Nikkei 225 closes higher by 2.13% at 21,729.97
Archives of “July 1, 2019” day
rssIran oil minister questions why OPEC decision was made in Osaka and not in Vienna
Comments by Iranian oil minister, Bijan Namdar Zanganeh
- If OPEC wants to stay relevant, decision should be made at OPEC meetings
- Says Iran has no difficulty with OPEC output cuts deal extension
- Says 6 to 9-months extension are acceptable either way
- But rejects any long-term OPEC+ charter
- Says unilateral decision by some OPEC member can lead to group’s collapse
- Sanctions must be lifted as first step towards talks with the US
- If US wants change, it should respect Iran
He’s mainly alluding to reports that Saudi Arabia and Russia had come to an agreement to extend the OPEC+ output cuts deal for about six to nine months over the weekend, before the OPEC/OPEC+ meetings take place later today and tomorrow.
In either case, most OPEC decisions in the past had long been a “Saudi-led majority” so it doesn’t surprise me that the most influential member of the pact pulls off a stunt like this. After all, they want oil prices higher and at the same time wants to eat into Iran’s market share amid US sanctions.
China June Caixin Manufacturing PMI 49.4 (vs. 50.1 expected and 50.2 prior)
Terrible result, follows the poor results from official survey released earlier.
- Output and new work intakes decline for first time since January
- Renewed reduction in export sales
- Goods producers cutback input purchasing and payroll numbers
Comments
- the second lowest since June 2016
- clear contraction in the manufacturing sector
- subindex for new orders slid into contractionary territory, pointing to notably shrinking domestic demand
- new export orders returned to contractionary territory, but was better than the levels seen from last April to last December. Front-loading by exporters was likely to support this gauge as the China-U.S. trade relationship was under great uncertainty.
- output subindex fell into contractionary territory
Bank of Japan (BOJ) Tankan report for Q2 2019. Manufacturing worse than expected.
Quarterly survey from the BOJ
- Tankan Large Mfg Index: 7 vs. expected 9, prior was 12 – worse than expected
- Tankan Large Mfg Outlook: 7 vs. expected ,6 prior was 8
- Tankan Large Non-Mfg Index: 23 expected 20, prior was 21 – better than expected
- Tankan Large Non-Mfg Outlook: 17 vs. expected 19, prior was 20
- Tankan Large All Industry Capex: 7.4% vs. expected 8.1%, prior was % 1.2
- Tankan Small Mfg Index: -1 vs. expected 2, prior was 6 – worse than expected
- Tankan Small Mfg Outlook: -5 vs. expected -2, prior was -2
- Tankan Small Non-Mfg Index: 10 vs. expected 10, prior was 12
- Tankan Small Non-Mfg Outlook: 3 vs. expected 6, prior was 5
The large Manufacturing result is the worst in 3 years. Trade war, global slowdown repercussions.
Yen crosses still adding to the ‘truce gap’
USD/JPY is heading to approach 108.50 following its gap higher this Mnday morning:
In response to this over the weekend:
USD/JPY getting another leg on:
China press response to trade truce: “Mexico, China can be partners against US pressure”
A weekend report in the outspoken Global Times – never shy about saying what they think.
This was in a report on Mexican Foreign Minister Marcelo Ebrard’s official visit to China, which continues this week.
- Although Trump said on Saturday that US companies could sell equipment to Huawei, security concerns raised by the US have not been completely settled
- It will be a fierce game whose results will decide whether Huawei can develop 5G networks in Latin America.
- Mexico is the target of pressure from the US, and that pressure is likely to continue.
- The US has too much influence over Mexico
- China and Mexico can see each other as partners in development and in resisting US pressure and unilateralism
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While the ‘truce ‘ is a positive the underlying issues remain unresolved, and given the two country’s divergent goals, unresolvable.
Australian Industry Group manufacturing Index 49.4 -3.3 Lowest since Sep 2016
Iraq’s oil minister says under $70 a barrel is too low
Comments from Iraq’s oil minister ahead of the OPEC meeting beginning Monday in Vienna.
- we have open mind on oil output deal extension
- fully endorses extension to end of year, no objection to nine months
- any decision by OPEC, OPEC+ must be taken within premises of OPEC
- on deeper cuts, says it’s too early to say
- says oil prices are on the low side, $70 plus is a good price
WSJ report – US-China Trade Talks Are Back on, but Obstacles Remain
If you’ve been off the infosphere over the weekend, this is the much awaited news, coming as expected:
- Trump – Xi meeting: US agreed to no new tariffs on China goods
- Trump relents on tariffs, Huawei as US-China trade talks set for a revival
The Wall Street Journal note the truce agreed to by Xi and Trump but say, quite rightly,
- an even tougher job lies ahead-appeasing hard-line factions within their own governments demanding they give no quarter.
For Xi
- party leaders and executives of state-owned enterprises believe Washington is out to demolish the government-led economic model that is responsible for China’s emergence as a global power
For Trump
- faces skepticism from some Republican and Democratic lawmakers who worry he will give up too much in any deal
- wariness among some of his own political appointees
- Heading into an election year, Mr. Trump must also contend with restiveness among his supporters in the business community and farm-belt states who have been hit by the tariffs imposed by both countries
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Yep. Truce is good but I don’t expect much substance if a “deal” is eventually patched together.
Weekend oil news – Russia & Saudi Arabia agree to extend OPEC+ oil output curbs
Russian President Vladimir Putin, over the weekend, said Russia has agreed with Saudi Arabia to extend the deal with OPEC on reducing oil output.
- For 6 to 9 months
- “We will support the extension, both Russia and Saudi Arabia. As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months,”
Saudi Energy Minister Khalid al-Falih also said deal would likely be extended.
The output agreement is expected to be extended in its current form and with the same volumes.
OPEC plus (OPEC plus key oil producing allies) begin their meeting today, Monday 1 July
