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Oil Prices Stable as Rate Cut Speculations and Middle East Risks Persist

Oil prices stabilized in ​Asian trade on Monday after six consecutive weeks of losses, as there was growing optimism about early ​monetary easing in 2024. However, concerns over ​Middle East supply disruptions arose following attacks on U.S. vessels in the ​Red Sea.

Crude prices had fallen below $80 a barrel due to underwhelming production cuts by the Organization of Petroleum Exporting Countries and its allies (OPEC+). Nevertheless, Brent Crude found some support around $78 a barrel, as the expectation of tightening supplies in the first quarter of 2024 provided a positive outlook.

The weakness in the dollar, which followed less hawkish signals from Federal Reserve Chair Jerome Powell, also contributed to the relief in oil prices.

According to the latest data, Brent oil futures expiring in February were steady at $78.77 a barrel, while West Texas Intermediate crude futures stood at $74.21 a barrel by 20:36 ET (01:36 GMT).

The recent attacks on multiple U.S. military and commercial vessels in the Red Sea raised concerns about potential disruptions in Middle East oil supplies. The Yemeni Houthi Group claimed responsibility for drone and missile attacks on Israeli vessels, which added a risk premium to crude prices. There were initially diminishing concerns about the Israel-Hamas war causing disruptions in Middle Eastern supplies, but these new attacks could potentially escalate the conflict and involve other Middle Eastern powers, potentially disrupting oil supplies.

Although there were some positive signals over the weekend, crude markets remained weighted towards the downside. The disappointing OPEC+ cuts failed to alleviate concerns about the global economic slowdown, as evidenced by weak Purchasing Managers’ Index (PMI) readings from major economies in November. China, the largest crude importer, and the United States, the largest fuel consumer, both had weak PMI prints, which contributed to market concerns over slowing economic activity and its potential impact on oil demand.

Additionally, this year, crude markets were affected by worries about slowing economic activity and the indication from major central banks that interest rates would remain restrictive for an extended period. On the supply side, U.S. production remained at record levels, while easing fuel demand led to significant builds in crude inventories.

Overall, while there was some stabilization in oil prices in Asian trade on Monday, ongoing concerns about global demand and ample supplies continued to weigh on crude markets.

US stocks mixed after key PCE inflation data; DJIA soars over 200 points

US stock futures were trading in a mixed fashion during Sunday’s evening deals, after a positive week from major benchmark averages as the S&P 500 marked a new high for 2023.

By 6:30 pm ET (11:30 pm GMT) Dow Jones Futures remained flat, S&P 500 Futures eased 0.1% and Nasdaq 100 Futures dipped 0.2%.

Ahead in the week, investors will be closely monitoring key employment data including ADP nonfarm employment change and nonfarm payrolls.

During Friday’s trading session, the Dow Jones Industrial Average added 294.6 points or 0.8% to 36,245.5, the S&P 500 added 26.8 points or 0.6% to 4,594.6 and the NASDAQ Composite lifted 78.8 points or 0.6% to 14,305.

The S&P 500, a broad index of large-cap equities, reached its highest point since March 2022 on Friday, accumulating nearly 20% in year-to-date gains. The Dow Jones Industrial Average, a measure of blue-chip stocks, has also seen a steady ascent for five consecutive weeks, yielding a 9.4% increase for the year. The Nasdaq Composite, known for its tech-heavy composition, has surged by 37% in 2023.

This recent upswing comes as investors increasingly wager on the Federal Reserve maintaining its current policy stance at the upcoming meeting this month, with potential rate cuts expected next year. Despite Fed Chairman Jerome Powell’s attempts to moderate rate-cut expectations by stating it’s “premature” to predict policy easing, the market seems to have disregarded his cautionary comments.

On the bond markets, United States 10-Year rates were at fresh 12-week lows of 4.197%.


Record-Breaking Surge in Gold Prices Fueled by Speculation of Fed Rate Cuts and Geostrategic Tensions

Gold prices surged to a record high in ​Asian trade on Monday, driven by a series of recent gains and market speculation regarding potential interest rate cuts by the ​Federal Reserve in ​March 2024. These gains were bolstered by factors such as easing ​inflation, soft labor market data, and less-hawkish signals from the Fed.

In addition to these factors, the near-term demand for gold was further fueled by an attack on an American warship and commercial vessels in the Red Sea. This event heightened concerns about a potential escalation in the Israel-Hamas war.

Chair Jerome Powell’s recent statements also played a role in shaping market expectations. While he reiterated that U.S. rates would remain higher for a longer period, there were changes in his signaling that suggested a different outlook. Powell acknowledged the progress made in curbing inflation and the potential for a “soft landing” for the U.S. economy. These signals reinforced expectations that the Fed may not raise interest rates in December and could potentially start cutting them by March 2024.

Ah, Monday morning, the perfect time to contemplate the joys and perils of investing after a weekend of relaxation. As we navigate the treacherous waters of the market, let us remember the wise words of ​Benjamin Franklin: “An investment in knowledge pays the best interest.” So, while your coffee steams and your computer boots up, take a moment to arm yourself with information, analyze trends, and make calculated decisions. After all, who needs a crystal ball when you’ve got research and determination? Happy investing, my fellow financial adventurers!