Category: Uncategorized

Published: 2/5/2024 2:49 AM ET

By Renju Jaya   ✉  | Published: 2/5/2024 2:49 AM ET | 

The Chinese service sector continued to expand in January, but the pace of expansion moderated on slowing new order growth, survey results from S&P Global showed on Monday.

The Caixin services Purchasing Managers’ Index, or PMI, unexpectedly fell to 52.7 in January from a five-month high of 52.9 in the previous month. The score was seen at 53.0.

The index has remained in the expansionary territory for 13 straight months, indicating a sustained recovery in the services sector.

There was another sharp increase in the overall new business driven by firmer underlying demand conditions and new customers.

Export business also increased further but the pace of growth eased fractionally.

Employment advanced for the second straight month with firms linking the increase to efforts to expand capacity amid higher sales. That said, the rate of job creation remained marginal.

Backlogs of work increased in January as a sustained rise in new business placed greater pressure on operating capacities.

On the price front, the PMI survey showed that cost inflation increased only slightly in January. Meanwhile, prices charged by service providers declined for the first time since April 2022.

Business sentiment remained strong underpinned by upbeat growth projections, increased customer numbers and planned company expansion. However, the degree of optimism fell to a three-month low.

The overall private sector that combines performances of manufacturing and services also continued to expand in January.

The composite output index posted 52.5 but down from December’s seven-month high of 52.6. The Caixin factory PMI was steady at 50.8 in January.

Earlier, the official PMI survey data showed that the private sector expanded at a faster pace in January.

The manufacturing PMI registered 49.2, up from 49.0 in December. Likewise, the non-manufacturing PMI advanced to 50.7 from 50.4 in the previous month.

In January, the People’s Bank of China announced a reduction in the reserve requirement ratio by 50 basis points in order to instill confidence in the economic recovery.

The RRR cut took effect on February 5. The move is expected to inject around CNY 1 trillion of long-term liquidity.

The central bank reportedly conducted CNY 100 billion of 14-day reverse repo operations on Monday. The rate on reverse repo was 1.95 percent.

Last week, the International Monetary Fund raised China’s growth forecast for this year to 4.6 percent and retained the projection for next year at 4.1 percent.

The upgrade reflected the carryover from stronger-than-expected growth in 2023 and the increased government spending on capacity building against natural disasters, the IMF said.

Published: 2/5/2024 10:33 AM ET 

The Institute for Supply Management released a report on Monday showing U.S. service sector growth accelerated by more than expected in the month of January.

The ISM said its services PMI climbed to 53.4 in January from a downwardly revised 50.5 in December, with a reading above 50 indicating growth in the sector. Economists had expected the index to rise to 52.0 from the 50.6 originally reported for the previous month.

“The majority of respondents indicate that business is steady,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

He added, “They are optimistic about the economy due to the potential impact of interest rate cuts; however, they are cautious due to inflation, associated cost pressures and ongoing geopolitical conflicts.”

The bigger than expected increase by the headline index was partly due to an acceleration in the pace of new orders growth, with the new orders index rising to 55.0 in January from 52.8 in December.

The report also showed a significant turnaround in employment in the service sector, as the employment index jumped to 50.5 in January from 43.8 in December.

Published: 2/5/2024 5:20 AM ET | 

Gold prices fell notably on Monday, extending losses for a second straight session as the dollar and bond yields rose amid much uncertainty about the Federal Reserve’s monetary path this year.

Spot gold dipped 0.8 percent to $2,023.51 per ounce, while U.S. gold futures were down 0.7 percent at 2,039.35.

The dollar hit a two-month high after U.S. data released on Friday showed much stronger than expected job growth in January and an improvement in consumer sentiment.

The U.S. economy added 353,000 jobs in January, much higher than expectations for an increase of about 180,000 jobs.

Job growth for December was revised higher and the jobless rate came in unchanged at 3.7 percent in January, prompting investors to scale back their expectations for interest-rate cuts this year.

U.S. Treasury yields also climbed after Federal Reserve Chair Jerome Powell made it clear during a “60 Minutes” interview aired on Sunday night that policymakers will wait to see continued progress toward cooler price increases before cutting interest rates.

The U.S. economic calendar for this week is relatively quiet, with traders likely to keep an eye on reports on weekly jobless claims, service sector activity and the U.S. trade deficit.

 Published: 2/5/2024 5:08 AM ET | 

Oil traded slightly lower on Monday, following its biggest weekly drop since October.
Brent crude futures dipped 0.3 percent to $77.12 a barrel, while WTI crude futures were down 0.4 percent at $72.03.

A stronger dollar kept prices under pressure as traders scaled back their expectations for rate cuts by the Federal Reserve this year.

