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23-05-2024
SINGAPORE: Oil prices fell for a third straight session on Wednesday on expectations the Federal Reserve could keep US interest rates higher for longer due to sustained inflation, potentially impacting fuel use in the world’s largest oil consumer.
Brent crude futures were down 43 cents, or 0.5%, to $82.45 a barrel. US West Texas Intermediate crude (WTI) futures slipped 50 cents, or 0.6%, to $78.16. Oil prices settled about 1% lower on Tuesday.
Fed policymakers said on Tuesday the US central bank should wait several more months to ensure that inflation really is back on track to its 2% target before cutting interest rates.
Higher borrowing costs can slow economic growth and pressure oil demand.
US crude oil and gasoline inventories rose last week, while distillates fell, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
Ahead of this weekend’s Memorial Day holiday, which kicks off the US peak summer driving season, retail gasoline prices fell for the fourth consecutive week. US prices of diesel, a key refined product for both the industrial sector and transport, have also slipped.
Investors are awaiting minutes from the Fed’s last policy meeting and weekly US oil inventory data from the US Energy Information Administration (EIA) due later on Wednesday.
The euro zone has all but promised a rate cut on June 6 amid more positive economic outlook. European Central Bank President Christine Lagarde said in an interview aired on Tuesday that she was “really confident” euro zone inflation was under control.
Monetary policy decisions from New Zealand, opens new tab and Indonesia are the main points of focus in Asia on Wednesday, as debate over the timing of the first US rate cut ebbs and flows, and lofty equity markets consider their next step.
Asian stocks retreated on Tuesday, snapping a seven-day winning streak despite the relative calm in currency and bond markets but Wall Street crept higher, with the Nasdaq reaching a new peak ahead of Nvidia’s (NVDA.O), opens new tab first-quarter earnings report.
The message on interest rates from a raft of Federal Reserve officials on Tuesday was patience. Indeed, it may be several months before policymakers are confident inflation is really falling back to target, allowing them to start cutting rates.
With many stock markets around the world at record or multi-year highs, a period of cooling may be inevitable. The MSCI Asia ex-Japan index on Tuesday slipped 0.9% its biggest fall in over a month while Japan’s Nikkei lost 0.3%, and Hong Kong’s Hang Seng shed more than 2%.
After Morgan Stanley’s Mike Wilson rowed back on his long-standing gloomy outlook for Wall Street on Monday, another prominent bear, JP Morgan’s Marko Kolanovic, reiterated his view that US stocks are too expensive and should head south.
He is much more upbeat on Asia, favoring Japanese and Chinese equities over US markets. Japan is attractive because of inflation and monetary policy normalization, while measures to support the housing market, underweight investor positioning and cheap valuations are reasons to buy China.
While the world maintains its vigil ahead of AI darling Nvidia’s results on Wednesday, investors in Asia digest two monetary policy decisions and other potentially exchange rate-moving data, including Japanese trade and South Korean producer price inflation. (Int’l News Desk)
