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- Asian share markets looked set to end a rough, volatile year on a subdued note on Thursday as a renewed slide in oil prices sapped sentiment, a baleful trend that shows every sign of lingering into 2016. The relentless decline in oil prices, which have slumped as much as 35 percent this year, has hit currencies of commodity-rich countries including the Russian rouble, Canadian dollar, Norwegian crown, Brazilian real and Mexican peso. While cheaper fuel is a boost to consumer spending power in much of the developed world, it is also a disinflationary force that reinforces bets on loose monetary policy in Europe, Japan and China, even as the Federal Reserve proceeds with glacial tightening.
- Australian and New Zealand dollars have had the biggest losses among Asia Pacific currencies. The Aussie AUD=D4 slipped about 0.1 percent to $0.7296, extending losses this year to almost 11 percent. The kiwi NZD=D4 held steady at $0.6845, on track for a 12.3 percent decline in 2015. Moves between the majors were much more limited. Holidays limited the damage in Asian markets on Thursday with many either closed or shutting early. Japan was one of the markets off on Thursday, though it was also one of the better performers this year with gains of almost 10 percent. The next major Asian event will be official readings on Chinese manufacturing and services in December, due on Jan. 1. Activity in China’s manufacturing sector is expected to have contracted for a fifth straight month, a Reuters poll showed, likely consigning the world’s second-largest economy to its slowest annual growth rate in 25 years.
- Gold prices fell towards two-week lows on Wednesday, as the curtain begins to fall on 2015. Trading volumes are expected to remain light in the final few days of the year, reducing liquidity in the market. Market participants were eyeing a report on U.S. pending home sales due later Wednesday after a recent run of mixed economic data failed to offer clues as to how fast the Federal Reserve will raise interest rates next year. With the first U.S. rate hike since 2006 out of the way, investors are now focusing on the pace of future rate increases. The Fed, from its forecasts, is anticipating four rate hikes next year. Gold is on track to post an annual decline of approximately 11% in 2015, the third yearly loss in a row, as speculation over the timing of a Fed rate hike dominated market sentiment for most of the year. Gold falls towards 2-week lows as trading starts to wind down.
- Oil prices remained in a downbeat mood during their final Asian-hours trading session of 2015 after record U.S. crude inventories reinforced concerns about a global supply glut that has pulled down prices by a third over the past year. Crude inventories in the United States rose 2.6 million barrels last week, the U.S. EIA said. Analysts polled by Reuters had expected a draw of 2.5 million barrels. Crude prices held losses after falling more than 3 percent in the previous session, with U.S. WTI crude futures trading around $36.70 per barrel at 0300 GMT on Thursday and Brent around $36.60 per barrel. Both benchmarks are down by around a third over 2015. The immediate outlook for oil prices remains bleak, with some analysts like Goldman Sachs saying prices as low as $20/barrel might be necessary to push enough production out of business and allow a rebalancing of the market. U.S. bank Morgan Stanley said in its outlook for next year that “headwinds (are) growing for 2016 oil.” Traders expect some U.S. oil to be taken out of America and supplied into global markets, following the surprise lifting of a decades-old U.S. crude export ban in December, which ended a years-old discount in U.S. crude prices to international Brent. Oil prices began falling in mid-2014 as ballooning output from the OPEC, Russia and U.S. shale drillers started to outpace demand. The downturn gained pace at the end of 2014 after a Saudi-led OPEC decided to keep production high to defend global market share rather than cut output to prop up prices. A year on and the oil downturn has turned into a rout with Brent prices briefly falling below $36 per barrel to levels last seen in over a decade, effectively wiping out the gains from a decade-long commodity super-cycle sparked by China’s unprecedented energy demand boom. The downturn has caused pain across the energy supply chain, including shippers, private oil drillers and oil-dependent countries from Venezuela and Russia to the Middle East. Analysts estimate global crude production exceeds demand by anywhere between half a million and 2 million barrels every day. This means that even the most aggressive estimates of expected U.S. production cuts of 500,000 bpd for 2016 would be unlikely to fully rebalance the market. Russia and OPEC are so far showing few signs of reining in production, leading traders to establish record high active short positions in the market that would profit from further crude price falls.