West Texas Intermediate contracts slumped more than 7 percent last week on the back of robust U.S. employment data, worries about China’s economic recovery and disappointment over OPEC+ group’s decision to leave its production policy unchanged.

Geopolitical tensions remained on investors’ radar after the U.S. and U.K. conducted strikes against Houthi targets over the weekend and the Iran-backed Houthis vowed to respond, saying the air strikes “will not deter us.”

The dollar hit a two-month high after Federal Reserve Chair Jerome Powell said in an interview on Sunday that policymakers will likely wait beyond March to cut interest rates.

It is feared that higher interest rates to tackle inflation could result in a slowdown in economic activity and a drop in demand for oil.

 Published: 2/5/2024 12:05 PM ET | 

The Canadian market is down firmly in negative territory at noon on Monday with stocks from across several sectors reeling under sustained selling pressure.

Materials stocks are down on weak bullion prices. Technology, healthcare, utilities and communications shares are among the other major losers. Several stocks from real estate, consumer discretionary and energy sectors are also notably lower.

Fading hopes of an early rate cut by the Federal Reserve following recent upbeat economic data and hawkish comments from top officials weigh significantly on the market.

The benchmark S&P/TSX Composite Index is down 217.89 points or 1.03% at 20,867.20 at noon.

On the economic front, the S&P Global Canada Composite PMI reading for January came in at 46.3, pointing to the eighth consecutive decline in the Canadian private sector activity. However, the reading was higher than the 44.7 score in the previous month.

The S&P Global Canada Services PMI posted 45.8 in January 2023, up from November’s 44.6, but still marking the eighth consecutive month of contraction in the country’s services sector.

Methanex Corporation (MX.TO), Docebo Inc (DCBO.TO), Cogeco Inc (CGO.TO), Ag Growth International (AFN.TO), Kinaxis Inc (KXS.TO) and Constellation Software (CSU.TO) are down 2 to 4%.

Stella-Jones (SJ.TO), Shopify Inc (SHOP.TO), CGI Inc (GIB.A.TO), Franco-Nevada Corporation (FNV.TO), West Fraser Timber (WFG.TO) and Intact Financial Corporation (IFC.TO) are also down sharply.

Nuvei Corporation (NVEI.TO), Celestica Inc (CLS.TO), Bombardier Inc (BBD.B.TO) and GFL Environmental (GFL.TO) are down 1 to 1.5%.

Monday Feb. 5

China, Japan and Euro zone services and composite PMI

Germany trade surplus

(9:30 a.m. ET) Canada’s S&P Global Services PMI for January.

(10 a.m. ET) U.S. ISM Services PMI for January.

(10:30 a.m. ET) Bank of Canada’s Market Participants Survey for Q4.

Earnings include: Caterpillar Inc.; Coveo Solutions Inc.; Estee Lauder Companies Inc.; McDonald’s Corp.; Palantir Technologies Inc.; TMX Group Ltd.; United Corporations Ltd.

—

Tuesday Feb. 6

Japan household spending

Euro zone three-year CPI expectations and retail sales

(8:30 a.m. ET) Canadian building permits for December. Estimate is a month-over-month increase of 1.0 per cent.

(10 a.m. ET) U.S. Global Supply Chain Pressure Index for January.

(12:45 p.m. ET) Bank of Canada governor Tiff Macklem speaks at the Montreal Council on Foreign Reserves.

Earnings include: Amgen Inc.; Chipotle Mexican Grill Inc.; Eli Lilly & Co.; Finning International Inc.; First Capital Realty Inc.; FirstService Corp.; Ford Motor Co.; Gilead Sciences Inc.; International Petroleum Corp.; Precision Drilling Corp. Toyota Motor Corp.; UBS Group AG

—

Wednesday Feb. 7

Germany industrial production

(8:30 a.m. ET) Canada’s merchandise trade balance for December.

(8:30 a.m. ET) U.S. goods and services trade balance for December.

(3 p.m. ET) U.S. consumer credit for December.

Earnings include: Alibaba ADR; Canaccord Genuity Group Inc.; Ceridian HCM Holding Inc.; Computer Modelling Group Ltd.; CVS Health Corp.; Meta Platforms Inc.; PayPal Holdings Inc.; Sun Life Financial Inc.; Uber Technologies Inc.; Walt Disney Co.

—

Thursday Feb. 8

China CPI, PPI, aggregate yuan financing, new yuan loans and money supply

ECB Economic Bulletin is released

(8:30 a.m. ET) U.S. initial jobless claims for week of Feb. 3. Estimate is 219,000, down 5,000 from the previous week.

(10 a.m. ET) U.S. wholesale trade for December.

