Markets Keep A Close Watch On Middle East Tension
Oil prices eased on Tuesday morning as market analysts and investors try to assess the potential impact of the conflict in the Middle East on energy supply. Stock markets in Asia rose shaking off pressures recorded yesterday.
On Monday, the upheaval in the Middle East boosted oil prices in global markets with the popular trading commodity recovering lost ground during the previous week. Brent crude oil traded 4% higher, up to $89 per barrel as investors scrambled to add more of the so-called “safe haven” assets to their portfolios.
Some market analysts already suggest that the US Federal Reserve (Fed) could re-evaluate any potential rate hike considerations to avoid a recession or even bring forward rate cuts during 2024. According to the CME FedWatch Tool, the likelihood of the Fed keeping rates unchanged in its November board meeting has risen to 89%.
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Germany CPI Inflation Report
On Wednesday morning, Destatis will publish the September CPI inflation report. Economists expect headline inflation to have remained unchanged at 4.5% and 0.3% on an annualised and monthly basis respectively. The last time a lower inflation rate was registered was in February 2022, just before the start of the war in Ukraine.
News coming from the German market however are not particularly positive. ING’s analysts noted that the country’s most popular business indicator, the Ifo index, dropped for the fifth month in a row, recording the lowest reading since 2018.
Germany’s manufacturing purchasing managers index (PMI) was 39.1 in August, its second lowest reading since May 2020, while a factory orders drop by more than 4% surpassed economists’ expectations.
OPEC Raises Long-Term Oil Production Forecast
In its 2023 World Oil Outlook, OPEC said it expected global demand to reach 116 million barrels per day by 2045, which would be 6 million more barrels than it predicted this time last year. OPEC’s report said that the investment funds to cover the production uptick could get close to $14 trillion.
OPEC Secretary General Haitham al-Ghais noted: “Recent developments have led the OPEC team to reassess just what each energy can deliver, with a focus on pragmatic and realistic options and solutions. Calls to stop investments in new oil projects are misguided and could lead to energy and economic chaos. History is replete with numerous examples of turmoil that should serve as a warning for what occurs when policymakers fail to acknowledge energy’s interwoven complexities.”
ECB VP De Guindos Urges For Caution
The ECB’s Vice President Luis De Guindos said on Monday that market participants should be cautious due to rising consumer prices. De Guindos noted that the macroeconomic environment is subject to "enormous uncertainty.”
However, De Guindos expressed his belief that inflation is on a downward trajectory despite elevated oil prices, the euro’s depreciation against the US dollar and rising labour costs.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
