Ahead Today
G3: Eurozone GDP, US Initial Jobless Claims
Asia: China Trade, Thailand CPI
Market Highlights
Oil prices fell sharply by more than 4%, with WTI breaking below $70/bbl, while Brent fell under $75/bbl. Whether this move was driven by supply or demand is a classic econometrics problem, but as a somewhat unsatisfactory answer probably involves both. We do know that US crude oil production has been rather strong, and this has in part offset Saudi’s production cuts so far. Latest EIA data showed that gasoline stocks rose by 5.4 million barrels, raising concerns about the strength of demand. Overall, there is perhaps a sweet spot for oil prices for the health of the global economy, beyond which it could start to impact various factors including investment and fiscal deficits of oil producing countries.
Ahead of key non-farm payrolls, ADP report showed hiring was lower than expected at 103,000. US 10-year yields dropped to 4.1%, where it last was in September, while risk assets were marginally softer. The S&P500 was down 0.4% while the Dollar strengthened.
Regional FX
Asian FX pairs were generally weaker against the Dollar on back of USD strength, with USDCNH rising to 7.17 while MYR and KRW declining 0.1% and 0.2%. There may have been some follow through from Moody’s Investor Service recent outlook cut for Chinese sovereign bonds earlier this week. BSP Governor Eli Remolona said that the central bank is still hawkish in terms of its monetary policy, and that it’s ‘premature to think about easing policy next year. The move lower in oil prices if sustained is nonetheless a positive for the Philippines given its status as a net oil importer and to lower inflation pressures. China will release export data for November, which is expected to show some improvement to +0%yoy from -6.4%yoy, leading to a still decent trade surplus of US$55bn.
