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- Asian share markets swept lower Monday after Wall Street suffered its worst starting week in history and doubts over Beijing’s economic competence sent investors into the arms of the safe-haven yen and sovereign bonds. The absence of Tokyo for a holiday only made liquidity even harder to come by, heightening volatility. China was again the epicenter of unease as the People’s Bank confounded analysts by guiding the yuan sharply stronger, a move that might calm concerns about a competitive devaluation but only added to market confusion as to Beijing’s ultimate intent. Perceived missteps by the authorities in managing the share and currency markets have led to concerns Beijing might lose its grip on economic policy too. That heightened tensions ahead of trade data on Wednesday where further declines are expected in exports and imports, underlining just how anemic world trade flows are right now.
- U.S. crude oil prices were down more than 2 percent in early trading on Monday as traders increasingly lose faith in a significant market recovery soon and bet on even lower prices. Global benchmark Brent LCOc1 was down 59 cents, also almost 2 percent, to $32.96 per barrel. Monday’s falls add to an over 10 percent price drop in the first trading week of the year and when Goldman Sachs said oil could hit $20, and would see sustained low prices through the first quarter “so producers will move budgets down to reflect $40 a barrel oil for 2016.” In a sign that traders are losing faith in a price rise anytime soon, big speculators have cut their net long positions to fewer than 50,000 contracts or 50 million barrels in the week to last Tuesday, a weekly report from a U.S. government agency that tracks commodity markets activity showed on Friday. At the same time, trading data shows that U.S. managed short positions, which would profit from prices falling lower, have risen to a record high. Oil prices have already fallen over 70 percent since the downturn began in mid-2014 as soaring global production sees hundreds of thousands of barrels of crude produced every day without a buyer, leaving storage tanks filled to the rims. Adding to overproduction is slowing demand, especially in China where growth has slowed to its lowest rate in a generation and experts see few signs of improvement for the next few years.
- U.S. payrolls surged in December and the job count for the prior two months was revised sharply higher, showing the economy on solid ground despite a troubling international backdrop. Nonfarm payrolls increased by 292,000 last month, the Labor Department said on Friday, as hiring got a boost from unseasonably warm weather. The unemployment rate held steady at a 7-1/2-year low of 5 percent even as more people entered the labor force, a sign of confidence in the job market. The robust employment data helped soothe fears about the economy’s health, and suggested recent weakness would largely be contained to the manufacturing and export-oriented sectors, which have been hit by a strong dollar and anemic global demand. Efforts by businesses to whittle down an inventory glut and spending cuts by energy companies have also inflicted pain. U.S. payrolls for October and November were revised to show 50,000 more jobs created than previously reported, adding to the report’s upbeat tone. The only wrinkle was a one cent drop in average hourly earnings. Economists, who slashed fourth-quarter U.S. growth forecasts on recent soft economic data, had expected payrolls to increase by only 200,000 last month. Fourth-quarter GDP growth estimates currently range from as low as a 0.4 percent annual rate to as high as a 1.1 percent pace.
- Slumping oil prices and slowing growth in China have cast a pall on the outlook for the global economy. The upbeat employment report briefly helped staunch the bleeding on Wall Street, but was offset by further declines in oil prices. The dollar firmed against a basket of currencies as traders ramped up bets the Federal Reserve would raise interest rates in March. Prices for U.S. government debt rose on safe-haven bids. Concerns about a slowdown in China, the world’s second-largest economy after the United States, have spooked investors worldwide. But signs of stability emerged overnight after China ditched a stock market circuit breaker and guided its currency higher.