apples and steel pipe. The Dow Jones index closed 2.9% lower, the S&P 500 dropped 2.5% and the Nasdaq 2.4% as equities experienced their biggest sell off since 8 February.

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