OPEC+ to boost output as Hormuz Strait traffic builds
European markets advanced with Wall Street closed for Independence Day.
Oil markets were in focus as New Zealand and Australia start the week, with OPEC+ members agreeing to boost their production and vessels moving more freely through the Strait of Hormuz.
The sharp decline in oil prices from their peak in March underpinned a more benign local economic outlook for ASB Bank’s economists, who are less gloomy about New Zealand’s prospects heading into the Reserve Bank’s policy review on Wednesday, which they expect will see the benchmark rate left unchanged.
European stock markets were broadly stronger on Friday, when Wall Street was closed for the Independence Day celebrations, with investors paring their expectations for the Federal Reserve to raise interest rates.
And South Korea is planning to establish a future fund from the extra tax revenue generated from the nation’s semiconductor boom, with SK Hynix poised to list in the US this week, raising a record US$29 billion for a foreign company on Wall Street.
Gaining energy
ASB Bank economists were more upbeat about New Zealand’s economic recovery in their latest quarterly forecast, predicting inflation to top out at 4.1% in the June quarter when they also anticipate a 0.3% contraction for gross domestic product. The economics team said the local outlook improved markedly in recent months as oil prices eased from their March peaks, supported by resilient commodity prices and a recovery in tourism.
“The New Zealand economy has shown greater resilience than many expected in the face of global uncertainty and higher fuel prices,” ASB chief economist Nick Tuffley said in a note. “While geopolitical risks remain elevated, falling oil prices have significantly reduced one of the biggest risks to growth and inflation this year.”
ASB’s economists expect the Reserve Bank will keep the official cash rate at 2.25% at this week’s policy review, in a decision dividing forecasters. Bond traders have priced in a 17-basis point increase, implying greater odds of an increase.
Major OPEC+ members agreed to increase in their collective production by another 188,000 barrels a day from next month, unwinding curbs put in place a few years ago. The oil producers have added 940,000 barrels a day since the Middle East conflict erupted in March, equivalent to about 1% of global demand.
Brent crude oil futures nudged up 0.5% to US$72.13 a barrel heading into the weekend.
European stock markets were stronger on Friday, with the UK’s FTSE 100 up 0.3%, Germany’s DAX gaining 0.8% and France’s CAC 40 advancing 0.4%.
Settling deals
UK budget carrier EasyJet agreed in principle to a £5.5 billion takeover offer on a fully diluted basis from US private equity firm Castlelake, having rejected four earlier offers.
Bloomberg reported that Germany’s government plans to borrow more to cover weaker-than-expected tax revenue and increase unemployment benefits as it prepares to reform its pension, including progressively lifting the retirement age.
Wall Street was closed on Friday for the Independence Day holiday, with upcoming quarterly earnings and minutes to the Fed’s latest policy review the main focus this week.
Meanwhile, South Korea’s SK Hynix is set to list in the US this week, raising US$29 billion as it seeks to access artificial intelligence investors. Separately, South Korea’s government plans to set up a future fund from the extra tax generated from its semiconductor boom to finance major national investment projects.
In other AI news, the Australian Financial Review’s Street Talk column reported Anthropic is seeking at least 1.4 gigawatts of capacity from Australian data centres, with Infratil’s CDC unit expected to win the lion’s share of the deal.
Australia’s resources-heavy S&P/ASX 200 index is poised to start the week lower, with futures pointing to a 0.4% decline when trading opens across the Tasman, even with gold futures up 1.5% at US$4,187 an ounce.
Local data today include ANZ’s commodity price index, while Mainfreight and a2 Milk Co shed rights to upcoming dividends.
The kiwi dollar traded at 57.11 US cents at 7am in Auckland from 57.13 cents last week.
ASB’s economists forecast the kiwi and Aussie dollars will decline against the greenback this year on the different interest rate paths for the nations. They forecast the kiwi to fall to 54 US cents by the end of the year.
Reporting by Paul McBeth. Image from Maria Lupan on Unsplash.
