Yuan Turns Into Global Risk Bellwether as China Leads Recovery By Bloomberg



© Reuters. Yuan Turns Into Global Risk Bellwether as China Leads Recovery

(Bloomberg) — As the dollar shows signs of exhaustion, the yuan is taking over as the barometer of global risk sentiment.

A worldwide rally in stocks, bonds and commodities is decoupling from the U.S. currency, which entered a bearish phase in June and is grinding lower for a fourth month. The rally is increasingly mirroring moves in the Chinese currency as it breaks psychological barriers and builds on its best month since October.

The closer relationship is no coincidence. At the heart of the global advance — and the yuan’s appreciation — is the growing optimism that China will lead the world out of the economic slump brought on by the pandemic. A tide of central bank liquidity, including from the Federal Reserve, is pouring into yuan assets as well as markets with close ties to the second-largest economy.

China Factory Deflation Eased in June With Recovery on Track (2)

This is the culmination of a process that started after the yuan’s shock devaluation in August 2015, with turning points for the Chinese currency often coinciding with shifts in global markets. And now, it may also be an indication that troubles in the U.S. — including a second wave of coronavirus infections — may have less effect on overseas markets if China’s recovery continues.

Here are some ways the yuan and global markets are joining hands:

The euro and the yuan are now following each other more often than at any time in the past 13 months. Their positive correlation increases in times of global risk-on rallies, such as in 2016, and falls in turbulent times, like last year when trade worries dominated. It even turned negative during the 2013 taper tantrum.

The relationship is thus an indirect indicator of the fortunes of euro-denominated assets, as well as Eastern European currencies that closely track the shared currency.

But nowhere else is the yuan’s influence more pronounced than in commodity prices. The Bloomberg Commodity Index now has the strongest beta with the yuan since 2011. That means a one percent gain for China’s currency translates into almost a 1.3% increase in commodity prices.

When the yuan rises, bond yields fall. That’s the signal from the Bloomberg Barclays (LON:) Global Aggregate Total Return Index, which is heading for the longest streak of monthly gains since May 2017. The negative correlation is a weak 0.26, but that’s still the deepest in three years.

U.S.-China Yield Gap Is Widest on Record. Would Love It.

Emerging markets have always lived under China’s shadow, which is only lengthening now. As Shanghai stocks extend a rally, the country’s market capitalization has reached $9.3 trillion, the highest since June 2015 when Chinese markets went into a tailspin after runaway increases. Now China accounts for 45% of emerging-market stock values, the most dominant in more than four years.

‘No Way I Can Lose’: Inside China’s Stock-Market Frenzy (2)

The increasing role of China’s markets in the macro picture backs the idea that watching the yuan’s moves helps to understand shifts in global markets. There’s just one risk: if Beijing increases its involvement in the market, that could distort the relationship, making the yuan a poor indicator.

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Global banks seeking details of U.S. sanction threat against China individuals for Hong Kong law By Reuters




By Alun John, Scott Murdoch and Sumeet Chatterjee

HONG KONG (Reuters) – International banks were seeking details on Friday of the scope of U.S. legislation that would penalize them for doing business with Chinese officials who implement Beijing’s sweeping new national security law on Hong Kong.

The U.S. Senate passed the bill unanimously on Thursday, a day after it saw full support in the House of Representatives, in a rare example of bipartisan support that reflects politicians’ concern over the erosion of the Hong Kong’s autonomy following China’s imposition of the law on Tuesday.

The bill calls for sanctions on Chinese officials and others who help violate Hong Kong’s autonomy, and financial institutions that do business with those who are found to have participated in any crackdown on the city.

But it does not lay out which individuals might be included, nor what they would be forbidden from doing.

Banks including Citigroup (NYSE:) and Bank of America (NYSE:) were among those holding calls on Friday with U.S. colleagues to discuss the potential fallout from the legislation, but few conclusions could be drawn at this stage, sources said.

Spokesmen for the banks declined to comment.

President Donald Trump has not yet indicated if he will sign the bill into law.

