Good morning! Here’s what you need to know in markets on Monday.
Chinese foreign currency reserves fell by $99 billion in January. On Sunday, the People’s Bank of China reported that the country now has just $3.23 trillion left in its foreign reserves, the lowest level since May 2012. The drop beat market expectations, which had predicted a fall of as much as $120-140 billion over the month.
The prolonged slump in the price of oil is forcing American producers to slash their budgets. Eighteen of the top 30 U.S. oil companies by output have so far outlined their spending plans for 2016. They have reduced their budget by 40 per cent on average, steeper than most analysts’ expectations, according to a Reuters analysis.
Asian shares are mixed Monday trading. MSCI’s index of Asia-Pacific shares outside Japan was down 0.2 per cent, with Australian shares slipping 0.3 per cent. Japan’s Nikkei skidded 1.2 per cent in early trade, but is now up by around 1.1% at 6:20 a.m. GMT (1:20 a.m. ET). Many of Asia’s biggest share indexes will be closed for some time this week due to the Lunar New Year. Chinese markets are shut all week.
It’s a day of data in Germany. Europe’s biggest economy will release trade data on the country’s industrial production during January at 7:00 a.m. GMT (2:00 a.m. ET). Production fell by around 0.3% in December 2015.
The price of oil is on the rise on Monday. After slipping in trade towards the end of last week, oil has started the second week of February in positive territory. At the time of writing, both benchmarks, Brent crude and West Texas Intermediate are trading up. Brent has popped 1% to around $34.40, while WTI is also up around 1% to $31.20.
Russia is planning to issue its first bond since the country was hit by sanctions for its role in the war in Ukraine. The Financial Times reports that the country’s finance ministry has approached 25 western investment banks and big Russian lenders Sberbank, VTB, and Gazprombank about issuing a euro denominated bond of around $3 billion.
The price of oil could continue to fall because of the high levels of debt held by oil companies. As reported by Business Insider, Jaime Caruana, a General Manager at the Bank for International Settlements argues that the high levels of debt held by oil companies has helped push prices down, saying: “Oil and gas companies’ bonds outstanding increased from $455 billion in 2006 to $1.4 trillion in 2014, an annual growth rate of 15%.”
Anglo American chief executive Mark Cutifani will make his first public appearance since unveiling a “radical” restructuring plan for the company. Bloomberg reports that the CEO will speak to investors and mining industry executives at a conference in South Africa on Monday, his first public engagement since announcing in December that Anglo is set to cut two thirds of its global workforce. The stricken miner has been one of the worst victims of the commodity price crash, losing more than 70% of its market capitalisation in the last year alone.
Hollande and Merkel held crisis talks about the migrant crisis over the weekend. German Chancellor Angela Merkel and French President Francois Hollande stressed on Sunday the migrant crisis, which brought more than a million people to the European Union last year, needs an EU-level solution.
A JP Morgan strategist has criticised the world’s central banks for trying and failing to control the world. Speaking to Business Insider, David Kelly, the global chief strategist at JP Morgan Funds, said: “The most infuriating thing is that central banks think they control the world, and in reality they have failed miserably,” adding that “It is truly astonishing that after 20 years of trying and failing to help the economy with low interest rates that they thought that doing something like [negative interest rates] is the answer,” said Kelly. “In fact, it might actually be bad for the economy.”
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