Hang Seng Index is Near Important Support

Stocks

Summary:

The economy of China is hit by the decision to liquidate the developer Evergrande due to a debt of USD 300 billion. Bloomberg writes that this will have huge consequences for all of China.

While the S&P 500 index rose by more than 3% since the beginning of January, the Hang Seng index fell by more than 8%. JPMorgan and HSBC point to local government debt, non-performing bank loans and negative sentiment in the private sector. Hang Seng Index is Near Important Support_1

Hang Seng Index is Near Important Support_1

The weekly chart of the stock index Hang Seng (HSI) shows that:

→ The price is in a downward trend, which is shown by the black line.→ The price dropped close to the 2022 minimum.→ The RSI indicator is located near the oversold zone.

What is important: the price is near the lower border of the long-term channel (shown by orange lines), from which support can be expected.

Expectations of investors to lower the interest rate from the Fed may increase the appetite for risky assets, which features Chinese stocks.

As Reuters writes, Goldman Sachs noted in its note to clients that hedge funds are actively buying Chinese shares – for the period from January 23 to 25, there was the largest capital inflow in the last 5 years. Perhaps the managers of hedge funds believe that the plans of the Chinese authorities to stimulate the economy for more than $280 billion will become a reality, and the price of the Hang Seng index will make a jump from the lower border of the long-term channel, breaking the black line of the downward trend.

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Zi Cheng

Traders' Opinions

Economic

In January, the rate of inflation for UK shop prices significantly decreased to its lowest level in nearly two years, as retailers implemented substantial discounts amid a period of sluggish sales, according to industry data.

The British Retail Consortium reported on Tuesday that annual shop price inflation dropped to 2.9% in January, a decline from the 4.3% recorded in December. This marks the seventh consecutive monthly decrease and represents the lowest rate since May 2022.

Simultaneously, separate data from research company Kantar, also released on Tuesday, indicated a slower decline in grocery inflation to 6.8% in January, compared to 6.9% in the preceding month.

While the BRC index encompasses all retailers, Kantar focuses on supermarkets. The BRC noted that non-food prices were the primary contributors to the January decline, reporting a food inflation figure of 6.1% for the month, down from 6.7% in December.

Both indices offer early insights into pricing trends before the official data is published on February 14, raising some optimism that underlying inflationary pressures are still diminishing, despite the headline measure ticking up to 4% in December.

The reduction in shop inflation was attributed to retailers heavily discounting goods during January sales to stimulate consumer spending amid subdued demand, according to BRC Chief Executive Helen Dickinson.

Although the inflation rate increased from 3.9% in November, December's figure remained well below the multi-decade high of 11.1% reached in October 2022.

Market expectations suggest that the Bank of England will maintain its benchmark interest rate at the current 15-year high of 5.25% on Thursday. However, forecasts anticipate a rate cut in June as inflation is projected to slow toward the central bank's 2% target.

UK Shop Price Inflation Index Fell To 2.9%_1

Non-food prices experienced a 1.4% month-on-month decline, contributing to an overall annual decrease across all categories, as reported by the BRC. Annual non-food inflation slowed to 1.3% in January, down from 3.1% the previous month, marking the lowest rate since February 2022.

The BRC highlighted a decline in the annual growth rate for both fresh and ambient food prices. The former eased from 5.4% to 4.9%, while the latter, referring to items stored at room temperature, decreased from 8.4% to 7.7%.

Despite the significant decline in price growth, the BRC cautioned about potential risks to the outlook, such as new cost pressures arising from higher business rates, the increase in the national living wage starting April, and unrest in the Red Sea.

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Ukadike Micheal

Economic

Commodity

Energy

Oil prices surged over 6% last week, settling at $83.55 a barrel on Friday, marking their highest level since early November. The upward trajectory was attributed to the impact of winter storms on U.S. oil production and robust economic data indicating the country's resilience, signaling strong fuel demand. Despite the growing threat of the Israel-Hamas conflict escalating, the oil market remained unexpectedly active.

