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Oil falls below $41 with surging covid cases menacing demand

EconNov 14. 2020Storage tanks located near a dock for Hornbeck Offshore Services, Inc. oil industry support vessels in Port Fourchon, La., on June 11, 2020. MUST CREDIT: Bloomberg photo by Luke Sharrett. 

By Syndication Washington Post, Bloomberg · Alex Longley · BUSINESS, US-GLOBAL-MARKETS

Oil fell for a second day — dropping below $41 a barrel in New York — as the ongoing spread of coronavirus dampens the demand outlook.

As well as the surge in European coronavirus cases, there are also growing numbers in the U.S., Japan and South Korea, all of which are major oil consumers. The International Energy Agency and the Organization of Petroleum Exporting Countries revised down their demand forecasts this week.

At the same time, supply is rising as Libya opens the taps. The country’s production rose to 1.145 million barrels a day on Friday, according to a spokesman for its state-run National Oil Corp.

Crude is still up more than 8% this week, however, after news of a potential covid-19 vaccine breakthrough spurred a sharp jump in global markets on Monday. Futures have also been supported by indications that the OPEC+ alliance is closing in on a deal to delay a planned easing of output cuts. Still, three of the world’s top central bankers warned that a vaccine wouldn’t be enough to put an end to the economic challenges created by the pandemic as it continues to stymie consumption in some parts.

“There is a clear divergence in the oil demand recovery between Asia and Europe,” said Kevin Solomon, an analyst at brokerage StoneX Group. “We can assume that tighter lockdowns will resume in the United States, ultimately crimping oil demand.”

West Texas Intermediate for December delivery lost 1.9% to $40.35 a barrel as of 1:11 p.m. in London. Brent for January settlement slid 1.4% to $42.93.

In Asia, refiners are having to outbid one another to secure supplies in the spot market as buying interest from Chinese refiners grows. Meanwhile in Europe, where motorway traffic is down by almost 50% in some countries, demand is stuttering anew. That’s impacting crude, with six supertankers of unwanted North Sea oil continuing to float in the region.

Passive oil investors are also taking a more circumspect view on oil in the short term. More than $460 million has been pulled from the market’s largest exchange-traded funds so far this week, according to data compiled by Bloomberg.

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U.S. consumer sentiment unexpectedly declines on economic views

EconNov 14. 2020Shoppers walk through the Queens Center shopping mall in the Queens borough of New York on Sept. 9, 2020. MUST CREDIT: Bloomberg photo by Peter Foley. 

By Syndication Washington Post, Bloomberg · Jarrell Dillard · BUSINESS, US-GLOBAL-MARKETS, RETAIL 
U.S. consumer sentiment unexpectedly declined in early November as an increase in covid-19 infections and the election prompted Americans to reassess their outlooks for the economy and finances.

The University of Michigan’s preliminary sentiment index for November decreased to a three-month low of 77 from a final October reading of 81.8, data released Friday showed. The median estimate in Bloomberg’s survey of economists called for a reading of 82.

The measure of expectations dropped by nearly 8 points to 71.3, while a gauge of current conditions was little changed at 85.8. Interviews conducted following the election recorded a substantial negative shift in Republicans’ expectations and no gain among Democrats. The survey began Oct. 28 and concluded late on Nov. 10.

“Republicans now voice the least favorable economic expectations since Trump took office, and Democrats have voiced more positive expectations,” Richard Curtin, director of the survey, said in the report. “In the months ahead, the partisan gap is likely to enlarge, although the gains will be limited until a potential vaccine is approved and widely distributed.”

Consumers’ views about their current financial situations deteriorated, to well below the pre-pandemic peaks, the report showed. Net declines in household incomes were reported in early November for the first time since March 2014, with the largest decrease among lower income households and older Americans.

Less optimism about the state of the economy may damp prospects for the holiday shopping season against a backdrop of surging new virus infections across the country. The rising caseloads could weigh on sentiment in the coming months as some cities and states reinstate more restrictive measures.

A separate report on Thursday showed that the modest momentum in the labor market’s recovery remains intact, with initial jobless claims falling by the most in five weeks.

