Asia pauses after Wall Street peak, oil pares losses

Wednesday, 24 December 2014 00:01 - - {{hitsCtrl.values.hits}}

Reuters: A holiday hush settled over Asian markets on Tuesday after Wall Street closed at historic highs while oil prices recouped just a little of the losses suffered when Saudi Arabia quashed all thought of curbing supply. A revival in risk appetite undermined the safe haven yen and kept the US dollar elevated across the board, while sovereign bonds were content to sit on recent gains.

Equity investors chose to focus on the benefits that falling fuel prices would have for consumer spending power. “Overall, we see this as a shot in the arm for the global economy,” Olivier Blanchard, chief economist at the IMF, and Rabah Arezki, head of the commodities research team, wrote in their blog on Monday. They estimated the boost to world growth would be between 0.3 and 0.7 percentage points above the Fund’s baseline forecast of 3.8% in 2015, with the gain to China ranging from 0.4 to 0.7 percentage points. Trading was light in Asia with Japan on holiday and markets moved only marginally. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3%. Australian stocks ran into profit-taking after three sessions of sharp gains and slipped 1.0%. On Wall Street, the S&P 500 .SPX had put on 0.38% to score an all-time closing high on Monday, while the Dow added 0.87% and the Nasdaq 0.34%. In Europe, opening gains of between 0.3% and 0.5% were projected for the FTSE, DAX and CAC. Stocks have been helped in part by further evidence the European Central Bank was set to buy euro government bonds. Expectations the ECB will act as soon as January saw the euro touch a 2-1/2 year trough at $ 1.2215 on Monday and it was last trading at $ 1.2227 EUR=. In contrast, the Federal Reserve remains on track to hike rates at some point in 2015 which has widened the premium offered by two-year US debt to 75 basis points over German bunds, the fattest margin since early 2007. US2YT=RR The attraction of US yields lifted the dollar to 120.12 yen JPY=, leaving last week’s 115.56 low as a distant memory. The dollar index reached its highest since April 2006. The steady climb in the dollar made life miserable for gold buffs with the precious metal stuck at $ 1,179.61 XAU=, after falling from $ 1,201.80 on Monday. Oil bulls also suffered a cruel blow when Saudi Arabia’s powerful oil minister said OPEC would not cut production at any price. Ali al-Naimi said the Saudis might instead boost output to grow market share and that oil ‘may not’ trade at $ 100 again. US crude CLc1 edged up 70 cents to $ 55.93, but remained well short of Monday’s $ 58.53 high. Brent LCOc1 stood at $ 60.49 having recouped 38 cents of Monday’s $ 1.25 fall. There was little in the way of Asian data due on Tuesday but a full US calendar includes November durable goods orders, final third-quarter GDP, home prices and inflation.

Gold inches up after losses, but still near three-week low

Reuters: Gold edged up on Tuesday after sharp overnight losses, but was still stuck near its lowest in three weeks due to weaker oil prices and strength in global equities and the dollar. Spot gold was up 0.3% at $ 1,178.60 an ounce at 0328 GMT. It tumbled nearly 2% in the previous session, dropping to $ 1,170.17 an ounce – its lowest since 1 December. “Skyrocketing equity markets, a firm dollar and weakening oil prices finally caught up to gold, triggering long liquidation and position squaring ahead of the Christmas and New Year break,” said Jason Cerisola, a metals dealer at MKS Group. Rising equities and a stronger dollar dull demand for gold as a safe-haven asset. Lower oil prices decrease its appeal as a hedge against oil-led inflation. Gold should likely see some support at $ 1,170, but more stop-loss orders will be triggered if the level is breached, Cerisola said. Wall Street closed at historic highs on Monday, boosting global equities. The dollar index, a measure of the greenback’s strength against a basket of major currencies, was holding close to a nine-year peak. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies. Oil prices resumed their downward march on Monday, after Saudi Arabia’s powerful oil minister said OPEC would not cut production at any price, though they edged up modestly on Tuesday. Bullion found some support in the physical markets, where top consumer China saw bargain hunters emerge after the price drop on Monday. Prices on the Shanghai Gold Exchange were at a premium of $ 4-$ 5 an ounce over the global benchmark, compared with $ 2-$ 3 in the previous session. “While emerging market buying on dips is likely to moderate further potential price declines, ongoing oil market weakness is a significant weight on bullion and may very well cap rallies,” HSBC analysts said in a report. In central bank activity, data from the International Monetary Fund data released on Tuesday showed that Russia raised its gold reserves for an eighth month in a row in November, while Ukraine reduced bullion holdings for a second straight month. Significant buying and selling by central banks can influence gold prices.