“Financial institutions are concerned about the legislation principally because of uncertainty about how the sanctions will be used,” said Nick Turner, a lawyer specializing in sanctions and anti money laundering at Steptoe and Johnson in Hong Kong.

Turner said the main area of uncertainty was around what would constitute a significant transaction, and whether that would prevent a bank providing retail or private banking services to a sanctioned person, as well as which individuals might be named.

The bill calls for the Secretary of State to report to Congress within 90 days of the law’s passage and identify any foreign person who has, or is, materially contributing to undermining Hong Kong’s autonomy.

Within 60 days, the Treasury Secretary must then submit a report identifying those banks that have knowingly conducted a significant transaction with someone named.

“Internally, it’s very difficult for us to take a call on this now and think about its impact without seeing the names of the people and the entities that would be targeted,” said a trade finance banker at a large European bank, who also discussed the bill with colleagues on a call.

“If they name party members who are sitting on the boards of large SOEs (state-owned enterprises), that would create a massive problem,” he added, declining to be identified due to the sensitivity of the matter.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Dollar wobbly as PMI data stokes hopes for global recovery By Reuters



© Reuters. Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration

By Tom Westbrook

SINGAPORE (Reuters) – The dollar was under pressure on Wednesday, after upbeat data in Europe boosted the euro and helped stoke hopes for a global economic recovery, underpinning investor appetite for riskier currencies.

IHS Markit’s euro zone Flash Composite Purchasing Managers’ Index, a broad gauge of economic activity, beat expectations with a bounce to 47.5 from May’s 31.9.

That is still below the 50 mark separating growth from contraction, but the strong rebound – together with upbeat data in Britain and the United States – lent support to a sense that growth is returning at pace.

It also seemed enough for now to offset worries about a resurgence in U.S. coronavirus cases, and to draw bets – reflected in a rising gold price – on broad dollar weakness.

The euro () is headed for its best month against the dollar since October, and in morning trade clambered back toward a one-week high hit overnight, last buying $1.1321.

The risk-sensitive Australian dollar led morning moves, with a 0.3% gain to $0.6952, pushing it towards the top end of the range that it has held for a couple of weeks. [AUD/]

The New Zealand dollar was down slightly on the day at $0.6477 after the country’s central bank said the balance of economic risks remains to the downside and it is prepared to use additional monetary tools as necessary.

The RBNZ kept interest rates on hold, as expected.

“We’re still seeing the counteracting forces of the economic recovery on the one hand and concerns around the virus spreading on the other hand,” said Kim Mundy, FX analyst at the Commonwealth Bank of Australia (OTC:) in Sydney.

“But overnight the Eurozone PMIs lifted, PMIs in the UK lifted and PMIs in the U.S. lifted, so the economic story, that we are seeing the recovery, is helping to underpin the commodity currencies.”

The mood lifted the British pound a fraction higher to $1.2524 and helped scrape it off a three-month low against the euro ().

The yen held on to overnight gains at 106.46 per dollar, reflecting caution and also corporate flows as investment juggernaut SoftBank (T:) started a $21 billion sale of its stake in U.S. telco T-Mobile (O:).

The moves came in spite of a spike in coronavirus cases.

For a second consecutive week, Texas, Arizona and Nevada set records in their coronavirus outbreaks, and 10 other states from Florida to California were grappling with a surge in infections.

Australia has reported its first COVID-19 death in more than month, amid an upswing in new cases in Victoria state, where some restrictions on gathering have been re-imposed.

Investors are so far betting that this will not prompt further lockdowns, or dent global economic recovery.

“We expect over the coming couple of weeks as we get more clarity on this, state Governors will be in a better position to decide how to proceed,” RBC Capital Markets’ Chief U.S. Economist, Tom Porcelli, said of the U.S. cases.

“For now, we have not seen any negative shift in consumer behaviour as a result.”





