October 4, 2022

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Chinese SMEs fall. Oil under pressure with the largest US issuance plan in the last 50 years

The slowdown in Chinese industrial production, a renewed Wall Street warning that Chinese companies listed in the United States risk being delisted, and rumors that the Biden administration is considering the largest market oil release in the past 50 years are the driving factors for today’s Asian markets. At 7:10 am Italian time, the Nikkei is down 0.3%, Hong Kong 0.9%, Shanghai 0.2%, while gold is down 0.7%, and US West Texas Intermediate crude oil is down 6.3% at 100.96. Euro sideways at 1.116, yen down 0.3% to 122.21, pound down 0.14% to 1.3116.

US 10-year notes are trading sideways at 2.349%, while Wall Street futures averaged 0.3% positive after the red session last night. And the ruble, which almost halved after Moscow’s invasion of Ukraine (the dollar rose against 130) today is gaining 5% (the dollar at 76) and is practically returning to last November’s levels (72) after President Vladimir Putin announced that Russian gas should be paid in rubles and after Moscow is considering The premise that all exported goods (including minerals, timber, and agricultural goods) are paid for in local currency, as opposed to penalties.

China’s official manufacturing PMI fell to 49.5 in March (economic contraction below 50) from 50.2 in February, below market expectations (49.9). This was the first drop in production since last October due to the outbreak of the Covid disease in major cities, including Shanghai and Shenzhen.

China’s service sector SMEs also fell in March, and more sharply, to 48.4 from January’s reading of 51.6. It was the first decline in the sector since last August due to downward pressure caused by widespread shutdowns in many large cities.

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US Securities and Exchange Commission Chairman Gary Gensler has denied rumors of a pending deal to prevent nearly 200 Chinese shares from being delisted from Wall Street, Bloomberg writes. He noted that only full compliance with audits would allow companies to continue operating in the US markets. The US and China have argued for two decades over this legal obligation, but the problem escalated during the Trump administration when Parliament passed a law eliminating foreign companies that refuse to comply with US rules.

The Biden administration is considering releasing 1 million barrels of oil per day for about six months from US reserves, for a total of 180 million barrels as the White House seeks to lower fuel prices, according to Reuters.

The move would be the third time the United States has tapped its Strategic Petroleum Reserves in the past six months and would be the largest release in the nearly 50-year history of a Strategic Petroleum Reserve (SPR).

Similar stocks have so far failed to bring prices down as global demand has nearly reached pre-pandemic levels while supply has contracted. Oil prices have soared since Russia invaded Ukraine in late February, and the United States and its allies responded by imposing heavy sanctions on Moscow, the world’s second-largest crude oil exporter. Brent crude rose to $139 a barrel earlier this month, the highest point since 2008. The White House announced that President Joe Biden will speak on the issue today.

Russia is one of the world’s largest oil producers, contributing about 10% of the global market. But it warned that sanctions and buyers’ general reluctance to buy crude from Moscow (for fear of getting bogged down in the same sanctions) could remove about 3 million barrels per day of oil from the market as of April. International Energy Agency (IEA). (All rights reserved)

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