U.S. oil hits four-year peak ahead of sanctions on Iran
By Henning Gloystein
U.S. oil prices hit their highest level since November 2014 on Tuesday and Brent crude was also near a four-year peak reached the previous day, with markets preparing for tighter supply once U.S. sanctions against Iran kick in next month.
Sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a $1.2 trillion a year open-trade zone that had been about to collapse.
More fundamentally, oil markets have been pushed up by looming U.S. sanctions against Iran’s oil industry, which at its most recent peak this year supplied almost 3 percent of the world’s almost 100 million barrels of daily consumption.
HSBC said in its fourth quarter Global Economics outlook that “our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel”.
Washington’s sanctions are set to start on Nov. 4, and analysts say there may not be enough spare production capacity in the short-term to meet demand, potentially requiring large storage drawdowns.
Many analysts say the Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member, will struggle to replace export falls from Iran.
“Admittedly, supply-side concerns are pushing the oil price higher, but there are now clear warning signs on the demand-side, which could yet send prices lower,” said Capital Economics in a note to clients.
“Softening demand growth and new supply should cool the bullish sentiment and push prices lower by the end of the year,” Barclays said.
Downtrend in EURUSD Price Accelerates, Italy News in Focus
By Martin Essex, MSTA
Worries about the Italian budget are still weakening the EURUSD price, which has now fallen for six sessions running and could decline further although a correction is possible first.
Last week, Italy’s populist government announced it would widen its budget deficit target for next year to 2.4% of GDP.
In addition, the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, has warned that Italy should obey EU rules ahead of an October 15 deadline for Italy to submit its 2019 budget for approval to the Commission.
Meanwhile, the downward pressure on the Euro has been exacerbated by data showing the slowest growth in the Eurozone manufacturing sector for two years. The final purchasing managers’ index for the sector, released Monday, showed the PMI at 53.2 in September, down from both the “flash” estimate of 53.3 and the previous month’s 54.6.
Turkey’s lira weakens, investors eye September inflation data
Turkey’s lira weakened more than one percent on Tuesday as investors turned their attention to Wednesday’s September inflation data and with negative sentiment in emerging markets exerting pressure on the currency.
The lira has lost some 37 percent of its value against the dollar this year on concerns over the central bank’s ability to rein in double-digit inflation and with President Tayyip Erdogan calling for lower interest rates to boost borrowing.
Inflation is expected to rise more in September. A Reuters poll of 15 economists forecast monthly inflation of 3.6 percent, with estimates ranging from 2.66 to 4 percent.
“Unless we witness a major shocker because of the inflation data, I think that the downside bias in dollar-lira should prevail over the shorter horizon.”
AUD/USD Ignores RBA Decision in Favor of Equities, Trade War News
By Megha Torpunuri
The Australian Dollar was barely higher against its US namesake as the Reserve Bank of Australia maintained its overnight cash rate at the record low of 1.50% at its October meeting. The monetary authority stated that low interest rates continue to support the local economy, adding that it also sees inflation in 2019 and 2020 to be higher than the current 2%. It also noted that the unchanged policy would be consistent with sustainable economic growth and meeting the CPI target over time.
Looking forward, the Australian Dollar faces the release of August’s trade balance and building approvals data in the next week. AUD/USD may also be impacted by September’s US ISM Non-Manufacturing/Service Composite figures, as well as the local unemployment rate and change in non-farm payrolls. Furthermore, the sentiment-linked Aussie Dollar will closely watch global stocks, as they may potentially slow down to mirror global economic growth.
JP Morgan: Don’t buy the GE rebound, abrupt CEO change could mean ‘serious issues at play’
By Thomas Franck
General Electric’s move to oust John Flannery as chief executive is no reason to celebrate and may in fact be a sign of “serious issues at play,” according to J.P. Morgan.
Equipment and industrial analyst Stephen Tusa reiterated both his underweight rating and $10 price target for GE shares Monday, telling clients that investors may be wrong to celebrate the switch given the suspicious timing. Flannery took on the job in August 2017.
Tusa’s price target is the lowest on Wall Street and represents more than 11 percent downside from Friday’s close at $11.29.
Barclays downgrades Intel to sell, citing risk of a big price war with AMD
By Tae Kim
Intel will either lose market share or be forced to cut its prices to compete with its resurgent competitor AMD, according to Barclays.
The firm lowered its rating to underweight from equal weight for Intel shares, predicting the chipmaker will generate disappointing earnings next year.
“Intel faces a costly battle ahead to retain share as competitive threat from AMD heats up, along with near-term slowing of end markets,” analyst Blayne Curtis said in a note to clients Monday. Intel’s financial model “sensitivity shows material downside to EPS, declining FCF [free cash flow] a real possibility.”
Curtis lowered his price target for Intel shares to $38 from $53, representing 20 percent downside to Friday’s close.
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