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Stocks rally to record as small caps outpace tech

EconNov 14. 2020

By Syndication Washington Post, Bloomberg · Rita Nazareth, Claire Ballentine · BUSINESS, US-GLOBAL-MARKETS 
Stocks climbed to a record as the rotation to economically-sensitive industries regained momentum even with a surge in coronavirus cases that could lead to more restrictions and crimp growth.

Both the S&P 500 and the Russell 2000 Index of small caps rallied to all-time highs, while the Dow Jones industrial average rose to pre-pandemic levels. All major groups in the equity benchmark advanced, with energy, industrial and financial companies among the biggest gainers. The tech-heavy Nasdaq 100 underperformed major gauges, with stay-at-home winner Zoom Video Communications Inc. tumbling. Walt Disney Co. jumped on solid results, and Cisco Systems Inc. climbed after upbeat sales projections. Tesla Inc., whose Chief Executive Officer Elon Musk tweeted he may have covid-19, fell. DoorDash Inc., the biggest U.S. food delivery platform, filed for an initial public offering.

The risk-on mood fueled a rotation into value and cyclical sectors, whereas more defensive industries underperformed. Stock funds attracted a record amount after positive results for a coronavirus vaccine, adding $44.5 billion in the week through Nov. 11, according to Bank of America Corp. and EPFR Global data. While the latest figures on covid-19 continued to fuel concern, with the surge in U.S. infections now spread to 49 states, the S&P 500 notched a second weekly rally.

“You have this push-pull,” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management’s Ascent Private Wealth Group. “As people become more optimistic, you get the recovery in the more cyclical sectors, and then as the optimism wanes a bit, you go back into the tech stocks.”

New York’s daily covid-19 cases exceeded 5,000, the highest for the state since April, as New York Mayor Bill de Blasio, D, warned parents to prepare for city schools to halt in-person classes as soon as Monday. California, Oregon and Washington state urged arriving people to self-quarantine, while Illinois reported a record number of daily infections and hospitalizations, a day after Chicago announced a stay-home advisory.

Federal Reserve Bank of St. Louis President James Bullard and New York head John Williams both voiced concerns about the economic impact of the pandemic, echoing previous comments from Fed Chairman Jerome Powell. U.S. consumer sentiment unexpectedly declined in early November as an increase in covid-19 infections and the election prompted Americans to reassess their outlooks. Meanwhile, a key measure of prices paid to U.S. producers decelerated in October, consistent with a pandemic that continues to limit pricing power.

U.S. stocks are poised for “a digestion period,” according to Keith Lerner, chief market strategist at SunTrust Private Wealth Management. He cited the S&P 500’s track record since 1990 after days when more than 60% of its component stocks reached 20-day highs, as they did Monday. There were 25 instances mentioned in a report Thursday. A month later, the S&P 500 was unchanged on average. Gains were posted over three-, six- and 12 months, with the latter period bringing an average increase of 12.5%.

These are some of the main moves in markets:

Stocks

–The S&P 500 gained 1.4% at 4 p.m. EST.

–The Stoxx Europe 600 Index was little changed.

–The MSCI Asia Pacific Index climbed 0.1%.

Currencies

–The Bloomberg Dollar Spot Index declined 0.4%.

–The euro advanced 0.2% to $1.1832.

–The Japanese yen appreciated 0.5% to 104.65 per dollar.

Bonds

–The yield on 10-year Treasurys rose one basis point to 0.90%.

–Germany’s 10-year yield decreased one basis point to -0.55%.

–Britain’s 10-year yield fell one basis point to 0.338%.

Commodities

–The Bloomberg Commodity Index was little changed.

–West Texas Intermediate crude fell 2.3% to $40.18 a barrel.

–Gold rose 0.6% to $1,887.63 an ounce.

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Banks eye new generation to expand credit-card customer base

EconNov 14. 2020

By The Nation

Banks’ credit-card divisions plan to tap more young customers next year to boost the growth of their business.

Somwang Toraktrakul, managing director of Krungsriayudhya Card Co Ltd, said the company will launch new products that are tailormade to tap the new generation, even though their spending through credit cards at present is not high.