Earnings include: BCE Inc.; Colliers International Group Inc.; ConocoPhillips; Duke Energy Corp.; Interfor Corp.; Lightspeed Commerce Inc.; Motorola Solutions Inc.; Philip Morris International Inc.; Russel Metals Inc.; Saputo Inc.; S&P Global Inc.; TFI International Inc.; Trisura Group Ltd.

—

Friday Feb. 9

China’s markets closed

Germany CPI

(8:30 a.m. ET) Canadian employment for January. The Street expects a month-over-month increase of 0.1 per cent, or 15,000 jobs, with the unemployment rate rising 0.1 per cent to 5.8 per cent.

(10:30 a.m. ET) Bank of Canada Senior Loan Officer Survey for Q4.

Earnings include: Arc Resources Ltd.; CAE Inc.; Cameco Corp.; Enbridge Inc.; Fortis Inc.; Magna International Inc.; PepsiCo Inc.; Telus International Inc.

March WTI crude oil (CLH24) on Friday closed down -1.54 (-2.09%), and Mar RBOB gasoline (RBH24) closed down -4.73 (-2.16%).

Crude oil and gasoline prices on Friday tumbled to 2-week lows and closed moderately lower.  Friday’s rally in the dollar index (DXY00) to a 7-week high weighed energy prices.  Also, advanced negotiations to halt the war in Gaza and release hostages are reducing the geopolitical risk premium in crude prices.  Technical selling added to Friday’s decline in crude after prices fell below their 50 and 200-day moving averages, triggering trend-following algorithms.

Crude prices are under pressure as negotiations continue for a halt in the war in Gaza, which has threatened crude shipments from the Middle East.  Bloomberg reported that talks are advancing for an agreement to pause the Israel-Hamas war and free civilian hostages captured by Hamas.

Friday’s stronger-than-expected U.S. economic news is bullish for energy demand and crude prices.  Jan nonfarm payrolls jumped +353,000, stronger than expectations of +185,000 and the biggest increase in a year.  Also, the Jan unemployment rate was unchanged at 3.7%, showing a stronger labor market than expectations of an increase to 3.8%.  In addition, the University of Michigan U.S. Jan consumer sentiment index was revised upward by +0.2 to a 2-1/2 year high of 79.0, stronger than expectations of 78.9.

Geopolitical tensions in the Middle East continue to support crude prices.  President Biden said the U.S. would soon retaliate for the attack on a base in Jordan last Sunday by militants in Iraq that killed three U.S. service members.  Last Friday, Houthi rebels ramped up attacks on commercial shipping in the Red Sea and struck an oil tanker with a missile that was carrying fuel in the Gulf of Aden.  The U.S. and the UK continue to launch airstrikes against Houthi rebels in Yemen in retaliation for Houthi attacks on commercial shipping in the Red Sea.  Earlier this month, the U.S. Navy advised vessels to avoid the southern Red Sea.  Houthis started attacking ships in the Red Sea in mid-November in support of Hamas in the Israeli-Hamas war and said they won’t stop the attacks until Israel ends its assault on Gaza.  Attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.

Crude prices also have support after a Ukranian drone attack last Thursday damaged Russia’s Rosneft PJSC’s major Tuapse refinery on Russia’s Black Sea coast.  Russia said last Friday that the Tuapse refinery, which processed 180,000 bpd of crude in the first half of January, will be shut down through at least February.  In recent weeks, several Russian oil processing and storage facilities have been targeted and damaged by Ukrainian drone attacks, increasing the risks of reducing Russian crude exports.

A negative factor for crude prices was Monday’s report from Kpler Ltd that showed OPEC+ members are dragging their feet on new crude output cuts.  According to Kpler estimates, exports from the seven OPEC+ members engaged in new crude production cuts announced for January have averaged about 15.4 million bpd so far this month, barely changed from December.

A decline in Russian crude oil exports is supportive of crude oil prices.  Tanker-tracking data from Vortexa monitored by Bloomberg shows the four-week average of refined fuel shipments from Russia fell to 3.09 million bpd in the four weeks to Jan 28, down -250,000 bpd from the prior week.

A decline in crude in floating storage is bullish for prices.  Monday’s weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -18% w/w to 63.97 million bbl as of Jan 26, the lowest in 3-3/4 years.

On Nov 30, OPEC+ agreed to cut crude production by -1.0 million bpd through June 2024.  However, a Bloomberg survey on Thursday showed the group cut production by -490,000 bpd in January, below the agreed-upon -1.0 million bpd cut.  Meanwhile, on Dec 21, Angola announced it was leaving OPEC amid a dispute over oil production quotas.

