Saudi Arabia's Doha Surprise

The summit in Doha among the world's largest oil producing countries turned out to be a complete wash. This came as oil producers failed to agree on a production cap that could have tightened supply.

Until a few years ago, US$100 per barrel was the new 'normal' for oil price. And then this capricious commodity proved everyone wrong. Early this year, crude oil prices hit US$30 per barrel for the first time in 12 years. The root of his turmoil has been the global supply glut. To get out of this oversupply, major oil producers held talks on 17 April in Doha, Qatar, over a plan to freeze output. As per the proposed freeze, crude oil producers were going to cap production at January levels up through October this year. However, the summit finished with no final accord.

It was noted that Saudi Arabia, the world's largest exporter of crude oil, refused to go along with the plan. The nation said that it would not limit its own output unless all OPEC (Organisation of the Petroleum Exporting Countries) nations, including Iran, do the same.

Further, concerns have mounted as OPEC has predicted less-than-expected crude oil demand in 2016. OPEC recently said that world oil demand will grow by 1.20 million barrels per day (bpd) in 2016. This is 50,000 bpd less than expected previously. Also, according to the International Energy Agency's (IEA) latest report, the world produces about 96.4 million barrels of oil per day. This is against the demand of 94.8 million barrels per day, as of the first quarter of 2016.

All of these developments could lead to a renewed drop in crude oil prices, which only recently has begun to recover.

All eyes now on June's meeting of OPEC countries, where the cartel's hand may be forced if crude prices begin another downward spiral.

Asad Dossani, editor of Daily Profit Hunter, recently wrote that OPEC has lost control of oil prices...and the resultant volatility is great for traders. You can read the entire article here.

Also, while we're on the topic of trading, Apurva Sheth, editor of Daily Profit Hunter, has recently penned an article that explains how people get stuck in ugly trades and how to get out of one. You can read the same here.

China's economy grew at an annual rate of 6.7% in the first quarter of 2016. This was slightly below the 6.8% growth in the final quarter of last year. While the growth was in line with government's expectations, it was the slowest quarterly growth in the Chinese economy in seven years.

However, not all the numbers were in the doghouse. It was noted that investment in industrial assets and infrastructure grew 10.7% for the year to March. This was well ahead of expectations and was recorded as the strongest growth since August. Chinese banks extended 1.37 trillion yuan in net new yuan loans in March, nearly double the previous month's lending of 726.6 billion yuan. Also, China's retail sales growth quickened to 10.5% in March.

While this data comes as a welcome breather for the Chinese economy, we believe China needs to do a lot better to come out of the ongoing slowdown phase. Sluggish demand and excess capacity are threatening to slow down China's economic engine, which had been growing at a frenzied pace in the past. And lack of transparency in the government and banking entities in China have made it difficult to decipher the reasons for the grown decline.

The need of the hour is to have more credible and trustworthy reports on economic developments. And that is where Nitin Gregory fills the gap. Nitin is a new writer at Equitymaster, currently based in China and taking a very close look at some of the key economic and competitive factors that we'd otherwise not have access to. In his latest article, he gives his on-the-ground outlook at what drives the real estate in China and how will it fare in the short term as well as the long term. You can read the entire article here.

Speaking of real estate, Rahul Shah, Equitymaster co-head of research, says stocks can crush real estate over the next three-to-five years.

In another news update it was noted that the Bank of Japan (BOJ) is considering applying negative rates to its lending program for financial institutions. The BOJ may consider the new step if policymakers decide to lower further the negative 0.1% interest rate applied to some bank reserves parked with the central bank. All eyes are now on the BOJ policy meeting scheduled for April 27-28.

One of the factors to weigh on the BOJ's stimulus decision will be signals coming out of the Federal Reserve meeting the day before. The upcoming federal policy meeting is scheduled for April 26-27.

The US Federal Reserve has waved the caution flag on interest rate hikes later this year. Fed officials said a rate increase in April would signal an inappropriate sense of urgency. However, some officials want to raise rates as soon as April if the incoming economic data is consistent with their expectations.

Last month, the US Fed not only left the rates untouched but also signalled that it would expect to raise its benchmark rate just twice this year. This was against the four interest rate hikes this year the Fed predicted earlier. The focal question for now is whether the Fed raise interest rates in its meeting later this month or leave them untouched.

For the week, global markets traded on a mixed note after tracking the above developments. Asian markets traded on a mixed note with shares in China leading the losses. For the week, China's Shanghai Composite was down 3.86%. On the other hand, the Hang Seng was up 0.71% and Japan's Nikkei 225 was up 4.3% for the entire week. European markets also traded mixed with shares in Germany leading the gains. For the week, the CAC 40 was up 1.66%, Germany's DAX was up 3.2%, while London's FTSE 100 was down 0.53%. Stock markets in the US traded on a negative note with the Nasdaq Composite down by 0.65% for the week.

Indian markets trade on a positive note

Back home, Indian indices clocked marginal gains during the week. For the week, the BSE Sensex was up by 0.82% and the NSE Nifty was up by 0.62%.

During the week, India's third-largest software services exporter, Wipro Ltd, announced its results for the fourth quarter and the full fiscal year 2015-16. The actual numbers for the company came in below expectations with the topline of its IT services business growing by 3.7% YoY to US$ 7.35 billion. This was marked as the company's slowest pace of growth since 2009-10.

Revenue of the company grew 9% YoY in FY16 while net income grew 3% YoY. For the quarter ended March 2016, revenue of the company grew 12% YoY.