The company is targeting a 7 to 8 per cent growth in card subscription next year, while it expects spending via its credit cards to grow 12 per cent.

Though spending via its credit cards in the past 10 months shrank 12 per cent, it is still an improvement from minus 50 per cent in March and April, he said.

The company’s credit-card subscription base at present totals 1.4 million cards, which is expected to rise to 1.5 million by yearend.

Thaweelap Rittapirom, Bangkok Bank’s executive vice president, said his bank will also focus on tapping the new generation next year.

It will take part in university activities to raise awareness of its BBL brand, which will make them think of BBL first when they want credit-card services.

The bank will also expand partnership in many sectors as part of efforts to boost the number of new cardholders and spending next year.

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Thailand urged to open up to foreign skilled labour, cut red tape on foreign investment

EconNov 13. 2020From left, Ambassadors to Thailand Brian John Davidson (UK), Allan McKinnon (Australia), Michael George DeSombre (US), Georg Schmidt (Germany), and Kazuya Nashida (Japan). 

By Wichit Chaitrong
The Nation

US Ambassador Michael George DeSombre and his counterparts from Australia, Britain, Germany and Japan have urged the Thai government to ease business restrictions in Thailand in order to attract more foreign direct investment in the post-Covid era.

The five foreign missions proposed 10 steps for Thailand to crack the top 10 in the World Bank’s global ease of doing business index.

The proposals are the outcome of consultation with Chambers of Commerce of four countries – Australia, Germany, Britain and the US – under the Foreign Chambers Alliance (FCA), DeSombre told press at his Bangkok residence on Friday.

Among the 10 proposals is a call for Thailand to open up to foreign skilled labour.

While the Board of Investment (BOI) and Eastern Economic Corridor (EEC) policy committee have offered incentives for foreign investors to bring in skilled workers, foreign businesses want a wider easing.

“We strongly encourage Thailand to open up to foreign skilled labour in general, not just through various exceptions or otherwise for the benefit of Thai people,” said DeSombre.

Thailand should make it easier for advanced manufacturing firms to establish plants here, he said. The country should not be afraid of opening up the labour market since foreign skilled workers would help train the next generation of Thai workers, he added. Thirty years ago, Dow Chemical and Siam Cement Group launched one of Thailand’s first petrochemical joint ventures with over 30 per cent of foreign workers, who helped to train Thai workers, said DeSombre. Today the same joint venture employs just one foreigner in a workforce of 1,000 people, he said, adding that a similar pattern could be seen at Ford Motor’s project in the EEC.

Meanwhile Japanese Ambassador Kazuya Nashida urged the Thai government to lift the 14-day quarantine requirement for short visits by investors from Japan. Foreign business travellers just wanted to visit Thai factories, not go shopping or to public places, and did not have more than two weeks to spare, he said.

Japan currently offers a fast-track lane for businesspeople from South Korea, Singapore and Vietnam.

He also called on Thailand to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Vietnam has an advantage over Thailand as it has already joined the CPTPP, and has other free trade agreements with the European Union and US, he said.

Germany’s Ambassador Georg Schmidt said German investors in Thailand were complaining about too much paperwork for customs clearances, tax refunds, invoices and renewal of licences and visas. Each investor has to sign about 100 such documents per week, said Schmidt.

He also praised Thailand for its digitisation efforts but called for faster development of electronic payment systems to ease business transactions. Several such initiatives are being trialled by Thai authorities. 

A pivot to digital commerce is among the FCA’s 10 steps for Thailand to reach the top 10 in the ease of doing business index. 

Others include simplifying and digitising cross-border clearances, simplifying BOI applications and applicability, establishing account-based customs processing, simplifying access for skilled labour, and improving bankruptcy processes.

Thailand has made impressive gains in the World Bank’s Ease of Doing Business index, moving from 46th to 26th to 21st in recent years. 

“By implementing the 10 measures the FCA proposes, we predict Thailand could quickly move into the top 10 of the World Bank index,” said the statement issued by the ambassadors.

Thailand is currently facing a shortage of skilled labour. Pre-Covid, the country also faced a shortage of unskilled labour, leading to the importation of migrant labour from neighbouring countries.