The surge in oil prices commenced earlier in the month when winter storms and extreme temperatures disrupted significant portions of U.S. crude output. The adverse weather conditions, particularly affecting oil fields in North Dakota and Texas, resulted in a reduction of about 1 million barrels per day, equivalent to approximately 7.5% of the typical daily domestic production.

Furthermore, recent economic data revealed a 3.3% annual growth rate for the U.S. economy in the fourth quarter, surpassing economists' expectations of 2%. This positive economic outlook heightened expectations for increased fuel demand.

Despite the geopolitical tensions, especially the Israel-Hamas conflict and attacks by Yemen's Houthi rebels on oil-carrying vessels, the oil market had exhibited a prolonged period of relative stability before the recent surge. The lack of a geopolitical risk premium in petroleum prices, as indicated by J.P. Morgan analysts, suggested that major supply disruptions were not factored into prevailing prices.

The consistent lack of significant supply disruptions contributed to the market's calmness, with attacks and geopolitical events failing to sustainably drive up oil prices in recent years. Oil options prices also reflected this subdued market sentiment, with option-implied volatility, a measure of the cost of insuring against oil price spikes, declining from over 50% to about 36% after the initial turmoil.

Notably, the recent attacks by Houthi rebels appeared more focused on disrupting traffic than causing substantial damage to oil infrastructure. Analysts pointed out that the rebels are unlikely to expand their campaign to the strategically crucial Strait of Hormuz, a critical chokepoint for global oil flows, as such a move would adversely impact their ally, Iran.

While disruptions in Red Sea shipping were estimated to have a small and manageable impact, lengthening voyages and adding a modest $2 per barrel to prices for affected ships, the transitory nature of these disturbances was highlighted. The cold snap in the U.S. and shipping disruptions were expected to have short-term effects on oil prices.

However, challenges persist in the form of a global surplus of crude and the prospect of expanding offshore projects, potentially adding to the glut in 2025. Non-OPEC countries, including the U.S., Brazil, and Guyana, have contributed to the surplus, and growth in oil demand is expected to slow with the increasing adoption of electric vehicles.

Citi Research anticipates a substantial increase in global oil inventories by an average of 1.2 million barrels per day in the coming year. Despite potential supply disruptions or unexpected surges in demand, the substantial idle production capacity of OPEC, nearly five million barrels per day, exceeds pre-pandemic averages, providing a cushion in case of unforeseen challenges.

The recent surge in oil prices, driven by disruptions in U.S. oil production and positive economic data, underscores the complex interplay of factors influencing the oil market. While geopolitical tensions have historically impacted oil prices, the market's resilience and the absence of sustained disruptions highlight the ongoing challenges of predicting and navigating the dynamics of the global energy landscape.

Source: Wall Street Journal

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ING

Economic

Now it's official, the German economy shrank by 0.3% quarter-on-quarter at the end of 2023. An imminent improvement is not in sight.

And it’s a wrap. The just released official GDP results show that the German economy shrank by 0.3% quarter-on-quarter in the fourth quarter of 2023. The year 2023 was the first full year since 2020 in which the German economy contracted (by -0.3% year-on-year). The GDP numbers from previous quarters were revised. As a result, the German economy has just avoided a technical recession (ie two consecutive quarters of contraction). But with an average quarterly growth rate of 0% QoQ since the second quarter of 2022, the German economy is anything but fast-growing. The best way to describe the state of the German economy is probably that it is in a shallow recession. In fact, the economy remains stuck in the twilight zone between recession and stagnation.

Closing 2023 but 2024 hardly looks any better

The year 2023 was another turbulent one, with the economy in permanent crisis mode. In fact, since 2020, there has been a long list of crises and challenges facing the German economy: supply chain frictions resulting from the pandemic lockdowns and war in Ukraine, an energy crisis, surging inflation, tightening of monetary policy, China’s changing role from being a flourishing export destination to being a rival that needs fewer German products, and several structural shortcomings. A combination of geopolitical risk events, cyclical headwinds but also homemade deficiencies. In light of so many challenges, some take comfort in the fact that the economy is “only” stuck in stagnation and has avoided a more severe recession.