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Pandemic to sink Japan business mood to lowest since 2009 global financial crisis: Reuters poll By Reuters



© Reuters. The outbreak of the coronavirus disease (COVID-19) in Tokyo

By Leika Kihara

TOKYO (Reuters) – Business sentiment among Japan’s big manufacturers in the second quarter likely tanked to levels last seen during the 2009 global financial crisis as the coronavirus pandemic crushed global demand and paralysed factory output, a Reuters poll showed.

The Bank of Japan’s closely watched “tankan” survey is also likely to show big non-manufacturers’ mood sinking to more than a decade-low, underscoring the sweeping economic impact of the global health crisis.

Analysts polled by Reuters expect the BOJ tankan’s diffusion index for big manufacturers to have hit -31 in the three months to June, down sharply from -8 in the first quarter survey. That would be the worst level since September 2009, when the collapse of Lehman Brothers a year earlier triggered a deep global economic downturn.

Big non-manufacturers’ index likely worsened to -18 in the June quarter from +8 three months ago, the poll showed, as lockdown measures to contain the virus forced citizens to stay home and retailers to close. That would mark the weakest level since December 2009.

“Manufacturers were hit hard by slumping overseas demand and exports,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

“Even harder hit were non-manufacturers. Sectors that were forced to close business due to state of emergency measures in April and May likely suffered devastating damage,” he said.

Both big manufacturers and non-manufacturers expect only modest improvements in business conditions three months ahead, the poll showed.

Big firms are likely to project a 2.1% increase in capital expenditure for the current fiscal year beginning in April, roughly unchanged from a 1.8% increase forecast in the March tankan, according to the Reuters poll.

Analysts are also closely watching how companies view job market conditions, as any evidence of excess labour capacity could signal rising job losses ahead.

The BOJ will release the tankan survey at 8:50 a.m. on July 1. (2350 GMT July 30).

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Europe threatens digital taxes without global deal, after U.S. quits talks By Reuters



© Reuters. The weekly cabinet meeting at the Elysee Palace in Paris

By Leigh Thomas and Jan Strupczewski

PARIS/BRUSSELS (Reuters) – France said a U.S. decision to quit global talks on how to tax big digital firms such as Google (NASDAQ:), Amazon (NASDAQ:) and Facebook (NASDAQ:) was a “provocation” and the European Union said it could impose taxes even if no deal was reached by year-end.

The latest transatlantic trade row was ignited after the Washington said on Wednesday it was withdrawing from negotiations with European countries over new international tax rules on digital firms, saying talks had made no progress.

Nearly 140 countries are involved in the talks organised by the Organisation for Economic Cooperation and Development (OECD) on the first major rewrite of global tax rules in a generation to bring them up to date for the digital era.

The talks aim to reach a deal by the end of 2020, but that deadline is now slipping out of reach with Washington’s latest move and the U.S. presidential election in November.

Finance Minister Bruno Le Maire said France, Britain, Italy and Spain had jointly responded on Thursday to a letter from U.S. Treasury Secretary Steven Mnuchin announcing the pullout.

“This letter is a provocation. It’s a provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants,” Le Maire said on France Inter radio.

A Spanish government spokeswoman said Madrid and other European countries would not accept “any type of threat from another country” over the digital tax dispute.

European countries says tech firms pay too little tax in countries where they do business because they can shift profits around the globe with little physical infrastructure. Washington has resisted any new unilateral taxes on Silicon Valley companies in the absence of an OECD deal.

CHAMPAGNE AND HANDBAGS

“The European Commission wants a global solution to bring corporate taxation into the 21st century,” European Economic Commissioner Paolo Gentiloni said.

“But if that proves impossible this year, we have been clear that we will come forward with a new proposal at EU level,” he said, saying taxes could be introduced even without a global deal.

France, one of several European countries which has enacted new taxes to collect more revenue from digital companies, had agreed to suspend collection of its levy while talks were under way on a global approach.

Le Maire said France would impose its digital services tax this year, whether or not Washington returned to negotiations.

“No one can accept that the digital giants can make profits from their 450 million European clients and not pay taxes where they are,” he said.

The French tax applies a 3% levy on revenue from digital services earned in France by companies with revenues of more than 25 million euros ($28 million) in France and 750 million euros worldwide.