Saudi Arabia said on Nov 30 that it would maintain its unilateral crude production cut of 1.0 million bpd through Q1-2024.  The move would maintain Saudi Arabia’s crude output at about 9 million bpd, the lowest level in three years.  Russia also said it will deepen its voluntary oil export cuts by 200,000 bpd to 500,000 bpd in Q1 of 2024.  OPEC Jan crude production fell -1.59 million bpd to 26.570 million bpd, a 2-1/2 year low.

Wednesday’s weekly EIA report showed that (1) U.S. crude oil inventories as of Jan 26 were -5.1% below the seasonal 5-year average, (2) gasoline inventories were +1.2 above the seasonal 5-year average, and (3) distillate inventories were -5.1% below the 5-year seasonal average.  U.S. crude oil production in the week ended Jan 26 rose +5.7% w/w to 13.0 million bpd, modestly below the recent record high of 13.3 million bpd.

Baker Hughes reported Friday that active U.S. oil rigs in the week ended Feb 2 were unchanged at 499 rigs, just above the 2-year low of 494 rigs from Nov 10.  The number of U.S. oil rigs has fallen over the past year from the 3-3/4 year high of 627 rigs posted in December 2022.

March Nymex natural gas (NGH24) on Friday closed +0.029 (+1.41%).

Nat-gas prices Friday recovered from a 9-month nearest-futures low and closed moderately higher.  Fund short covering emerged in nat-gas futures Friday when prices failed to break below $2 MMBtu, a significant support level.   Nat-gas prices have sold off sharply over the past three weeks as unseasonably warm U.S. temperatures have reduced heating demand for nat-gas.  Forecaster Maxar Technologies said Friday that the eastern half of the U.S. is seeing forecasts trend warmer for February 7 to 11.

Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas announced last Friday that it is shutting one of its three production units for a month for repairs after extreme cold in Texas damaged equipment.  The closure of one of the units will limit U.S. nat-gas exports and increase U.S. nat-gas supplies.

Lower-48 state dry gas production Friday was 104.7 bcf/day (+9.3% y/y), according to BNEF.  Lower-48 state gas demand Friday was 89.9 bcf/day (-20% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Friday were 13.8 bcf/day (+2.8% w/w), according to BNEF.

The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices.  AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.

An increase in U.S. electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended January 27 rose +1.0% y/y to 80,177 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 27 fell -0.3% y/y to 4,105,901 GWh.

Thursday’s weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended January 26 fell -197 bcf, a smaller draw than expectations of -203 bcf but above the 5-year average draw of -185 bcf.  As of January 26, nat-gas inventories were up +2.9% y/y and were +5.1% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 71% full as of January 29, above the 5-year seasonal average of 58% full for this time of year.

Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ending February 2 fell -2 rigs to 117 rigs, just above the 2-year low of 113 rigs posted September 8.  Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).

Published: 2/2/2024 5:01 AM ET | 

Gold held steady on Friday after climbing in the previous session on weak U.S. labor market data.

Spot gold was marginally lower at $2,054.28 per ounce, while U.S. gold futures were virtually unchanged at $2,071.10.

Gold prices were poised for their biggest weekly gain in nine weeks as the dollar softened, and bond yields dipped on weak U.S. labor market data.

U.S. jobless claims rose last week, and fourth quarter unit labor costs undershoot forecasts while business activity in the manufacturing sector continued to contract in January, separate reports showed on Thursday.

Despite the Fed’s hawkish tone, economists continue to believe it is a matter of “when, not if” the U.S. central bank will eventually lower rates.

By RTTNews Staff Writer   ✉  | Published: 2/2/2024 5:01 AM ET | 

Gold held steady on Friday after climbing in the previous session on weak U.S. labor market data.

Spot gold was marginally lower at $2,054.28 per ounce, while U.S. gold futures were virtually unchanged at $2,071.10.

Gold prices were poised for their biggest weekly gain in nine weeks as the dollar softened, and bond yields dipped on weak U.S. labor market data.

U.S. jobless claims rose last week, and fourth quarter unit labor costs undershoot forecasts while business activity in the manufacturing sector continued to contract in January, separate reports showed on Thursday.

Despite the Fed’s hawkish tone, economists continue to believe it is a matter of “when, not if” the U.S. central bank will eventually lower rates.

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CME Group’s FedWatch Tool currently indicates a relatively modest 37.5 percent chance of a March rate cut but a nearly 100 percent chance rates will be lower by early May.

The Labour Department is scheduled to release its more closely watched report on January employment later in the day.

Economists expect employment to increase by 180,000 jobs in January after an increase of 216,000 jobs in December.

The unemployment rate is expected to inch up to 3.8 percent from 3.7 percent.
U.S. University of Michigan’s consumer sentiment results for January and factory orders figures for December are also awaited.