Looking ahead, at least in the first months of 2024, many of the recent drags on growth will still be around and will, in some cases, have an even stronger impact than in 2023. Just think of the still-unfolding impact of the European Central Bank's monetary policy tightening, the potential slowing of the US economy or new uncertainty stemming from recent fiscal woes. A recent illustration of the longer-term impact of energy prices, higher interest rates and changing economic structures is the gradual increase in insolvencies since mid-2022. But the ongoing sharp drop in new orders in the construction sector doesn’t bode well either. To make things worse, the new year brought new problems for the German economy: strikes by train drivers, and supply chain disruptions as a result of the military conflict in the Red Sea have made another contraction in the German economy in the first quarter of the year even more likely.

It does not look as if the German economy will leave the twilight zone between recession and stagnation any time soon.

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Owen Li

Economic

Commodity

The next decade of liquefied natural gas seemed on track, after the chaos of 2022.

The US, Qatar and some African countries would lead global production expansion, Europe would continue switching to LNG to complete its escape from Russia, while China and other Asian countries would seek LNG to feed their economies, replace coal and complement renewables.

Now the administration of President Joe Biden in the US has thrown a spanner into the works.

The continuing increase in US shale gas has turned the country into the world's biggest exporter from an LNG importer as recently as 2015.

Yet, despite the fears of some gas consumers when the first LNG export plants were being improved, production has managed not just to keep up with demand, but to run ahead.

Apart from a spike in 2022, domestic prices have stayed low, hovering about $2.50 per million British thermal units since 2012 – the equivalent of about $15 per barrel of oil.

Adjusted for inflation, US gas has never been this cheap on an annual average basis in the whole history of the national marker price since 1989.

The lure of moving inexpensive US gas to hungry and higher-paying consumers in Europe and East Asia has spurred the latest wave of LNG export proposals.

Projections suggest the US could have 160 million tonnes of annual export capacity by 2027, beating even Qatar's expanded 127 million tonnes, and well ahead of previous leader Australia at about 90 million tonnes.

Now comes the spanner. The US Energy Department will scrutinise new projects for environmental impact, having rethought its methodology, particularly the effects of leaks of the global warming gas methane, the main constituent of natural gas.

Whatever the technicalities, the decision is a popular one for the Democratic Party's environmental wing, but not good news either for climate or worldwide energy security.

The new reviews won't stop existing LNG exports of 90 million tonnes annually, nor projects under construction which could double that.

As my co-worker at the Columbia Centre on Global Energy Policy, Akos Losz, observes, the most immediately affected projects are those which have signed some sales contracts but have not yet taken a final investment decision.

There are five of these, three in Louisiana and two in Texas, totalling about 60 million tonnes of intended annual capacity. Three of them are extensions of existing plants, while two are new.

If the reviews are protracted or if some projects are rejected, that will cast a chill over future investments. Commonwealth LNG has been waiting for four years for approval, while the licence for a project in Louisiana by Energy Transfer will expire if it can't start construction soon.

On the other hand, projects under way already, such as Texas LNG, may gain interest.

One of the companies involved in an expansion, Venture Global, is already embroiled in a legal battle with several European customers, who claim it broke contracts to deliver to them on spurious grounds, so it could resell at higher prices elsewhere.

Whatever the legalities, this does not give American LNG a reputation for reliability. The new reviews and the sense of a capricious policymaking environment in Washington are a more general problem.

Delays, which might morph into an outright ban, aren't good for the climate, whatever the environmental campaigners think. There should be plenty of LNG on the market by the late 2020s.

So the real impact of any obstruction will be on supply in the early and mid-2030s, when coal should be vanishing from the global energy system.

That could be good news for competitors to the US LNG juggernaut, including the UAE, which is progressing with a large new export plant at Ruwais, as well as Canada and several African countries.

Lower LNG might partly be replaced by more renewables, but renewable energy is already expanding as fast as practically possible in many places. In emerging Asian economies, renewables don't suit home heating, cooking or heavy industry.

When countries such as Pakistan couldn't find affordable LNG in 2022, they turned back to polluting heavy fuel oil and coal. The same will be true in the longer term for China, India, Bangladesh, Indonesia, Vietnam and other Asian giants.

The timing is particularly bad for two reasons.

First, with the presidential election coming up in November, Europeans and other US allies are wondering whether they will see the return of Donald Trump – bringing more tariffs, a likely abandonment of Ukraine, perhaps an American withdrawal from Nato, and who knows what other geopolitical and geoeconomic chaos.

But, in practical terms, the continuing gush of “America First” economics that a second term for Mr Biden would bring, is not very welcome either.

One example is the injudicious decision to review the purchase of US Steel, only the country's fourth-biggest steel maker, by Nippon Steel, from Japan, a close American ally.

This is reminiscent of the campaign against Dubai Ports' purchase of some US facilities in 2006, which faced similarly xenophobic and nonsensical national security objections.

The US's lavish subsidies from its Inflation Reduction Act for new energy manufacturing, and its attempts to secure raw materials through self-sufficiency rather than co-operation with partners, make life difficult for inherently more competitive companies elsewhere.

That delays low-carbon plans. And less US LNG would look like a policy of starving struggling European industries of energy.

Second, attacks by Houthi forces on shipping in the Red Sea continue to escalate. US and UK air strikes have so far not deterred them.

On Friday, a British tanker carrying Russian oil – which was expected to be safe – was hit by a missile and set alight. Qatar has started routing LNG cargoes to Europe around Africa.

The danger to maritime transit through the Red Sea may not persist. But, if it does, it strengthens the case for Europe to rely primarily on LNG from the US.

If the war in Ukraine eventually subsides into a frozen conflict, appeasers in European capitals from Brussels to Berlin to Budapest may return to relying on Russian gas.

The US gas and LNG industry does need to clean up its act – stopping flaring and methane leaks, cutting emissions from ships, running its LNG plants on clean electricity, and fitting carbon capture and storage.

Some of the new projects pursue such methods. The US's competitors will be pleased if misguided environmental enthusiasm jams the gears of its world-leading LNG industry.

Source: The National News

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Cohen

Cryptocurrency

In a notable shift in cryptocurrency investment flows, Fidelity's relatively new Bitcoin exchange-traded fund (ETF) has witnessed remarkable inflows, eclipsing the outflows from the longer-established Grayscale Bitcoin Trust (GBTC). This event marks a pivotal moment as investment preferences within the digital asset space continue to evolve.

Investment Dynamics Altering in the Crypto ETF Space

According to Cointelegraph , recent activity indicates a turning point as the Fidelity spot Bitcoin ETF amassed $208 million on January 29th, compared to Grayscale's $192 million outflow. This event signifies the first instance of Fidelity outpacing Grayscale in daily net inflows since their initial operational days.

Data from Farside Investors show a surge for Fidelity's FBTC, marking the firm's position as a formidable contender in the crypto ETF market. Concurrently, reports from BitMEX Research highlight that Grayscale's GBTC experienced its fifth consecutive day of slowing outflows.

Grayscale's recent figures show a steep decline in capital withdrawal, with a roughly 25% decrease from January 26th's $255 million and a significant 70% fall from the peak outflows of $641 million on January 22nd. Only January 11th had lower outflows, coinciding with the fund's transition to a spot Bitcoin ETF structure.

The Impact of ETF Flows on the Bitcoin Market

CryptoNews noted that market analysts have been scrutinizing GBTC's outflows, as the opportunity for investors to liquidate positions previously underwater might be affecting Bitcoin's market price. JPMorgan experts have suggested that the sell-off-related pressure should now be vastly diminished.