Washington has threatened to impose trade tariffs on French Champagne, handbags and other goods in response.

The United States opened trade investigations this month into digital taxes in Britain, Italy, Spain and other countries over concerns that they unfairly target U.S. companies.

President Donald Trump threatened this month to impose tariffs on EU cars if the bloc did not drop its tariff on American lobsters.

Efforts to reach even a limited U.S.-EU trade deal have foundered and sources on both sides see little chance of progress with a U.S. presidential election barely four months away.

A finance ministry spokesperson in Britain, which is seeking trade deals with Brussels and Washington after it left the EU, said that London’s “preference is for a global solution to the tax challenges posed by digitalisation, and we’ll continue to work with our international partners to achieve that objective.”



Dollar Up on Back of Jitters Over Global Economic Recovery By Investing.com



© Reuters.

By Gina Lee

Investing.com – The dollar was up on Friday morning in Asia, rallying from its losses during the previous session.

Investors turned to the safe-haven asset after U.S. data said that 1.877 million Americans during the previous week, higher than the forecasted 1.8 million claims.

The that tracks the greenback against a basket of other currencies gained 0.11% to 96.765 by 11:42 PM ET (4:42 AM GMT).

Investors are now looking to Friday’s report, due to be released later in the day. Payrolls are forecast to fall by 8 million.

But optimism over a global economic recovery from COVID-19 continues to remain high, with investors expecting further stimulus measures from governments and the expected development of a COVID-19 vaccine to further boost economic recovery.

According to Johns Hopkins University data, there are over 6.6 million COVID-19 cases and almost 400,000 deaths globally as of June 5.

The pair was up 0.05% to 109.18, and the pair gained a modest 0.01% to 7.1081.

The pair was up 0.08% to 0.6947 and the pair jumped 0.11% to 0.6469.

The pair held steady at 1.2595.

Meanwhile, Asian risk currencies such as the AUD basked in the aftermath of the European Central Bank on Thursday increasing the size of its Pandemic Emergency Purchase Program (PEPP).

ECB will now spend EUR1.35 trillion ($1.521 trillion), up from EUR 750 billion, to mitigate the economic impact of COVID-19. The program has also been extended to at least June 2021, and ECB pledged to reinvest the proceeds until the end of 2022 at the earliest.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Wall Street Rally Goes Global as Weak Dollar Lifts All Boats By Bloomberg



© Reuters. Wall Street Rally Goes Global as Weak Dollar Lifts All Boats

(Bloomberg) — For investors wondering how markets can keep rallying in the midst of economic disaster, just look to the weakening dollar.

Its descent to a three-month low is adding a pillar of support to the bullish foundations powering risk assets across the globe this week. Emerging markets, commodities and equities have surged as money managers look beyond unemployment headlines, and focus on central bank stimulus and business reopenings.

While the greenback’s decline is one sign that risk appetite is rising, it’s also adding extra fuel to the fire. A lower U.S. currency makes American goods cheaper overseas, helping companies boost earnings.

It also eases financial strain among emerging-market countries by allowing them to repay dollar-denominated debt more easily, and boost hard commodities like gold, and oil that are priced in the currency. Plus, there’s an added boost to inflation expectations, which benefits stocks most likely to profit from a stronger economy.

In the past month, the dollar weakened against all but two major currencies. The Bloomberg Dollar Spot Index slid 0.2% on Thursday, extending an almost 7% retreat from a recent high on March 23. The jumped 30% and copper gained 19% in that time.

The Dollar Is in a Funk and That’s a Good Sign for the Economy

“The falling dollar is a big deal as it eases financial conditions,” said Mark Nash, the head of fixed income at Merian Global Investors in London. “Fiscal stimulus, balance sheet growth of banks and the Fed are a good part of solving the problems we had before, which was not enough lending and dollar strength globally.”