Wipro also projected that the first three months of 2016-17 will not be much better. This comes at a time when its rival, Vishal Sikka-led Infosys projected an at-best revenue growth of 13.8% in dollar terms for this year.

Indian Indices Book Marginal Gains

The index opened the week with a gap but has failed to make any headwind after that. It ended the session on a very flattish note every day this week. This indicates that the index may be losing out on momentum as the resistance at 8,000 kicks in. For the week 8,000 remains a strong barrier which the bulls will find difficult to cross.

COMMODITIES

Gold sought as safe-haven asset amid volatility

Gold traded on a positive note during the week. On Monday, it opened higher as against its previous week's closing. Gains were seen on the back of a firm trend in precious metals overseas. Also, the metal witnessed buying interest after the failure of talks among oil producers to freeze output triggered a sell-off in crude oil and equities. Slight losses were seen midweek as investors went on for profit booking at prevailing higher levels. Losses were also seen during the end of the week and gold closed its session in the red. The MCX Gold June contract opened the session at 29,010.00/10 grams. It traded at a high of 29,756.00/10 grams before finally closing the session at 29,021.00/10 grams.

Gold Ends Lower

Silver mimics gold

Silver traded in tandem with gold during the week. It opened its session on a positive note on Monday. The uptrend was led by a sell-off in equity markets and a firm trend in precious metals overseas. On Tuesday, the MCX contract for delivery in May surged as much as 3% as against its previous closing. Weaker dollar and weak global cues aided this buying interest. The contract for May opened the session at 36,750.00/kg. It traded at a week high of 38,600.00/kg and settled at 38,563.00/kg on Wednesday.

Crude oil surge ahead of output freeze meet

Crude oil attracted most of the news in commodity markets during the week. It traded in the green for the entire week. On Monday, it extended its last week's rally that was seen on the back of a drop in US inventories. Also, hopes that the exporters will agree to an output freeze in their upcoming meeting supported the prices. This momentum led to buying activity in crude oil and helped it surge as much as 1% on Monday. On Tuesday, crude oil witnessed volatility. This was seen on the back of doubts on whether crude producers will be able to reach an agreement to rein in a worldwide supply glut. One shall note that OPEC and non-OPEC producers (including the top two exporters, Saudi Arabia and Russia) are going to hold talks on 17 April in Qatar over a plan to freeze output. On Wednesday, crude oil registered losses amid a weakening trend in overseas markets. The major news in this space was OPEC prediction that global demand for its crude oil will be less than previously thought in 2016. The announcement is said to bring volatility for crude oil in the coming days. The MCX April contract opened on Monday at 2,651.00/barrel and closed the Wednesday session at 2,793.00/barrel.

Crude Oil Witness Uptrend

Natural gas ends higher

Natural gas traded on a mixed note during the week. It witnessed losses on Monday on reports of rise in storage levels. The US Energy Information Administration (EIA) in its weekly report said that natural gas storage in the US in the week ended April 1 rose by 12 billion cubic feet. This was as against expectations for a gain of 8 billion cubic feet. However, these losses were reversed during the following days of the week and natural gas ended its session in the green. The MCX April contract opened the week at 132.50/mmBtu and finally closed the Wednesday session at 135.90/mmBtu.

CURRENCIES

Dollar reined by US Fed comments

The dollar traded on a negative note during the week. It opened weak against the rupee on the back of fresh selling by banks and exporters. The dollar also stood weak against a basket of major currencies. Much of the losses for dollar came from the dovish comments made by Janet Yellen for US interest rate hike last week. However, these losses were limited as dollar registered some gains during the following days of the week. On Monday, the rupee opened the session at 66.72 against the US dollar and settled the week at same levels.

USD Ends Higher

Euro trades on a mixed note

Euro witnessed buying interest during the week. Weakness in dollar helped the euro register gains on Monday. However, some losses were seen on Tuesday as the dollar gained traction. On Monday, the euro opened at 75.98 against the INR. It reached a high of 76.36 and a low of 75.39 and closed the week at 75.45 against the INR.

Sterling witness volatility

The sterling traded on a mixed note during the week. It witnessed volatility on the back of UK March inflation data. Some losses were also seen as concerns over June's referendum on leaving the European Union (EU) deepened after the IMF's latest warning. On Monday, GBP opened at 94.20 against INR. It touched a low of 94.00 and closed the week at 95.08.

Japanese government to intervene with yen's surge

The yen took most of the headlines in currency markets during the week. It reached a fresh 17-month high on Monday. However, this rally prompted the Japanese government to warn that it could take steps to weaken the exchange rate. It was noted that the Japanese government was closely monitoring the foreign exchange market with a sense of urgency, noticing the yen moves were one-sided and speculative. These warnings suggest that the authorities in Japan are cautious towards arresting the yen's appreciation. One shall note that the Bank of Japan adopted negative interest rates late in January. However, the move did little to weaken the yen so far. JPY against INR traded at a low of 60.93 and a high of 61.84. Finally, it stood at 61.05 against the rupee to end its session.

Commodities 15th April 22nd April % Change
Gold/10 gms 28,959.00 29,021.00 0.21%
Silver/kg 38,507.00 39,985.00 3.83%
Crude Oil/barrel 2,805.00 2,936.00 4.67%
Natural Gas/mmBtu 127.70 142.60 11.66%
Currencies 13th April 22nd April % Change
INR / USD 66.72 66.53 0.28%
INR / EUR 75.45 75.03 0.55%
INR / GBP 95.08 95.74 -0.69%
INR / JPY 61.05 60.14 1.49%

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