MARKET UPDATE

Oil treads water ahead of OPEC+ panel meeting, PCE inflation data

Oil prices moved little on Friday and were set to end the week flat amid caution over an upcoming OPEC+ panel meeting, as well as more cues on the U.S. economy from a reading on the Federal Reserve’s preferred inflation gauge.

Ministers from Algeria, Kuwait, Venezuela, Russia, and Oman are set to meet virtually next week as part of a panel called the Joint Ministerial Monitoring Committee (JMMC). The panel can call for a full meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) and can also decide on crude output from the members of the panel.

But Reuters recently reported that the panel is unlikely to alter production levels, given that crude prices recovered sharply in early 2023, and that demand is forecast to surge as the Chinese economy recovers.

Brent oil futures rose 0.2% to $87.69 a barrel, while West Texas Intermediate crude futures rose 0.3% to $81.22 a barrel by 20:31 ET (01:31 GMT). Both contracts rose sharply on Thursday following better-than-expected U.S. GDP data, but were set to end the week largely unchanged.

 

Japan, Netherlands to join US in restricting chip equipment exports to China

Japan and the Netherlands will soon agree to join the United States in restricting exports of semiconductor manufacturing equipment to China, Bloomberg News reported.

Talks between the countries will conclude as early as Friday, with the Netherlands restricting ASML Holding (NASDAQ:ASML) NV from selling machines to China used to make certain types of advanced chips, Bloomberg reported, citing people familiar with the matter.

Japan would impose similar restrictions on Nikon (OTC:NINOY) Corp, the report said.

Deputy Chief Cabinet Secretary Seiji Kihara, a government spokesperson, said Japan would make “appropriate steps” based on the United States’ and other nations’ regulatory moves. He declined to comment further when asked about the report at a Friday afternoon media briefing.

 

Asia FX muted as PCE data looms, yen boosted by inflation

Most Asian currencies kept to a tight range on Friday in anticipation of the Federal Reserve’s preferred inflation gauge, while the Japanese yen rose as higher-than-expected Tokyo inflation readings fed into expectations for more hawkish moves by the Bank of Japan.

The yen rose 0.2% against the dollar and was among the best-performing regional currencies for the day, as data showed inflation in Japan’s capital rose to a new 41-year high in December. The reading heralds a similar rise in countrywide inflation, and is likely to invite more hawkish measures from the BOJ in the coming months.

While the central bank ducked expectations for more monetary tightening measures during its January meeting, markets expect rising inflation to eventually force the BOJ’s hand. Such a scenario is positive for the yen, which was battered by a growing rift between local and U.S. interest rates in 2022.

Broader Asian currencies kept to a tight range as overnight data showed that the U.S. economy grew more than expected in the fourth quarter. While the reading helped ease concerns over an immediate recession, it also showed that the Federal Reserve has more economic headroom to hike interest rates.

 

 

 

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