The dollar’s decisive retreat signals that the global liquidation rout for the history books in the depths of the March madness is now over. That’s a risk-on signal for Wall Street banks recommending international trades to clients including high yield and emerging-market debt around the world. The premium investors demand for holding 10-year Italian bonds over benchmark German debt has come down by 88 points from this year’s peak in March.

Carry traders that thrive on a weak dollar to buy higher-yielding emerging-market currencies are also on a high. A Bloomberg currency index that measures carry-trade returns from eight developing nations, funded by short positions in the greenback, posted its first positive month this year in May.

“It is usually the case that when the dollar is not soaking up liquidity i.e. rising, there is room for credit to perform,” said Luke Hickmore, who oversees about $3 billion as investment director at Aberdeen Standard Investments in Edinburgh.

Hickmore is turning to riskier assets such as credit, though he acknowledges that the rally is largely running on central bank stimulus. There’s a good chance that worries about corporate health will come back into the picture later this year, and bring a wave of ratings downgrades.

“I have been very skeptical to say the least about a broad risk-on move. However, the high frequency economic data is improving and we are still getting massive fiscal and central bank buying,” Hickmore said. “It is, on balance, time to be risk-on, but maybe not up to the max budget.”

Tug-of-War Between Bulls and Bears Is Muddling Risk Signals

There’s also skepticism that the dollar’s weakness will last, especially in the middle of a recession. Bank of America (NYSE:) Merrill Lynch’s Athanasios Vamvakidis, the head of G-10 FX strategy, says the team is expecting a 4.3% drop in global economic growth, deeper than the consensus view for a 3% contraction.

“Investors expect a recovery of the global economy after the lockdown,” he said. “The recovery is going to be very weak, as economies cannot really go back to normal.”

Jack McIntyre, a portfolio manager at Brandywine Global Investment Management, is more optimistic. He’s buying up higher risk assets and currencies to take advantage of the “backstop” from the Federal Reserve, and pointed to the violent U.S. protests as part of the reason behind the dollar’s poor performance.

“When I looked at the riots and the way the U.S. is handling the coronavirus pandemic, I thought, ‘Oh my God, we are coming apart at the seam,’” McIntyre said in an interview. “Maybe the U.S. is losing some of its exceptionalism. The dollar has been overvalued for a long time, and this might finally be a catalyst for the dollar to weaken.”

(Updates with dollar move in fifth paragraph.)

©2020 Bloomberg L.P.

 





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Global shares hit 3-month highs on economic recovery hopes By Reuters



© Reuters. Investors look at screens showing stock information at a brokerage house in Shanghai

By Elizabeth Howcroft

LONDON (Reuters) – World shares hit three-month highs on Wednesday and the dollar fell for the sixth day running as easing lockdowns and hopes for more monetary stimulus gave investors confidence, despite civil unrest in the United States and rising COVID-19 tolls.

The MSCI (NYSE:) world equity index, which tracks shares in 49 countries, rose to its highest since March 6, having gained throughout the Asian session.

The index is down more than 7% year-to-date, amid pandemic lockdowns that have pushed many economies into contraction.

MSCI’s main European Index also held near three-month highs and European bourses opened higher, with the up over 1% and back to levels not seen since March 6.

In China, Japan and South Korea, where COVID-19 is relatively contained, stock indexes have recovered substantially to be only about 5-6% below this year’s peaks.

There are some signs of recovery in business activity as governments restart their economies, albeit in the knowledge that easing lockdowns too early could trigger a second wave of COVID-19.

A closely-watched survey of service sector activity in China recovered to pre-epidemic levels in May.

Broader economic optimism supported risk-sensitive currencies and pushed down the dollar, which hit a three-month low against a basket of comparable currencies at around 0730 GMT.

“In a scenario where there’s no meaningful recurrence of the virus, and progress is made on treatments and vaccines, we expect the U.S. dollar’s weakness to continue,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Oil rose on Wednesday, with Brent above $40 for the first time since March, as optimism mounted that major producers will extend output cuts and a recovery from the pandemic will spur demand for fuel.

futures for August were up around 1.8% at $40.27 a barrel, by 0730 GMT. U.S. West Texas Intermediate (WTI) crude futures gained $0.92, or 2.5%, to $37.73 a barrel, the highest since March 6.

fell 0.5% to around $1,717 per ounce.

