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Remarks by China President Xi Jinping; China must maintain strict “dynamic COVID-19 clearance” policy
Control and prevention measures must not be relaxed; and the impact of COVID-19 on economic and social development must be minimised.
This will not alleviate much of the pressure in Shanghai, where the pandemic’s largest outbreak has occurred since the pandemic’s inception. For context, Shanghai reported more than 25,000 cases in its most recent update.
- For the time being, US futures remain higher, with earnings taking centre stage.
- S&P 500 futures are up 0.6 percent on the day. European indices have also recovered earlier losses to be up 0.1 percent to 0.2 percent, though the DAX is still down 0.3 percent. However, US futures are continuing to rise, with the S&P 500 and Dow futures both up 0.6 percent, and the Nasdaq futures up 0.8 percent.
- As much as there is optimism, it may be fleeting as earnings reports become more prominent.
- It all comes down to what companies say about the state of the economy and how badly inflation is affecting the business outlook. As Adam pointed out, sentiment could be swayed by what JP Morgan CEO Jamie Dimon says later today.
According to the IEA, recent developments should prevent a significant deficit in the oil market. Lowers 2022 global oil demand by 260k bpd due to China, according to the latest IEA oil market update COVID-19 situation, decreased OECD demand Lower demand and increased output from OPEC+ and IEA stock releases should keep the deficit from widening. Traditional Russian oil customers are cutting back, and there is no indication of increased volume towards China. Global oil inventories have been declining for 14 months in a row.
As inventories continue to fall, the oil market was perceived to be much tighter heading into the latter stages of the year, resulting in a steep backwardation in the early stages of Q1.
However, the more bullish outlook has been somewhat tempered in recent weeks as a result of China’s lockdowns and global growth concerns about inflation.
Long-term, there is still a case for a structurally more bullish oil market, but for the time being, the factors mentioned above keep that kind of assurance in check.
Japan Finance Minister Suzuki reiterates that sharp FX moves are undesirable
Some jawboning by Japanese officials
FX stability is critical Sharp FX moves are undesirable, pay close attention to FX moves.
We’ve heard it all before, and it’s no coincidence that the USD/JPY is currently trading at its highest level in two decades, above 126.00. This type of verbal intervention cannot be considered more than a speed bump. A strong break above 126.00 opens the door for the pair to move up to 130.00 in the near future, so keep an eye out for that. In the meantime, Japanese officials can be expected to continue jawboning.
Any kind of actual intervention remains unlikely for the time being, as it would have to be a coordinated move with US approval. It could happen if the USD/JPY rises too quickly, but that could only happen if the market becomes rather disorderly.