Iranian militia leaders killed
Reports that US airstrikes may have killed a senior Iranian commander saw crude oil prices surge in Asian trading this morning. In a knee-jerk reaction, West Texas Intermediate (WTI) prices jumped almost 4% to reach the highest level since April 30, amid concerns about supply disruptions. The jump was the biggest since September 16, the day of the attacks on Saudi Arabian processing facilities. In response, an Iranian Revolutionary Guard Corps officer said that Iran would take “revenge” on the US for the deaths.
The 55-day moving average has moved above the 200-day moving average at $57.768 for the first time since September 12. The May 2019 high is at $63.792.
WTI Daily Chart
Equities pressured, gold gains
The reported attacks have taken the edge off risk appetite during the Asian session, with stock markets giving back most of yesterday’s gains, while safe-haven plays into gold and the Japanese yen were evident. US indices slid between 0.84% and 0.98%, with the NAS100 index under-performing, while Japan225 futures tumbled 1.64%, given Japan’s dependence on oil imports. Recall that Japan’s cash markets will be closed until Monday due to an extended holiday.
The risk-off mood sent gold prices higher, extending the current bullish run to an eighth consecutive day and hitting the highest level in four months.
Gold Daily Chart
More RRR cuts to come?
The financial press in China was awash with talk that the People’s Bank of China could be cutting the Reserve Ratio Requirement again in the near future. A PBOC official had said that the reserve ratio is still high by global standards, and can be adjusted further. On January 1 the PBOC announced a 50 bps reduction in the RRR for all banks to 12.5%, effective January 6, and it was the eighth cut since early 2018. The China50 index jumped to a near two-year high on the news yesterday, but has given back most of those gains this morning.
US PMI data on tap
The calendar is starting to get busier after the holiday period, with UK house prices from Nationwide for December, Hong Kong retail sales (that’s not likely to be an encouraging number), December’s German unemployment rate and provisional consumer prices all scheduled.
The US session features the ISM manufacturing PMI for December, which is expected to improve to 49.0 from 48.1, though would still be below the 50 contraction/expansion threshold for a fifth straight month. The minutes of the pre-Christmas FOMC meeting complete today’s session.