STEEPENING U.S. YIELD CURVE

Germany’s ten-year government bond yield rose to its highest since mid-April as the global risk-on mood saw demand for safer debt decline, slipping back slightly to -0.386% by 0825 GMT.

The European Central Bank is expected to ramp up stimulative bond purchases when it meets on Thursday.

The euro, which rose above $1.12 for the first time in 11 weeks in early London trading, is on track for a seven-day winning streak against the dollar – its longest streak since December 2013.

The safe-haven Japanese yen hit a two-month low of 108.85 to the dollar before bouncing back to around 108.79 per dollar.

The U.S. Treasury yield curve steepened, partly reflecting the sale of more government debt to finance massive stimulus efforts.

The 30-year U.S. Treasuries yield rose to as high as 1.532%, its highest since mid-March, as expectations of central bank policy support kept shorter yields in check.

The yield gap between five- and 30-year Treasuries rose to 118 basis points, the highest since early 2017.

Tens of thousands of people defied U.S. curfews to take to the streets on Tuesday for an eighth night of protests over the death of a black man in police custody.

“The disconnect between what the average person sees happening in the world and what they see happening in the financial markets is getting wider and wider,” Marshall Gittler, head of investment research at BDSwiss, wrote in a note to clients.



China drives global oil demand recovery out of coronavirus collapse


BEIJING/NEW YORK/TOKYO (Reuters) – China’s oil demand has recovered to more than 90% of the levels seen before the coronavirus pandemic struck early this year, a surprisingly robust rebound that could be mirrored elsewhere in the third quarter as more countries emerge from lockdowns.

FILE PHOTO: Oil and gas tanks are seen at an oil warehouse at a port in Zhuhai, China October 22, 2018. REUTERS/Aly Song/File Photo

While China – the world’s second-largest oil consumer – is the outlier for now, easing travel restrictions and stimulus packages aimed at resuscitating economies could accelerate global oil demand in the second half of 2020, industry executives said.

“The brisk resumption of Chinese oil demand, 90% of pre-COVID levels by the end of April and moving higher, is a welcome signpost for the global economy,” said Jim Burkhard, vice president and head of oil markets at IHS Markit.

Widespread lockdowns to contain the spread of the virus took an especially heavy toll on oil markets, wiping roughly 70% off global prices by mid-April and leading to huge build-ups in oil and fuel inventories worldwide.

“When you consider that oil demand in China — the first country impacted by the virus — had fallen by more than 40% in February — the degree to which it is snapping back offers reason for some optimism about economic and demand recovery trends in other markets such as Europe and North America,” said Burkhard.

Benchmark oil prices have also bounced back as lockdown measures eased, with Brent futures rallying 50% and U.S. crude futures over 90% since May 1.

While oil analysts agree that China’s demand is rebounding, estimates differ in terms of degree and duration.

Wood Mackenzie expects China’s oil consumption in the second half to grow 2.3% to 13.6 million barrels per day (bpd) from the same period last year, driven by increased transportation and industrial use.

“By the third quarter, China’s gasoline demand would have surpassed the same period last year by 3% to 3.5 million bpd,” the consultancy said, while diesel consumption could grow by 1.2% to 3.4 million bpd over the same period.

In contrast, the International Energy Agency (IEA) said in its May report that China’s demand will fall 5% on year to 13.2 million bpd in the second half.

Even so, there is strong consensus that both gasoline and diesel use are expected to accelerate as more people and businesses boost movement.

(Graphic: Traffic congestion at major cities – here)

“China has led the demand recovery path so far. Following this, other countries such South Korea, Australia and Vietnam where the (virus) cases are broadly under check will see an improvement in petroleum demand,” FGE analyst Sri Paravaikkarasu said.

GLOBAL IMPACT

JBC Energy analyst Kostantsa Rangelova said Asia’s total refined product demand could rise to 34.3 million bpd in the second half, up from 31.6 million bpd in the first six months, but still about 1.5 million bpd lower from the same period a year ago, mainly because of the decline in jet fuel demand.

