OIL: Declines Continue In Asia Trading
- Oil's overnight fall continued in the Asia trading day with WTI and Brent lower
- WTI opened at US$60.94 bbl and moved steadily lower to $60.64, a fall of -0.45%.
- The places WTI on course for a weekly decline of nearly -1.5% and would represent a second week in a row of similar falls.
- Brent opened at US$64.11 bbl and moved steadily lower to $63.82, a fall of -0.50%
- The places WTI on course for a weekly decline of nearly -1.5% also and would represent a second week in a row of similar falls.
- Kazakhstan says it cannot cut oil production and hopes to increase output beyond planned levels later this year, despite its commitments to OPEC+. The country's Energy Minister stated that Kazakhstan has minimal impact on production output, and has notified OPEC of its position.
- In an OPEC+ meeting this Saturday, the market expects announcements around an increase in supply by June of a further 1.3m bbl per day from July onwards.
- It remains unclear why the sudden desire to increase production at a time when global growth prospects are challenged. The move no doubt will please President Trump who is determined to see lower prices.
- Wildfires are threatening about 5% of Canada's crude output as a blaze in Alberta's oil sands region spreads and approaches major production sites.
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ASIA STOCKS: China Bank Earnings Look Challenging
The anticipated release of earnings from China major banks sees an earnings downdraft as stimulus measures last year eroded margins and now the looming trade war poses a further threat. ICBC saw net income down 4% in Q1 driving shares lower by 6%.
In Korea Samsung shares were down even though net income was better than expected as forward looking assessments question the ability to sustain the chip demand seen in recent reporting periods.
- A quiet day for China’s major bourses, weighed down by the banking results with the Hang Seng up just +0.22%, CSI 300 +0.07%, Shanghai Comp -0.08% and Shenzhen the outperformer up +0.94%.
- The KOSPI was the one of the strugglers today as it slipped -0.63% on tech concerns, fuelled by Samsung’s release.
- Malyaia's FTSE KLCI bounced back from yesterdays fall to gain +0.83% today.
- Indonesia’s Jakarta Composite continued its good run gaining +0.45 and is up over 4% for the month.
- The FTSE Straits Times in Singapore rose +0.39% and the PSEi in Philippines jumped +1.54% on strong trade data.
- India’s NIFTY 50 is up +0.21% in early trading and if maintained has delivered gains of over +3.5% for the month.
THAILAND: Growth Outlook Likely To Drive Another BoT Rate Cut
The Bank of Thailand (BoT) decision is later today and 17 out of 21 analysts on Bloomberg expect it to cut rates 25bp to 1.75% (see MNI BoT Preview). In its February statement, it said that it would be monitoring the impact of “trade policies of major economies”, Thai manufacturing activity and loan growth/credit quality. These factors and the stronger THB plus March’s earthquake signal that the central bank is likely to revise down its growth forecast from “around 2.5%”.
- The baht has strengthened around 8% y/y both against the US dollar and in trade weighted terms. This is likely to weigh on exports and the important tourism sector, which saw a 6.9% y/y decline in arrivals in February and is likely to be impacted by the earthquake.
- Q1 customs export growth improved to 15.1% y/y from 10.5% in Q4, but it is highly exposed to the US with 20% of 2024 exports going there worth 11.4% of its GDP, only second to Taiwan in the region. Its exposure to China is a lot less but not immaterial at 12.7% of exports and so they could be impacted directly and indirectly from US trade policy. April S&P Global manufacturing PMI prints on May 2 and may show early impacts on the region given Thailand’s exposure.
US proposed tariffs & country exposure to the US
Source: MNI - Market News/LSEG/US Treasury
- The manufacturing PMI eased to 49.9 from 50.6 in March and the Q1 average at 50.0 was down from 50.5 in Q4 and is signalling stagnation in the sector. Orders are soft with export orders contracting.
- March manufacturing production fell 0.7% y/y, this is not as weak as it has been over recent months, while capacity utilisation rose to 63.7 from 59.0, the highest in two years.
- BoT noted in February that “loan growth and credit quality showed signs of stabilising”. This has generally continued but there was a slight softening in lending.
Thailand manufacturing
FOREX: G10 Wrap - USD Trying To Bounce, Market Remains Bearish
The BBDXY has had an Asian range of 1220.99 - 1223.27, Asia is currently trading around 1222. Bloomberg - “ The European union has made tangible offers to Donald Trump's administration in an effort to return stability to the global economy, according to the bloc’s commissioner for international partnerships”. “The ECB’s Yannis Stournaras urged caution with any additional rate cuts due to global uncertainty, but said the deposit is expected to be trimmed to 2%”. US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light.
- EUR/USD - Asian range 1.1355 - 1.1396, Asia is currently trading 1.1370. Intra-day support is around 1.1300, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3382 - 1.3415, the GBP momentum seems to be stalling towards the decent Weekly resistance around 1.3500. Intra-day support 1.3280 area.
- USD/JPY - Asian range 142.17 - 142.55, has drifted higher for most of the Asia session. On the day the 143 handle should once again offer supply, then more importantly the 145/146 area should once more offer good levels for sellers to reengage. A break back below 142.00 and the market will once again turn its focus on the pivotal 140.00 area.
- USD/CNH - Asian range 7.2619 - 7.2761, the USD/CNY fix printed lower again at 7.2014. Will need to get back above 7.3000 again to start thinking about moving higher again. The longer it stays below there the higher the chance of weaker longs being forced to pare back exposure.
- Cross asset : SPX -0.44%, Gold $3303, US 10-Year yield 4.16%, BBDXY 1222, Crude oil $59.68.
- Data/Events : French & Italian GDP, US ADP private jobs data, GDP, Chicago PMI, PCE and Home Sales.
Fig 1: USD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg
