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Stocks shine once again, Turkey’s lira plunges on rate cut

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Stocks shine once again, Turkey's lira plunges on rate cut
© Reuters. FILE PHOTO: A man wearing a facial mask, following the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing Nikkei (top in C) and other countries stock index outside a brokerage at a business district in Tokyo, Japan, Janu

By Marc Jones and Tom Westbrook

LONDON/SYDNEY (Reuters) -Wall Street was tipped for a firmer open on Thursday after the German and French bourses rose to record highs despite big falls in energy stocks, while the day’s big loser was the Turkish lira following a 100 basis-point interest rate cut.

A pan-European equity index approached a record high, having risen 17 times over the past 10 sessions, thanks to a strong earnings season. , Switzerland’s SMI and 40 touched all-time highs.

“There’s a gradual creeping of money in to the European market,” said Graham (NYSE:) Secker, European equity strategist at Morgan Stanley (NYSE:).

“As concerns through July, August and September about the U.S. and China slowdown and earnings season are starting to lift, that’s allowing equities to move higher,” he added.

Further gains were capped however by weakness in energy stocks that were hit by futures slipping below $80 after the United States and China hinted they could tap their fuel reserves [O/R].

London’s commodity-heavy fell, with heavyweights Royal Dutch Shell (LON:) and BP (NYSE:) losing as much as 2%.

The dollar retreated from 16-month highs against a basket of currencies and U.S. Treasury yields flatlined, holding below recent three-week highs.

However, the dollar pullback offered little respite for emerging markets, with the Turkish lira in the spotlight.

The currency tumbled to record lows near 11 per dollar, after its central bank defied 20% inflation and a year-to-date lira fall of almost 30% to slash interest rates by another 100 basis points.

That comes on top of 300 bps in cuts in recent months, as the central bank responds to calls from President Tayyip Erdogan for lower borrowing costs.

Jason Tuvey, an economist at Capital Economics, said Turkey was running the risk of “a self-fulfilling cycle as its unwillingness to tighten policy prompts a further sell-off of Turkish assets, raising inflation expectations and further increasing demands for higher interest rates”.

“The experience from 2018 is that the currency could experience intra-day falls of more than 10%.”

The cost of insuring exposure to Turkish debt in the credit default swaps (CDS) market surged 11 basis points to 438 bps.

Attention turned to Wall Street, with up 0.3% and futures on the tech-heavy Nasdaq up more than 0.5%.

Shares fell on Wednesday after retail giant Target (NYSE:) became the latest to warn that three-decade high U.S. inflation was putting pressure on profit margins. Housing data also showed a sector beset with shortages of labour and materials [.N]

There was no sign of Europe’s inflation pressures easing either as gas prices there consolidated a 60% November surge amid wrangling over the Nord Stream 2 pipeline.

The inflation linked 10-year Bund yield was just off a fresh record low while a market-based gauge of future inflation — the five-year, five-year forward inflation gauge — hovered just under 2%. [GVD/EUR]

Hinting at division among European Central Bank policymakers, board member Isabel Schnabel said on Wednesday that the central bank must be ready to rein in inflation if it proves to be more stubborn than expected.

Earlier in Asia, ended down 0.3%. () while a 5% fall in China’s Alibaba (NYSE:) took the Hong Kong tech index sharply lower. ()

Elsewhere, the euro, which on Wednesday touched a 16-month low below $1.13, rose 0.2% to $1.1345.

The , which measures the currency against a basket of six rivals, reached its highest since mid-July 2020 on Wednesday at 96.226, but was last down 0.2% at 95.654. [FRX/]

Economy

Oil Prices Fall amid Protests in China

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Oil prices decline

Oil prices fell on Monday amid a general decline in investor appetite for risk amid information about the ongoing protests in China against vested restrictions.

The cost of January futures on Brent crude oil on London’s ICE Futures exchange was $81.31 per barrel on Monday, down $2.32 (2.77%) from the close of the previous session. At the close of trading on Friday, those contracts fell $1.71 per barrel to $83.63.

Oil prices decline – what’s going on in the market?

The price of WTI futures for January crude fell by $2.31 (3.03%) to $73.97 per barrel in electronic trading on the New York Mercantile Exchange (NYMEX). By closing of previous trades, the cost of these contracts decreased by $1.66 (2.1%) to $76.28 per barrel. Brent and WTI gained 4.6% and 4.8%, respectively, last week.

According to Bloomberg, protests were held in cities across the country, including the capital Beijing, as well as Shanghai, Xinjiang, and Wuhan, which was originally the epicenter of the COVID-19 spread.

That contributes to a stronger U.S. dollar, which reduces the attractiveness of investments in crude, and also raises the possibility of even more significant tightening of restrictions by Chinese authorities, the agency said.

“The outlook for the oil market remains unfavorable and the events of this weekend in China do not add to the positive,” notes Warren Patterson, who is in charge of commodities strategy at ING Groep NV in Singapore.

According to the forecast of analytical company Kpler, oil demand in China in the fourth quarter will decrease to 15.11 million barrels per day (bpd) compared to 15.82 million bpd a year earlier.

Earlier we reported that Russia will ban the sale of its oil to countries that have imposed a price ceiling.

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Economy

Oil Russia ban news: Russia will ban the sale of its oil to countries that have imposed a price ceiling

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oil Russia ban

Will Russia sell oil to Europe? The administration of President Vladimir Putin is preparing an order prohibiting Russian companies and any trader from buying Russian oil to sell raw materials to countries and companies that have imposed a price ceiling on Moscow. Bloomberg news agency wrote this, citing a report from sources.

“The Kremlin is preparing a presidential decree banning Russian companies and any traders buying national oil from selling it to anyone who participates in the price ceiling,” the publication wrote.

According to the newspaper’s interlocutors, this would prohibit any mention of the price ceiling in contracts for Russian crude, as well as transferring it to countries that have joined the price ceiling for the natural resource.

In the first half of September, the press service of the US Treasury Department said that the USA, together with its allies from G7 (Great Britain, Germany, Italy, Canada, France and Japan) and the European Union (EU) would impose a ban on marine transportation of Russian oil on December 5 and oil products – on February 5.

Earlier we reported that EU negotiations on limiting the prices of Russian oil reached a deadlock today.

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EU talks on restrictions on Russian crude oil prices today stalled

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russian crude oil price today

Negotiations between the European Union countries about the “ceiling” of Russian crude oil prices today reached an impasse; Bloomberg reported, according to its sources.

Representatives of the bloc cannot reach an agreement on the ceiling price of Russian oil. According to the agency, the proposed European Commission limit of $65-70 per barrel, Poland and the Baltic countries believe “too generous,” while Greece and Malta, which is actively engaged in transporting fuel, do not want the limit to fall below $ 70. Recall that the Russian response to the oil price cap was negative. The Russian government has officially said that it will only sell oil at market prices.

“We are looking for ways to make this solution work and we are trying to find a common ground to implement it in a perfectly pragmatic and efficient way, while avoiding that it may cause excessive inconvenience to the European Union,” said German Chancellor Olaf Scholz.

Earlier, we reported that the SEC fined Goldman Sachs $4 million for non-compliance with ESG fund principles.

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