In India, the world’s No. 3 oil consumer, state refiners ramped up output in May as fuel sales recovered ahead of the lockdown lifting in June.

In Japan, the fourth largest oil user, gasoline demand is expected to contract by 10% in October to December, but rebound strongly from the 27% contraction seen in April to June, refiner Cosmo Energy Holdings said.

(Graphic: Global Oil Demand – here)

In the United States – the top oil producer and consumer – road fuel demand is expected to rise to 10.6 million bpd in the second half, according to Rystad Energy, 22% higher than the first half.

However, gasoline consumption will still be 5% down from 2019 on higher unemployment, reduced incomes and more people working from home, Rystad analyst Per Magnus Nysveen said.

More road trips this summer could give demand a significant near-term boost, however, said Patrick De Haan of U.S.-based consultancy GasBuddy.

“Depending on this consumer demand, if more people hit the road, refineries are well-positioned and will rise to meet the increase in demand and that may be a lifeline for them this summer,” he added.

Even so, some U.S. refiners are hesitant to dramatically boost output, remaining cautious on gasoline demand as they eye still-growing distillate inventories.

Cowen research’s refining analyst Jason Gabelman estimates it will take two years for refining margins to rebound as the U.S economy recovers from the effects of the pandemic and subsequent stay-at-home orders.

Oil executives are also wary of fresh downturns in oil demand as countries slash economic growth forecasts and populations alter travel habits.

“For now, we don’t know whether demand for gasoline and jet fuel will ever return to the levels before the pandemic,” JXTG Holdings President Tsutomu Sugimori said at a May 20 briefing, adding that it was difficult to predict how consumers lifestyles would change.

People may prefer to continue working from home and going out as little as possible to avoid being infected, he added.

(Graphic: Global refining margins – here)

Reporting by Muyu Xu in Beijing, Jane Chung in Seoul, Yuka Obayashi in Tokyo, Stephanie Kelly and Laura Sanicola in New York, Sonali Paul in Melbourne and Chayut Setboonsarng in Bangkok, Ahmad Ghaddar in London, Isla Binnie in Madrid, Seng Li Peng, Koustav Samanta, Roslan Khasawneh and Florence Tan in Singapore; Writing by Florence Tan; Editing by Gavin Maguire and Kim Coghill



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Global airport group says pandemic safety rules to lengthen pre-departure waits By Reuters



© Reuters. Spread of the coronavirus disease (COVID-19), in Istanbul

MONTREAL (Reuters) – New global guidelines featuring physical distancing to restart aviation safely during the coronavirus pandemic could add up to two hours of pre-departure time for passengers at some airports during peak hours, the head of an international airports’ group said on Tuesday.

“A large airport with low volume, they should not need much more time for the passenger to come to the airport to keep the physical distancing,” Angela Gittens, director general of Airports Council International (ACI), told reporters.

“At a smaller airport or an airport that has peaking, I would say that it is going to be another hour or even two hours.”

A United Nations aviation agency-led task force has published guidance for airlines, airports and countries to achieve a uniform approach to flying safely during the coronavirus pandemic, although it stopped short of providing specific requirements for the hard hit industry’s recovery.

The guidance, which was adopted by the International Civil Aviation Organization’s (ICAO) governing council on Monday, includes having travelers wear masks, and stand at least a meter apart at airports.

The guidelines, backed by industry, address the current hodgepodge of rules put in place during the coronavirus pandemic that make flying different in almost every country.

Aviation experts have said that a common set of safety practices will be instrumental in restoring passengers’ confidence.

“The guidelines need to be in place quickly,” said Alexandre de Juniac, director of the International Air Transport Association (IATA), said during a virtual press conference.

Philippe Bertoux, ICAO’s representative from France who headed the task force, said members would continue to meet and propose changes as the pandemic evolves.

“There will be a follow up,” Bertoux said.

“The current guidance is a living document that will evolve.”

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