Market Drivers – US Session – 1-12-2021

Mohamed Abdelhamid 2 December, 2021 4:03 am Commodities, Forex Market, Market Update

US President Joe Biden’s administration will extend requirements for travelers to wear masks on airplanes, trains and buses and at airports and train stations through mid-March to address ongoing COVID-19 risks. A formal announcement extending the requirements through March 18 is expected on Thursday.

The news adds to the Omicron-led risk aversion, weighing on the US stock futures and Antipodeans. However, Fed Chair Jerome Powell’s measured response on inflation seems to put a carpet under the EUR/USD prices.

US WTI crude oil futures pared gains on Wednesday after a U.S. official said the country was continuing to consider tools to manage energy prices, and as government data pointed to weaker gasoline demand.

WTI U.S. crude futures were trading $1.3, or 2.02%, higher at $67.51 a barrel at 12:04 p.m. ET (1619 GMT), after paring some gains immediately after the weekly government stock data. They were up as much as 4% earlier in the session.

Oil prices were also impacted by a new coronavirus variant triggering fresh travel restrictions that could dampen oil demand and after an OPEC+ document showed the group forecasting a bigger oil surplus in the new year than previously thought. Global benchmark Brent crude was up $1.5, or 2.3%, at $71.75 a barrel.

Economic Data
According to a survey compiled by the Institute of Supply Management, released Wednesday, US Manufacturing PMI rose to 61.1 in November from 60.8 in October. That was slightly above the expected reading of 61.0 and above October’s reading at 60.8.

The employment index rose to 53.3 from 52.0, the new orders index rose to 61.5 from 59.8 and the prices paid index fell more than expected to 82.4 from 85.7, versus an expected decline to 85.5.

The ISM Manufacturing Index showed an improvement in November, in agreement with market expectations. According to Wells Fargo’s analysts, the report is the first sign of an easing of the supply chain crisis.

Some manufacturers are starting to find the help they need. The employment component rose to 53.3 in November. That is the highest reading since April and suggests that this Friday’s jobs report could see a hiring boost in the manufacturing sector.

A weekly report published by the US Energy Information Administration (EIA) revealed on Wednesday that crude oil inventories in the US fell by 0.910 million barrels in the week ending November 26.

This was smaller than the expected draw of 1.273 million barrels. Distillate stocks saw a larger than expected build of 2.16M barrels (forecasts were for a 0.462M barrel build).

Gasoline stocks also saw a larger than expected build of 4.029M barrels (forecasts were for a 0.029M barrel build).

WTI fell slightly in wake of the bearish inventory numbers, with WTI now trading just above $68.00 versus pre-data levels above $68.50.

Other Developments
The economic impact from the pandemic has gradually faded since the start of the world health crisis but still remains strong according to statements by Bank of England Governor Andrew Bailey on Wednesday, when asked how to assess news of the Omicron variant of coronavirus.

Financial markets have pared back their expectations of a Bank of England rate rise on Dec. 16 since information emerged about the new variant last week, and now see a two thirds chance of a rate rise, down from three quarters before.

“Direct economic effects of COVID have attenuated a lot since the fall in GDP in the second quarter of last year, when we went off a cliff,” Bailey said.

Turkey’s President Recep Tayyip Erdogan abruptly replaced the finance minister amid deepening national debate over aggressive interest-rate cuts that have undermined the lira and fueled inflation and price pressures. Lutfi Elvan will exit after less than 12 months in office.

The new minister is Nureddin Nebati, according to a decree published in the Official Gazette. Nebati, 57, has been a deputy finance minister since 2018 and is close to former finance minister Berat Albayrak who is Erdogan’s son in law.