The new king of Saudi Arabia, Salman Bin Abdulaziz Al Saud, assumed the throne which led to speculations that there will be no changes in policies regarding crude production and exports. As a result, oil dropped to the lowest in nearly six years.
Benchmark for oil futures in the US slipped 1.6 percent that reversed preliminary gains of as high as 3.1 percent. The new king announced that he will continue his predecessor’s guiding principles. Saudi Arabia will not reduce production to increase prices, according to Saudi Prince Alwaleed Bin Talal.
Reports said US stocks had the highest increase since 2001.
West Texas Intermediate oil for settlement in March delivery declined 72 cents and closed at $45.59 per barrel at the New York Mercantile Exchange. Futures went down 6.4 percent while volume was roughly 13 percent more than the 100-day median.
Meanwhile, Brent oil moved forward 27 cents (0.6 percent) to $48.79 per barrel in Europe (ICE Futures exchange) after surging to $49.80. The volume was two percent above the average. Brent closed at a premium of $3.20 to WTI as against $1.04 last January 16.
There is a mild reaction in international markets.
The Saudi prince said crude will not go back to $100 per barrel and world supply will be shaped by the price collapse.
The Kingdom may not be pleased with prices. Nonetheless, this issue has to be dealt with rationally.
Saudi Arabia’s position in maintaining output levels will not be modified, according to sources.
Last Thursday, the State Bank of Pakistan (SBP) announced that in Karachi, the entire county’s liquid foreign reserves of the dollars remains at 15.01908 billion.
The statement stated that the State Bank’s foreign reserves as of January 16 amounted to $10.33005 billion while the net foreign reserves found in the
other banks totaled at $4.68903 billion.
On the week ending January 16, the liquid foreign exchange reserves of SBP were decreased from $34 million to $10.331 billion as compared to $10.365 billion of last week.
Within the period, payments of $57 billion were made by SBP of their external servicing debt account; as well as other official payments. During the week, there was no major inflow recorded under consideration.
Last Thursday, bulls relaxed as the local bourse trading stayed under selling pressure due to financial offloading of expected discount rate of 100 basis points system (bps) snipped by central bank.
In the Stock Exchange of Karachi (KSE), the 100 index lost 182.53 points as it closed at 34146.97 points versus the 34329.50 points of the previous session. The 30-index of KSE declined by108.65 points and culminated at 22206.25 points against 22314.90 points of last closing.
Jawwad Aboobakar who is analyst for the Elixir Securities said that the equities of Pakistan closed negative as it broke a six day green closing streak on a day’s healthy turnover that tested nerves.
He added that stocks have positive opening although selling of the institution dragged index to red with the financial side bearing the brunt as investor’s firm viewed a cut of 100bps cut in discount rate over the weekend.
The economy of New Zealand is expected to develop further notwithstanding waning oil prices and the strong Kiwi dollar.
Prime Minister John Key sees the economy as expanding even as the export industry is affected by the oil crisis.
The country’s currency scaled up to more than eight percent against the single currency during the last three months mainly because of the QE concerns.
The kiwi rallied to a record high versus the euro after the Swiss National Bank unveiled its revelation to abandon the minimum exchange rate. Officials predict that economic growth will go up to 3.25 percent annually from 201 to 2018.
According to Statistics New Zealand, the economy grew faster than expectations from July to September of 2014 while GDP increased by one percent in the same period.
One of the keys was sustained economic activity in the United States which contributed to the upbeat mode in New Zealand. The Prime Minister set aside concerns of economic deceleration in Asia especially its major trading partner, China.
The growth of New Zealand is being stimulated by national industries such as dairy (the nation’s major product for export) as well as exploration of oil and gas. Aside from milk, NZ also exports meat, wood and oil.
The economic outlook of HSBC for New Zealand is still upbeat since it is expected to boom this year.
Germany did not hide its disappointment with the ECB’s agenda to pump an abundance of cash into the distressed euro area.
The Germans sense that they will be forced to subsidize measures taking away incentives from cash-strapped EU members to accomplish reforms stipulated by German Chancellor Angela Merkel.
She cautioned that the ECB’s agenda must not in any way eclipse the real need for structural changes.
There is much concern on the plan of the central bank to take billions of debt from struggling euro states.
The bond buying spree is deemed by many as a very costly method that brings the entire euro system deeper into unfamiliar terrain.
Politicians and leaders in business supporting Merkel’s moderate bloc echoed their sentiments that the actions of ECB head Mario Draghi do not tackle root causes of euro zone torpidity.
German officials contend that fiscal policies are not replacement for formative modifications that national governments should embark on.
The ECB cannot generate recovery single handedly. The euro zone needs higher growth, according to observers.
Some critics of quantitative easing describe this scheme as unlawful state financing through printing of currency. It is said to contravene European accords.