Additionally, new data illuminates the collective volume of the nine fresh U.S. spot Bitcoin ETFs, which nearly doubled the volume of GBTC on January 29th. With a combined $994.1 million against GBTC's standalone volume of $570 million, other key players like BlackRock's iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) are gaining substantial ground.

A Competitive Marketplace Spurs Fee Reductions

The Bitcoin ETF landscape is becoming increasingly competitive, driving fund providers to lower their fees to remain attractive. Invesco and Galaxy Asset Management recently joined the fee-cutting trend by adjusting the Invesco Galaxy Bitcoin ETF's (BTCO) expense ratio from 0.39% to 0.25%. This positions BTCO on par with other dominant firms like BlackRock, Fidelity, Valkyrie, and VanEck.

These strategic fee reductions aren't limited to the U.S. market, as Europe's ETF orbit also sees cost competition, possibly leading to a migration of traders from European to U.S.-based ETF products. CoinShares and other entities have undertaken similar fee cuts, proactively responding to the evolving market dynamics.

As the cryptocurrency investment scene matures, these fund flow and fee structure fluctuations underscore a vibrant and rapidly.

Source：TOKENPOST

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Ukadike Micheal

Economic

Forex

Italy and Spain surpassed analysts' expectations with stronger-than-anticipated economic expansions at the close of 2023, instilling hope for the euro zone to avert a downturn. Italy's GDP rose by 0.2%, driven by robust trade, while Spain experienced a surge of 0.6%, marking its fastest pace since mid-2022. In contrast, France avoided a recession, and Germany remained the weak spot with a GDP contraction of 0.3%, consistent with an earlier reading.

The euro zone faced a marathon of GDP reports, culminating in an assessment for the 20-nation bloc, fueling concerns of a potential recession. Despite this, any recession would likely be shallow, not prompting immediate interest-rate cuts by the European Central Bank. Germany, the largest economy, has been teetering on the brink of recession for multiple quarters, with sluggish momentum, heightened by persistently low foreign demand and cautious domestic consumer spending. The Bundesbank has cautioned that the first quarter may witness economic stagnation or a marginal contraction.

Elevated sick leave, faltering consumer spending, and a lack of rebound in foreign demand for German goods contribute to the economic challenges. The ifo Institute projected a 0.2% GDP contraction between January and March, citing widespread complaints from companies about falling demand across various sectors.

Italy's GDP exceeded expectations by rising 0.2% in the fourth quarter, outperforming economist predictions of stagnation. The industrial and services sectors contributed to this growth, with the overall expansion for 2023 reaching 0.7%. However, growth is anticipated to moderate in the coming year, with the central bank projecting a 0.6% increase. The impact of elevated ECB interest rates and inflationary pressures may test Italy's resilience.

In the Czech Republic, outside the euro zone, the economy narrowly avoided a return to recession in the final quarter of 2023, growing by 0.2%. Exports were the main driver, and domestic demand also rebounded. However, supply-chain disruptions pose ongoing risks for key manufacturing industries relying heavily on imports.

Spain emerged as a recent outperformer among large euro-zone nations, expanding by 0.6% in the fourth quarter, surpassing the expected 0.2%. Household consumption drove this growth, pushing the overall expansion for 2023 to 2.5%. Despite being hit hard during the pandemic, Spain's government continues to support the economy, rolling over aid packages into 2024 amid efforts to phase them out gradually. Unexpectedly, Spanish inflation quickened to 3.5% in January, surpassing the estimated 3%, challenging assumptions that December's uptick was a one-off occurrence.

Austria exited a six-month recession in the fourth quarter, with output rising by 0.2%. However, for 2023 as a whole, GDP fell by 0.7%. The Wifo institute noted stabilization in the domestic economy toward the year-end but highlighted heterogeneity in the development of service sectors, with consumer and investment demand remaining subdued.

The diverse economic performances across euro-zone nations underscore the complex challenges and uncertainties faced by the region. As geopolitical and economic dynamics continue to evolve, the euro zone navigates a delicate path, seeking to sustain growth, manage inflationary pressures, and address potential headwinds to economic recovery.