Oil Climbs, Rouble Falls as Markets Take Mutiny in Stride

FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oilfield in Midland, Texas US August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oilfield in Midland, Texas US August 22, 2018. REUTERS/Nick Oxford/File Photo
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Oil Climbs, Rouble Falls as Markets Take Mutiny in Stride

FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oilfield in Midland, Texas US August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oilfield in Midland, Texas US August 22, 2018. REUTERS/Nick Oxford/File Photo

Oil was slightly higher on Monday and the rouble lower as an abortive weekend mutiny by Russian mercenaries raised questions about Russian stability and crude supply, but left investors hesitant to draw any further conclusions.

Brent crude futures were last up 0.2% at $74.02 a barrel having earlier fetched as much as $74.80. The rouble dropped to a 15-month low early in Moscow, Reuters said.

MSCI's index of Asia-Pacific shares outside Japan slipped to a three-week low, as small falls in China, Taiwan and Australia offset minor gains in South Korea.

Japan's Nikkei eased 0.1%. The battered yen rose marginally on hints at looming government intervention to support it and after a summary showing a central bank board called for an early revision of yield curve control.

European futures gained 0.3%, S&P 500 futures rose 0.2% and FTSE futures added 0.1%.

Russian mercenaries made a short-lived rebellion on Saturday, seizing the southern city of Rostov and advancing on Moscow demanding the removal of Russian military commanders in charge of the war in Ukraine.

The private Wagner army then withdrew after striking a deal guaranteeing their safety and the passage of their leader, Yevgeny Prigozhin, to Belarus.

The consequences for the Ukraine war were not clear, though the challenge to Russian President Vladimir Putin's authority was the starkest in decades of his leadership.

"I don't think the market can get its head around working out if there are implications," said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

Analysts at RBC Capital Markets said one concern was the possibility of martial law in Russia and its effect on the workforce at ports and oil production facilities.

Gold, which had hit a three-month low on Friday, rose 0.2% to $1,925 an ounce. US Treasuries were firm with yields, which fall when prices rise, marginally lower.

Two-year yields fell 2 basis points to 4.731%. Ten-year yields fell 1.8 bps to 3.721%.

"This putsch ... has revealed cracks and fragilities that now cannot be unseen," said Mizuho economist Vishnu Varathan.

"It undeniably amplifies global geopolitical risks."

CHINA FOCUS

With the mutiny being on the watchlist rather than driving action in Asia, investors were left to pore over the latest signs of China's recovery stalling, which on Monday was softer-than-hoped-for travel figures for last week's holiday.

S&P Global also followed most Wall Street banks and cut its 2023 GDP growth forecast for China on Sunday.

Blue chip stocks fell 0.7% in Shanghai.

The yuan slid to catch up offshore falls during the break on Thursday and Friday, but the People's Bank of China fixed the midpoint of its trading band surprisingly strong, suggesting it might not be so tolerant of further weakness.

The yuan was last at a seven-month low of 7.2199 per dollar.

The risk-sensitive Australian dollar was steady at $0.6683. The euro nursed last week's modest drop at $1.0903 and sterling held at $1.2730.

The yen, down nearly 9% this year as global interest rate expectations rise and Japan's central bank stays dovish, bounced as much as 0.3% to 143.27 per dollar, partly thanks to speculation around intervention or a policy shift.

Japan's top currency diplomat Masato Kanda toughened his tone on Monday, describing recent moves as "rapid and one-sided" in a possible prelude to intervening to buy yen.

A Bank of Japan policymaker also called for revision to its yield curve control policy, a summary of opinions at the June meeting showed on Monday, suggesting the central bank's ultra-loose monetary settings may be at a crossroads.



China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)
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China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)

Chinese lawmakers are deliberating a draft of the country's first basic law specifically focused on the development of the private sector, the country’s Xinhua news agency reported.

“The law will be conducive to creating a law-based environment that is favorable to the growth of all economic sectors, including the private sector,” said Justice Minister He Rong, while explaining the draft on Saturday during the ongoing session of the Standing Committee of the National People's Congress, the national legislature.

The draft private sector promotion law covers areas such as fair competition, investment and financing environments, scientific and technological innovation, regulatory guidance, service support, rights and interests protection and legal liabilities.

The draft has incorporated suggestions solicited from representatives of the private sector, experts, scholars and the general public, the minister said.

China left its benchmark lending rates unchanged as expected at the monthly fixing on Friday.

Persistent deflationary pressure and tepid credit demand call for more stimulus to aid the broad economy, but narrowing interest margin on the back of fast falling yields and a weakening yuan limit the scope for immediate monetary easing.

The one-year loan prime rate (LPR) was kept at 3.10%, while the five-year LPR was unchanged at 3.60%.

In a Reuters poll of 27 market participants conducted this week, all respondents expected both rates to stay unchanged.

Morgan Stanley said in a note that the 2025 budget deficit and mix are more positive than expected and suggest Beijing is willing to set a high growth target and record fiscal budget to boost market confidence, but further policy details are unlikely before March.

Last Friday, data released by the country's central bank said total assets of China's financial institutions had risen to 489.15 trillion yuan (about $68.03 trillion) by the end of third quarter this year.

The figure represented a year-on-year increase of 8%, said the People's Bank of China.

Of the total, the assets of the banking sector reached 439.52 trillion yuan, up 7.3% year on year, while the assets of securities institutions rose 8.7% year on year to 14.64 trillion yuan.

The insurance sector's assets jumped 18.3% year on year to 35 trillion yuan, the data showed.

The liabilities of the financial institutions totaled 446.51 trillion yuan, up 8% year on year, according to the central bank.

Separately, data released by the National Energy Administration on Thursday showed that China's electricity consumption, a key barometer of economic activity, rose by 7.1% year on year in the first 11months of the year.

During the period, power consumption of the country's primary industries increased by 6.8% year on year, while that of its secondary and tertiary sectors rose by 5.3% and 10.4%, respectively.

Residential power usage saw strong growth of 11.6% during this period, the administration said.

In November alone, power usage climbed 2.8% from one year earlier, according to the data.