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- Crude futures lost ground in early Asian trading on Monday, with U.S. oil plunging more than 2 percent, pressured by a global supply surplus despite a cut in the number of U.S. rigs for an eleventh week out of 12. Venezuela’s oil minister said on Sunday that OPEC cannot allow an oil price war and must take action to stabilize the crude market soon. When asked how low oil prices could go in 2016 if OPEC doesn’t change its policy, he said: “Mid-20s.” U.S. crude was briefly supported on Friday as U.S. drillers removed 10 oil rigs in the week ended Nov. 20, the biggest weekly decline since late October, bringing the total rig count down to 564, oil services company Baker Hughes Inc (N:BHI) said in its closely followed report. Industry research group Baker Hughes (N:BHI) said late Friday that the number of rigs drilling for oil in the U.S. decreased by 10 last week to 564. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future. Markets were keeping an eye on developing geopolitical tensions in the oil-producing Middle East as Jordan’s King Abdullah, a U.S. ally, will hold talks in Moscow on Tuesday with Russian President Vladimir Putin on how to tackle “terror groups” led by Islamic State in Syria, an official source said. Meanwhile, Algeria’s energy earnings are forecast to fall to $26.4 billion next year after low oil prices cut into the OPEC nation’s economy, Finance Minister Abderrahmane Benkhalfa said on Sunday.
- The euro sagged to a seven-month trough on Monday as the prospect of more policy easing in Europe benefited the U.S. dollar, while activity in Asian shares was crimped by a holiday in Japan. The strength of the dollar also combined with worries about Chinese demand to clobber commodity prices again, sending copper to its lowest in over six years. The head of the European Central Bank, Mario Draghi, last week offered the strongest hint yet that the ECB will unveil fresh stimulus measures at its Dec. 3 policy meeting. The contrast with the U.S. Federal Reserve could not be more stark as it seems destined to lift rates in December for the first time in a decade, underpinning the dollar. The impact was clear in bond markets where yields on two-year German debt hit their lowest ever at negative 38 basis points, while U.S. yields were at their highest since mid-2010.
- Japan’s government plans to raise the minimum wage and introduce other steps to revitalise the economy, but the draft of stimulus measures seen by Reuters on Monday appeared to break no new ground on reforms that analysts say are needed to end decades of stagnation. Prime Minister Shinzo Abe’s government will also offer some financial support to people living off their pensions to bolster consumer spending, a copy of the draft obtained by Reuters showed. Citing unnamed sources, the Nikkei newspaper said on Monday that the government is planning to raise the minimum wage by 3 percent. But the draft didn’t provide any specifics and analysts say the government will need to do more to foster durable growth.Raising wages is an urgent task for policymakers as Tokyo is keen to ramp up consumer spending, which is seen as crucial to boosting domestic demand and pulling the economy out of 15 years of deflation. However, some economists remained sceptical of the plans because they do not do enough to address Japan’s rigid labour market and low worker productivity.
- The euro languished near a seven-month low against the dollar on Monday, weighed down by expectations that the European Central Bank will ramp up its monetary stimulus next month. Most major banks have stuck firmly to the view that the euro will fall toward parity with the dollar in the months ahead as the Federal Reserve begins to lift interest rates while the ECB takes the opposite course. Comments by European Central Bank President Mario Draghi on Friday reinforced expectations for the ECB to unveil more monetary stimulus at its policy meeting on Dec. 3, putting renewed pressure on the euro. Draghi said the ECB is ready to act quickly to boost anemic inflation in the euro zone. He highlighted changes to the ECB’s asset purchase program and deposit rate as possible tools to stop inflation from falling further below its target of just under 2 percent.