The ECB bond-buying criminally shares liability for debts of other nations.
The group called Alternative for Germany preferred to call it as a reckless move of the EU central bank which will deal out bonds using the back door. The organization asserts that problematic countries like Greece must abandon the bloc.
The Bank of Canada reduced interest rates. BOC Governor Stephen Poloz said this is meant to ensure that will outlast any oil price plunge.
It cut the standard rate to 0.75 percent yesterday which is considered a startling move that can protect the G-7’s biggest oil exporter from the 55 percent decline since June.
The central bank said this slump can affect employment, housing and consumer consumption aside from influencing inflation, businesses and government expenditures.
The oil drop has already upset Canadian incomes.
The housing industry of Canada is on a 10-year tear. For instance, the regular price of a residential unit in Vancouver has increased 67 percent since 2005 to C$638,500. On the other hand, prices in Toronto prices grew 71 percent to C$521,300.
Consumer mortgages helped push the percentage of household debt to a highest 162.6 percent of non-refundable income during the third quarter of 2015.
The central bank stated the plunge of oil prices will have an effect on housing activity in energy-intensive areas like Alberta.
The Bank of Canada estimates that housing sector’s output contribution will go down by 0.6 percent if prices remain at $60 per barrel until 2016, according to reports.
The bank believes the windfall can pay for debt instead of strengthening the economy.
Canada’s biggest lenders to include Toronto-Dominion Bank have maintained prime rates this far. The rate served as yardstick for unpredictable mortgages as well as credit lines. It is fixed at three percent since September of 2010.
Asian stocks wavered primarily because of talks that the European Central Bank will finally put into action its QE strategy.
MSCI (Asia Pacific) already gave up a minimal 0.1 percent to 134.46 in Japan. Standard & Poor’s and STOXX Europe added 500 and 600 respectively to advance 0.6 percent and continue a seven-year peak.
However, the ECB suggestion can still be modified, according to some market analysts. Besides, purchases will not be made any time before March 1st.
The composite index of Shanghai scaled up 4.7 percent which is the highest going back to October of 2009.
Meanwhile, the US Federal Reserve is evaluating its position on the national economy especially at this time when the global economy seems to be very anemic.
Central bank officials will meet next week even as they are not expected to make public projections for the economy until the end of this quarter. The Fed is not seen as increasing interest rates in April.
Futures markets show a minimal 15 percent chance that benchmark rates will be higher by June of this year.
Debility in the EU, China and Japan makes the world financial system look dimmer this year.
The Swiss National Bank’s abandonment of the 1.20 ceiling for CHF gave rise to an unparalleled catastrophe in the financial sector. The SNB is among respected central banks devastated by deflation and debilitating economies.
Confounding the SNB’s “infamous” verdict are plummeting crude oil prices; escalating US currency; reservations regarding the stability of the EU’s common currency: and, rising global apprehensions over pressures brought about by deflation. Many economic analysts describe the move of Switzerland’s central bank officials as failure to cope with pressures and abnormal financial situations that endanger the world’s feeble economy.
The ramifications of the SNB judgment were not confined to Switzerland but many parts of the world except perhaps the United States. The entire FOREX community was affected and some even went to the extent of seeking financial aid or worse, shutting down operations. Even the Financial Times Stock Exchange gave way because of the sudden move. The Swiss market immediately crashed even if the franc gained an upper hand over other currencies not including the US dollar.
Fortunately, accounts of UFX.COM traders were not harmed by the consequences of this crisis, according to the company’s managing director, Dennis de Jong.
He believes that the key is the moral obligation of UFX.COM to its clientele.
De Jong said, “UFX.COM has taken on automated methods to prevent accounts from touching negative balances.” The company works only with state of the art technology to secure market investors from the explosive nature of international markets. Indeed, UFX.COM boasts of a firm environment for all traders.
Forex providers are currently observing closely the financial scenario that has been seen uncertain over major financial instruments. The Saxo Bank in joining forces with the JFD Brokers in expanding the leverage provided on their platforms. This action comes after the immediate alternations participants made in the crosses of CHF following the turmoil of the Swiss franc last week.
Forex magnates reported that clients of Saxo Bank are notification of changes in their margin requirements. The firm expects to gain back a move after a long time where there was little action in the markets. Saxo Banks executive, Steen Jakobsen clarified in an emailed to Forex Magnates that he foresees a drastic change in the financial markets after a prolonged period of low activity across classes of assets. He is signaling new clients of these new risks but guarantees that trading is done with adequate margin in case of larger, as well as very short-term in market shocks as their preparation for a period of increased volatility.
These new will come out on the 21st of January.
Under the Dodd-Frank Act, low leverage was an implemented post-2008 practice. One of the few providers that limit a 2% margin is Oanda. After it was changed in Japan, leverage rules are expected to be implemented in Singapore.